Ontario's Electricity Secret Isn't Clean

The Toronto Sun had an editorial this morning on “Clean electricity’s dirty secret”.  It must have generated a buzz about the negative pricing, and dumping of hydro supply, because it was followed this afternoon with an article, by Antonella Artuso, which told us of the Premier’s responses to reporters’ questions regarding exporting power cheaply;  “McGuinty said he appreciates that many Ontarians struggle with his energy program — including the requirement that municipalities take wind turbines — but the goal is to bring green manufacturing jobs to the province and supply greenhouse gas-free electricity.”

If that is the goal, perhaps our Premier isn't getting great information from his underlings regarding his programs success. I've heard he's a real detail guy, so I've assembled some details to help out.

I recently started looking at hourly production data from the IESO, and bringing it alongside some longer term data also from the IESO. I've been surprised to discover the largest hours of net exports are quite deliberate - and the production figures are enormous.  Three days containing some of the largest net exports since IESO tracking began were in 2011 between January 31^st - February 2^nd.  During these 3 days Ontario demand was high, peaking at 22045MW at 7pm on the 31^st.  That was near the anticipated high for the month in IESO forecasts.  Production at that time was 25776MW – the second highest production, since the IESO records begin in 2002, during the 2410^th highest demand hour (demand hasn’t been above 25776MW since 2006).

This graph shows the supply during this 3 day period.  The wind is not particularly notable.  The natural gas output is.  The light blue line is Ontario Demand, so supply above that line represents exports. 

This has been a frequent occurrence in Ontario during the last winter.  19 of the top 20 highest net exporting hours, since 2002, have occurred since December 16^th, 2010, and only 2 of those hours were due to exceptionally low demand (on New Years’ Day).  

The plan, requiring 3500MW of generation from burning natural gas for export at around 4 cents/kWh, isn't likely a plan to supply GHG-free electricity.  I’d say that’s a plan to hide the reckless procurement of unnecessary natural gas supply behind a screen of wind.

In the shoulder seasons, that isn’t to say wind can’t be a problem.  In stark contrast to the oversupply during the peak demand hours of the above days, April 11^th is an example of huge oversupply at night.  It is worse.  The winter’s deliberate excess is sold at 3-4 cents/kWh, which is likely around, or maybe over, the incremental cost of its production (the nature of the natural gas contracts is speculated upon – because they are private, but indications are we pay the largest plants a flat rate for the capacity  - for production we pay only for the fuel).  In the spring, we run into situations, such as we encountered overnight on both the 10^th and the 11^th of April, where we simply have too much supply even without any intermediate or peaking production, and the need to dump power causes the downward spike in the price (the red line measured on the right axis):

April 19th: Electricity Stupidity Day in Ontario ... Again

Yesterday price hikes were announced by the Ontario Energy Board (OEB). You'll likely average about 7.28 cents/kWh after May 1^st.

Yesterday the Ontario government issued a press release beginning “Ontario families can expect stable electricity bills this summer and fall due to the new Ontario Clean Energy Benefit (OCEB), which is taking 10 per cent off monthly bills for families, farms and small businesses.”

Yesterday, the IESO posted it's daily Surplus Baseload Generation Report.

 

At the new price, which is about 7.2 cents/kWh ($72/MWh), this surplus report means that the plan, if all goes as expected, is to purchase 468,873 MWh for a price of approximately $33.75 million dollars, or about $1.3 million dollars a day - which we will need to dump in external markets, at whatever price we can get.

The market price so far in 2011 is slightly down from the same point in 2010 ($32.60/MWh, down from $33.75/MWh). 

The Plan is to have too much supply 55% of the time - the plan is to have too much supply for over 50 continuous hours 4 separate times in the next 25 days.

The plan is to subsidize exports.

The OCEB tells you how much you'd be paying to subsidize New York, Michigan and Quebec directly, instead of through your taxes.

It's not a break for families. 

It is another way of breaking families.

Wind Gluttony and Hydro Greed

Forbes has a report today on The Bonneville Power Administration (BPA), being forced to abandon plans to limit wind output in periods of extreme oversupply. 

I noted in a previous post a New York Times Blog entry that explained the BPA can't spill water to avoid generating power; “Water that goes over a spillway as opposed to through a turbine picks up bubbles of nitrogen gas from the atmosphere. When baby salmon absorb the bubbles, they experience something resembling the bends in a human diver.” In a display of sanity, the BPA stepped up monitoring and planning, including the regular display of balancing load, wind, hydro and thermal generation. The current snapshot is instructive; it shows huge exports made possible by enormous hydro supply, with a production trend that matches the load profile. Wind is used too, but the wind trend is balanced by thermal – as is the case everywhere wind has significant penetration.

Maybe the salmon were only considered in 2010, duing the UN's International Year of Biodiversity. I read portions of the Canadian Index of Wellbeing report last week, and I was struck by “Average maximum fish lengths shrunk from 111 cm. in 1950 to 55 cm. in 1994 to 46 cm. In 2006.” I've never been accused of being a fish-hugger (at least not to my face), but that seemed alarming.

This past weekend, “Hydro power's dirty side” explored the Romaine River project which is to include, “four new dams, seven dikes, giant spillways and canals and 279.2 square kilometres of reservoirs.” The article claims that following the Romaine appetizer the Petit Mecatina and Magpies will be devoured, and with their harnessing, “everything dammable will have been dammed.”

The Guardian's environmental blog added to the hydro examination with an entry on a pending Mekong River dam.. The Xayaburi dam is proposed in poor Laos, primarily to feed Thailand electricity. There's a cursory concern to the impact on the river who's fishery is the main source of protein for 60 million inhabitants of the area. If they can get the first dam built, Laos plans many more, and Cambodia and Vietnam wouldn't mind getting in on the game too, and China is refusing to deal with the 4 downstream nations as they have dams upstreams near the source of the Mekong. It can't be easy to put a price on species of catfish larger than cars, and stingrays heavier than tigers, but in a world where a couple of hundred of poorly labeled 'green' MW's trump salmon, it would have to be under 1250MW of hydro must be worth it.

Hydro is becoming another area where power can be chosen to replace a source of food – and almost certainly the cause of lost biodiversity.

There is a lot of ink spilled on the unfortunate neighbours of the Fukushima Daiichi site. I do not know when, if ever ,they'll be allowed to return home. I'm fairly certain there will be a lot more people in Laos, Vietnam, and China, displaced due to hydro projects, and there will be a larger loss of habitat in Quebec due to newly created reservoirs.

The Conference Board of Canada Fails To Make a Case for Investment in Canada's Electrcitiy Infrastructure

Building a Case For Investment, is a report prepared by the Conference Board of Canada. The report, (which I'll refer to as simply The Case) contains some some questionable assumptions, but a lot of research was put into the document, and it's worth the second look for some relevance. The written text is far less meaningful than the subtext included with the figures for generation. That subtext shows the Conference Board picking Canada's traditional sources as winners (large hydro and natural gas), and throttling the wind monster.

The second sentence of the preface contains the first false premise I spotted; “With half of the generation assets built before 1980, the industry faces a pressing need to accelerate investment in infrastructure at all levels.” This immediately struck me as false because 60% of Canada's electricity generation is from hydro – which lasts a long time. The Case later lists estimated useful economic years as; 40 for coal generation, 50 for hydro, 25 for nuclear, and 25 for natural gas/biomass. These are far too low. Figures from the U.S. Energy Infromation Administration (EIA), for 2008, show the average life of existing coal generation plants was 43, biomass 33, hydro 60 and nuclear 30. The average plant operating in the US is, in many categories, older than the Conference Board of Canada assumes Canada's plants will last.ⁱ EIA data further indicates that the overall capacity factor for all generation dropped to 44.9% from 54.6% only 10 years earlier. Coupled with the low natural gas price, which is lowering the market pricing of all generation (as natural gas is primarily the fuel used for meeting incremental demand – or peaking), there is increasingly less appetite for any new generation.

While The Case notes a declining investment at times over the past number of decades, it doesn't note the corresonding lack of increased demand during those same time. The investments of the early 90s lead to a dearth of investment in the late 90's precisely because of the recession in the early 90's. The actual needs analysis, or demand forecast, is stated to have been, “identified using the National Energy Board long-term outlook and the net trade capacity calculated for each province.” I'm going to assume that refers to the NEB's “Canada's Energy Future – Reference Case & Scenarios to 2030 – Energy Market Assessment”, which is from 2007. 2008 and 2009 were the first back-to-back years of declining demand for electricity in the United States of America since the 1930's. I have reviewed electricity demand projections for Ontario, and the United States, elsewhere on this blog (particularly in commenting on Ontario's Long Term Electricity Plan). These are not only more current, there also isn't demand growth of any significance expected in either jurisdiction. The most recent U.S. Energy Information Administration (EIA) long-term outlook has a 150% decrease in electricity imports by 2035. Those American imports are the Canadian exports, which The Case notes as 7-9% of total Canadian generation. Readers of this blog will know I have argued that Ontario does not so much export as it dumps excess, for whatever it can get. I believe Manitoba's exports have been at very low rates as well. The Case assumes exporting is desirable, and export markets will be available. Neither assumption need be valid. That said, I didn’t see any actual demand projections in The Case.

The Case does conclude that new “capacity additions, projected at 39.4 gigawatts (GW), are estimated to require $116.4 billion of investment (60 per cent of total generation investments). That is almost certainly nonsense. This would essentially add more supply than Ontario has while Ontario itself is unlikely to grow demand, nor is Quebec, and I think it is unlikely the Maritime provinces or Manitoba will see large demand growth either. The chance of needing “new” capacity isn't great.

I had assumed the Conference Board was aware of this, and was making the case to replace each watt of coal, or older generation, with 2 watts – 1 of wind to show, and another of natural gas to actually meet demand. This is the scam that is to drive investment, and the Conference Board reads like it is creating the need/demand, and pricing the green option, coupled with an actual useful option, to fulfill it.

But it doesn't quite carry the scam off – it's hard to put so much work into researching the issue and not recongnize the obvious at some point. The recognition is disguised in Chapter 4 of the report. A review of Table 4, the researched “Generation Capacity Under Construction or at Advanced Planning Stage”, Table 5, the research “Generation Capacity Proposed,” and Table 6, the “Generation Capacity Included in Investments”, shows which projects the Case believes should proceed, which should not – and it actually shows additional capacity in some provinces that aren't yet planned or proposed!

Adding the proposed, from table 5, to the planned of under construction from table 4, yields 51213MW . The Case is based on the 39386MW. Of the 11827MW of projects the Case dismissed, 13013MW were wind. There is an obvious conclusion that The Conference Board of Canada clearly made, correctly, but has excluded from the written text of the Case. In the province I am most concerned with, the Case lops off 6043MW of wind, 501MW of solar, 42MW of biomass, 41MW of landfill or biogas, and 52MW of large hydro. The Case then adds in 2000MW of nuclear (presumably the new build for Darlington – which should have been included in the proposed generation figure), 13MW of small hydro, and 1400MW of natural gas. This is a rejection of Ontario's Long Term Electricity Plan, with the sole exception of it's nuclear aspect.

There's another disconnect in the Case. The summary notes “Replacing aging generation, transmission, and distribution assets at the same time as integrating more distributed generation and renewable energy creates opportunities at all levels of the electric power system. The key challenge is to manage the costs to consumers.” Fair enough, but chapter 3 indicates there is no desire to invest productively, or to consider matching supply and demand. The Case notes in the 60's and 70's investment averaged 6% annual growth, and by the 90's and 00's, it was only .5%. In not unrelated statistics from Ontario, shown in the first post to this blog, in the 60's and 70's annualized Ontario growth was 5.7% and since 1990 it's nil. Chapter 3 has another argument in the 'service lives of new capital” rapidly decling. From 43 in 1985 to 21.3 in 2010. I really don't want to know what they are talking about, but it sounds like we should spend twice as much because we are half as productive. This should be a disconnet in terms of meeting the challenge given regarding costs.

Let's reread that last sentence from the summary:

“The key challenge is to manage the costs to consumers”

That could mean let's make sure we get every cent possible out of consumers.

The Conference Board of Canada's “Canada's Electricity Infrastructure: Building a Case for Investment” is an ambitious research project, but it's aversion to discussing value for the end customer, and failure to link supply and demand, either historically or in projections for the future, make it, like IWT output, a sudden burst of little, or no, value.

Power Polititcs: "Events Dear Boy, Events"

Electricity generation made a surprise appearance in our federal election campaign last Friday, when Prime Minister Harper ventured to Newfoundland and announced a new Conservative government would provide loan support for a lower Churchill hydro project.   Sunday brought the reintroduction of cap-and-trade as the Liberals dropped their policy book, and this morning's top news story on the CBC was that we need to spend all kinds of cash on new capacity – their source being the companies selling all types of new generation and grid technology.  All this interest will vanish shortly because the politics behind the Lower Churchill project won't be talked about honestly (Quebec can't admit they've been thugs on Churchill Falls for 4 decades and intend on remaining thugs for another 3 decades - and Newfoundland can't admit the project is to free them from the shackles of Quebec).  There is time for provincial politicians to take advantage of the situation.

I have a fairly simple, but very political, opinion on the funding for Newfoundland's Lower Churchill and maritime transmission project (the way Prime Minister Harper noted support for the Newfoundland and Labrador's Premier's project is towards the end of the speech here). Newfoundland and Labrador feels there are another 4000MW of capacity to be developed, cheaply, at and below, the existing Churchill Falls Facility. The current generation, of 5428MW, can have some upgrades – but Hydro Quebec has had a contract for the vast majority of the output since 1969, and it goes through 2041 (at about $2.50/MWh). The contract has meant Quebec receives about 20 times the financial benefits from Churchill Falls' output, than the Province that the project is located in, and which owns the majority of the project. One estimate I read had Churchill Falls responsible for $2 billion of Hydro Quebec's $2.8 billion annual profit. It's a long-term sore spot that's been to the Supreme Court a couple of times. Because of this, the 1000MW of upgrades that could be done at Churchill Falls aren't even discussed, which leaves two other projects downstream. The bigger of these 'lower Churchill” projects is at Gull Island (around 2300MW) and the smaller is at Muskrat Falls – for 824MW. The worst economics are for the smallest project.

They are planning on proceeding with the smallest project. The $6 billion figure being bandied about is therefore considered to be for 824MW of generation. But the value of the project needn't be that. If Newfoundland and Labrador have the foresight to build the transmission capacity for closer to 3000MW, at least for the most expensive sections running under the ocean from Labrador to Newfoundland, and again from Newfoundland to Nova Scotia, the next 2300MW, either from Gull Island or from Churchill Falls itself, would be much more economical. Churchill Falls produces over 30 million MWh annually , and each sells for about $60 less than it would in New England – or Ontario. Can a $6 billion load get paid back by enabling that to circumvent the Quebec deal?

Yes.

Newfoundland may gain some taxing options on Churchill Falls production in 2016. Politically, Newfoundland needs another route to get power out of Labrador, and they can find ways to pay for it that are unrelated to the 824MW of Muskrat Falls capacity.

Most people in the world would be astounded to know there is a 31TW/year source with the output selling at such a low price. The problem for developing more of the area's cheap hydro is getting it out. Quebec has the ability to drive an extraordinarily hard bargain – as they have other cheap hydro sources too. Newfoundland proper, also is largly hydro supplied (there is a 500MW Holyrood oil site that will be redundant as the Lower Churchill supply becomes available). It's a long way to markets that currently don't have clean electricity supplies (the Maritime provinces), especially if the route can't include Quebec.

Regardless of the unspoken justification for supporting what is, at face value, a very expensive project, the justification was communicated as supporting a clean electricity project.

Steve Aplin picked up on that one immediately, at his pro-nuclear (and excellent) Canadian Energy Issues blog:

“The Muskrat Falls loan guarantee is promised for an 824-MW project that is expected to cost $6.2 billion. Back in 2009 when the Ontario government asked vendors for proposals to build the new Darlington reactors, federally owned AECL’s bid was rumoured to be around $26 billion. Do the arithmetic, and you see that the federal Conservatives are willing to back a Newfoundland-Labrador power project that is, dollar for dollar and megawatt for megawatt, almost exactly proportional to Darlington.”

At about the same time the Darlington Joint Review Panel Public Hearing included some comments on pricing, which doesn't seem to have been as high as the press rumours.  From the transcript for April 2^nd, page 189:

"Albert Sweetnam,for the record. At present, there is no estimated cost for the units at Darlington. The reason for this is that no vendor has been selected and no technology has been selected.However, the Assistant Deputy Minister, when he was here, indicated that the province is looking at a price range in between $5,000 and $8,000 per kilowatt hour, and that's the range that is presently being utilized.”

Mr. Sweetnam (of OPG) later clarified, “On the 26 billion, this is an amount that was stated in the newspapers. It's not based in fact, and it was refuted by the procurement agency for the province ...”

It's pretty clear that in calculating the $/kW for only Muskrat Falls, and only the transmission capacity for Muskrat Falls output, that Ontario has the same pricing in a nuclear option.  Ontario's nuclear plans include removing 3000MW of capacity from service at Pickering. The two proposed reactors at Darlington are either the only new build required in the next 20 years, or only one of two.

Enter the CBC reporting team with, “Canada's power grid needs $293B infusion: Report.” This is nonsense. I'll read the report – someday – but the CBC article notes, indirectly, where the nonsense comes from as it cites the province planning the largest increase in capacity is Ontario. I've written extensively on Ontario's plans – and why they are bad.  Primarily it is because there has been almost no ability to integrate wind to meet demand, and the plan primarily calls for more wind. Ontario is planning on adding wind specifically because it doesn't have growing demand and this is the angle the Charlatans of the day are working.

Now the world is figuring out the very same things about the wind supply fable. A report this week out of the UK, for the John Muir Trust, notes the same patterns that make wind unreliable in Ontario, and that negate any possible benefit in terms of reducing the need for traditional/real capacity, also make wind a poor idea there. That report followed one a week earlier from Pöyry, one of Europe’s leading advisers in the energy market. That report included;

“We have little doubt that investors will face major challenges developing appropriate investment and divestment strategies to deal with this kind of future ahead. Thermal assets may be highly valuable if the market evolves in one direction, but they also face the strong possibility that the intermittency from wind and solar can create power stations that for most of the time do not make a profitable contribution.”

The Interstate Natural Gas Association of America (INGAA) has already pounced on this theme. While major generation company executives are calling for a withdrawal of all subsidies to curb the current supply glut – as well as because natural gas is so cheap the electricity generation industry stateside now sees it's profits move with the price of natural gas – this gas industry body is noting that the back-up generation required for wind will also require subsidy for new gas builds, due to low capacity factors (and presumably high fuel use as reserves are kept spinning).

It's a pretty great game for a salesman – if you can just hook the folks with the illusion their demand is increasing (it hasn't in my province for 2 decades, and it isn't expected to move significantly higher here, or in the much larger USA, for another 2 decades), first sell them some clean stuff they'll need to subsidize, and then some real stuff that they'll have to subsidize only due to the clean stuff.

Add on the much more complicated transmission structures and already high costs to consumers surge out of control as in Ontario during 2009 and 2010, as demand dropped.

The saner model would be building only when necessary, and then only the cleanest reliable source first, even at a price of $6000-$8000/kWp

Steve Aplin blogged today that the current federal election, with the Harper pledge of loan support for Newfoundland's Lower Churchill project, provides Ontario's Liberal government political leverage to pressure Prime Minister Harper to commit to supporting Darlington's new build. I won't disagree with the opportunity – but I've never thought McGuinty would commit to new nuclear.  His primary challenger, PC leader Tim Hudak, has mocked his opponents dithering and promised the nuclear industry would receive clear direction from him shortly after a Progressive Conservative victory in the fall.  
Mr. Hudak might want to move up his timetable for having an opinion.