Response to Comments on Power Dumping

It was an honour to work with Parker Gallant on “Ontario's Power Trip: Power dumping.”  I wanted to follow-up on some of the comments now attached to the article.  I don't do this necessarily as a response to the commentators, but some of the arguments recur frequently in government and ENGO releases, so I have worked on some responses.

Kevin Hryclik noted we should be thinking about storage solutions. While this is outside the scope of the article, I'll note here that the IESO's December 2009 “The Ontario Reliability Outlook” noted challenges both in storage technology and the economic ability to integrate it:

“System operators and regulators alike are contemplating how to integrate new storage technologies into the system: how to dispatch them, who should own them and how to pay for them; whether storage facilities should pay the same uplifts and tariffs as other loads when they withdraw energy from the grid; and then whether they should receive the same payments as other producers when they inject it.”

I did not find the word 'storage' in the IESO's 18-Month outlook from this June, 18 months after that quote was printed. I suspect the reason for that is there is little reason to have storage support renewables – if you need some gas, or coal, or nuclear, supply, all run cheaper when not following load, and storage would make as much sense for running coal in baseload mode as it would for supporting wind.  Arnold Guetta is therefore right to be dubious.

Michael Tiffe wondered why you wouldn't just hold off on hydro sources while it is windy, and suggests this may be a management issue. Because we don't have reservoir hydro here, so you largely lack that ability  – but there is a broader answer encompassing other markets too (see Quebec trade later in article). As with storage, my response would be when you introduce intermittent sources you reduce the efficiency of other sources – if that is Beck it means water over the falls, as it can mean with other falls elsewhere.

Oriel Mendeovitz points out some research that could be done in introducing other “fat cat” contracts, 'deemed' generation, etc. The figures in this article for wind and exports are far less than the total 'subsidy', which is the Global Adjustment (essentially).  Other investigations into cost are on my blog - I'd suggest the review of May's record for an overview.

Geoff Olynyk joins in the wish emissions are being reduced by renewables. Maybe yes but certainly not during periods, which are frequent, when steam bypass is implemented (at Bruce B), or water goes over Niagara Falls instead of through turbines. There's a difference between peaking generation and intermediate generation these posters should explore.

Alan Fox's suggestion on the possible redemption through electric cars, might be partially in jest, but increasing consumption is a solution, and doing so by replacing fossil fuels in transportation is a laudable way to do that.  Unfortunately some forecasts have us in a shortfall for generation by 2017 as renewables/gas hope to displace nuclear.  It's less than clear that electric cars will be an affordable way to electrify transportation – which is again related to 'storage' technologies.

Rick Coates knows more than I do about the operation of the IESO – I hope his comments corrected the misperception that the grid operator's mismanagement is a significant issue in the overall cost escalation.

Tom Adam's made some valid points, which I responded to on another site. Most of the criticisms deal with omissions or, in his opinion, oversimplifications. Complex issues are presented in a brief article, so both are somewhat true. The attempt, on my part, was to communicate increasing supply that does not, and cannot, follow demand is driving up exports, and driving down price, and is planned to do so increasingly throughout another half of a decade.  The lower market price drives up the cost of exporting, and the higher price paid for the increased imbalance in our supply chain further drives Ontarians' pricing higher.

Martin Laplante did get the point of the figures, but is predisposed to misinterpret them. Low demand and high supply mean dumping on external markets. The reason Ontario consumers are now paying about 7.3 cents/kWh, for only the electricity, is because the government signed contracts that pushed the price there. The reason we have too much supply is because the government pushed the price there - government contracted supply lacking the ability to follow demand.

Nuclear exists at OPG and Bruce Power. I have gone through reporting for each, crunched some figures, and the contribution of nuclear to the GA is high when the HOEP is low – as Mr. Laplante notes. Yet the big growth in the GA even in years such as 2010, where the HOEP recovers slightly and demand is slightly higher, is not nuclear at all, nor is it the poorly compensated public hydroelectric.  It's the 'other' category, which contains natural gas, renewables, demand reduction programs, etc.

That deals with Mr. Laplante's first deflection, which has enough truth to be stated but not enough to be correct.

Mr. Laplante continues to state that imports/exports exist to ensure every jurisdiction has a “cushion” in the right places. This is an important point that is also kind-of-true. The broader the market the greater the ability to withstand the sudden loss of a significant generation source. But it remains true that on some level, amongst many connected markets, supply must equal demand, so one would assume sometimes Ontario would be an importer, and sometimes an exporter. Yet so far this year there is one singe occurrence of Ontario ending a day as a net importer – and that was April 7^th, a date including an hour where Ontario's 1400MW of wind capacity produced 1 MW of output and on the day wind's capacity factor was under 4%. That is no coincidence.

Mr. Laplante also states that exports exist to recoup revenue that would be lost when you have sources you can't turn off and state,

 “What the prices tell you is that power is being exported at non-peak periods, at night. That hourly data is part of the IESO data that's not being quoted because it contradicts the desired conclusion.” 

Here it is.  It's wasn't quoted because it isn't the key driver of the changes spiking the cost. The figures in the article starts in 2006, in which nuclear production was as high as it has been ever since – and one reason it starts there is to refute the propaganda from the ministry.

I have charted the hourly averages, and the trend is similar – with just the amplitude changing.¹ The first complete year, compared to the last complete year actually shows a flattening of the curve. 2010 is notable for its flattened curve.

This blog started with an entry concerned about a supply mix short on load following capability, and also includes comments on the supply mix critical of the same features. My other blog has many articles on how to increase the responsiveness of nuclear to account for supply curtailment too.

More recently I started capturing the hourly production figures by source, and the intertie data by destination. These are very instructive as to why the line is flattening.

This chart shows the averages for each hour of day, for July 2011 as of the 21^st. Two things are notable. One is that the movement is generally one way or the other - with the predicted export from Ontario at night, and import from Quebec in the day.

But for everybody else (largely Michigan and New York), Ontario's exports have really kicked in during the peak demand periods.

During our winter peak, at 7pm on January 11^th, we were net exporters of 2,721MW. It seem Ontario's operators are taking advantage of any instance where the market price (we'll use the HOEP) is above the marginal cost of production for coal and gas, over a period of time. Rick Coates comments later that nuclear is not the only source that needs to produce output aside from a brief demand period. All of our CCGT, contracted, will run better for more hours, and the price of starting a coal unit I've seen quoted as high as $80,000 (including equipment depreciation from wear)– so once they are hot, you want to keep them hot.  The HOEP averages, by hour, so far this month, therefore reflect the trend in non-QC exports:

We are driving up the price through contracting supply that cannot follow demand, and we are masking the total costs of that policy during peak pricing periods by running coal and gas production whenever it can be exported above the cost of production.  

Martin Laplante ended with “Oh, and if you want the actual IESO figures, in 2010 we exported 567.4 million dollars worth of electricity at 3.7 cents per kWh, and imported 247.6 million at 3.8 cents per kWh.” This continues the fantasy that there isn't a cost of production to the exported product, so I'll reiterate the figures he gives are correct, but his thinking incorrect.

Following is a database query result, with the calculations by hour, but here's how to get similar figures with summary figures. The Global Adjustment (GA) plus the Hourly Ontario Energy Price (HOEP) is defined, by the IESO², as 'the cost' of electricity. Exports are sold without the Global Adjustment, so exports multiplied by the GA estimates the loss (the HOEP is used in my hourly method). Imports are purchased at what is considered their cost in Ontario, but end consumers pay the GA on this power. So that could be considered a profit. The figures shown in the table within the article are more accurately derived from query of hourly figures, with total revenues (the HOEP on exports, both the GA and HOEP on imports), subtracted from the costs (the GA and HOEP on exports, only the HOEP on imports). The query output here  includes an additional week of data for 2011 than that in Thursday's article.

Year	Imports (TWh)	Import Revenue ($M's)	Import Expense ($M's)	Exports (TWh)	Export Revenue ($M's)	Export Expense ($M's)	Revenues ($M's)	Expenses ($M's)	Profit/Loss ($M's)
2006	6.2	$341.30	$318.22	11.4	$502.81	$548.83	$844.11	$867.05	-$22.94
2007	7.2	$410.46	$381.25	12.3	$570.37	$618.34	$980.83	$999.60	-$18.77
2008	11.3	$659.72	$593.17	22.2	$1,096.46	$1,234.22	$1,756.18	$1,827.39	-$71.20
2009	4.8	$309.90	$163.46	15.1	$461.50	$912.63	$771.40	$1,076.10	-$304.70
2010	6.4	$417.88	$247.75	15.2	$549.18	$973.60	$967.06	$1,221.36	-$254.30
2011	2.2	$166.92	$81.14	7.9	$239.97	$563.09	$406.89	$644.22	-$237.33

I would note this table is a specific response to ministry press releases - a more polite response than I have previously written.  Ontarians may not care about the import portions of this equation, which wouldn't change much if we did address the actual $1.4 billion shortfall in the pure export figures.

1I could map the data as YTD which would likely show the hump from 2011 in all years, as I assume it reflects our spring freshet coinciding with our weakest demand period.

2Definition of cost is 2^nd final paragraph here, Import/Export figures are at the bottom of this page, and GA figures are available at, or linked from, this page.

Ontario’s Power Trip: Power dumping

Ontario’s Power Trip: Power dumping | FP Comment | Financial Post

The article is by Parker Gallant and myself, Scott Luft.

"During the spring months in Ontario, the winds blow a lot. For companies in the wind-power business, that’s good news. For the province’s electricity consumers, though, it’s another financial disaster that, on an annual basis, drains up to $400-million out of consumers’ pockets. But that money doesn’t directly fund green electricity for Ontarians who pay for it. Instead, the bulk of wind power is essentially surplus power that is exported to the United States and out of province at rock-bottom prices. Ontarians are paying $135 for units of power that are dumped on the export market at prices as low as $20. Sometimes, Ontario has to pay other jurisdictions to take the surplus off its hands."

... more

The Fog Around Emissions From Electricity Generation

I've been mulling over tackling this topic since the ENGO's launched a campaign, to support the Green Energy Act and related FIT lotteries, built around implications of increasingly large heath costs due to the use of coal plants - despite a 90% reduction in the use of those coal plants. Recently there's been a great deal of news related to the points I thought were pertinent, the primary one being that if pollutants from electricity generation are decreasing, and respiratory problems are increasing, you should probably look at other urban issues,

I'm going to just skip over arguing the background fairly quickly. What I'd like to cover is simply that my province, Ontario, has a pretty clean electricity output compared to adjacent jurisdictions in the US, but that both jurisdictions have made some headway on smog-related emissions. I already noted a site you can go to explore the government line, parroted through their ENGO's, on coal plants being the cause of respiratory issues in the big city, and here's a better place to go for a better understanding of the complex issues involved with smog - and respiratory health. No doubt burning anything can contribute to smog, but there is something deceptive in implying respiratory problems are rising due to the coal use that has been rapidly declining - as others, including Ross McKitrick, have pointed out.

A quick word on the data for the following charts. The Ontario data is taken from first the National Inventory report for 2009 (page 50 of Part III), and secondly from the 2004 Inventory (Page 364). Bizarrely the two don't exactly match. Between reporting 2009 estimates in 2011, and 2004's estimates in 2006, we really made a dint in emissions in 1990. Methodology changes. The US data is from the EIA site. I've included California simply due to it's reputation - which I don't get. Keep in mind the figures presented here on volume refer to production, and not consumption - Ontario imported a great volume of electricity in 1990, and by 2008 it was exporting a lot. The situation is reversed for New York state.

The urgency for many is CO2 emissions, which show Ontario starting out as the lowest and staying there. 1994 was the peak for nuclear production in Ontario (60% of the total) - then we closed some units and ran more coal, but by 2005 we'd returned 4 of the idled units.

This is a little skewed to smaller producers, so here's the production totals. I emphasize the majority of Ontario's production change, from 1990 to 2009, is due to a move from importing to exporting.

Put these together and you get a surprisingly stable emissions rate/intensity picture:

Not a whole lot of moving about in the order there. But that's just the CO2 story - and I think that story is pretty simple. If you don't produce it with hydro produce it with nuclear - all else is fiddling while, if you concur with most on the science, earth burns.

 

But the smog picture is entirely different. US EPA ruguations were introduced last week to address cross border emissions, largely on NOx and SO2 and with the specific intent of addressing the ground level ozone ingredients that can be detrimental to health. All the states graphed, with the exception of California, are included in those regulations.

All were already making some progress.

 

Tyler Hamilton stated that “on average 55 per cent of air pollution comes into southern Ontario from the United States.” I'm very skeptical that is true. What few realize is the extent to which adjacent states' emissions have already been dropping. 

Michigan clearly has some improving to do (I've previously noted their supply mix - heavy on coal - here)

So everything should be getting better - and there seemed to be indications in southwestern Ontario, and the GTA, that things are. Smog days are again a rarity, instead of the weekly occurance they were in 2003-2005.

And yet the medical folks still are claiming not only increased respiratory troubles, but it is once again being noted, internationally, that city dwellers just don't live as long as country folks.

Because of air quarlity..

From Hamilton, Ontario to London, England the debate may be starting up on how to make cities better places to breath.

I think that would be a great debate to have. I don't think the data supports that electricity generation improvements can do much more in improving urban air quality.

Pembina is an Oilfield

An article in the Toronto Star, Don't blame green power: Energy bills rising anyway, alerted me to the latest marketing pitch from the Pembina Institute. Behind the Swithch, Pricing Ontario Electricity Options is the latest propaganda release. It claims to consider 2 scenarios: in one Ontario's Green Energy Act (rumoured to have been penned by a cabal including Pembina) continues to gut Ontario, and an allegedly worse one where the the legislation is dismantled and somehow a greater reliance on fossil fuels is the outcome. They then make some bad assumptions which serve to deceive Ontario about the impacts, on pricing, the scenarios are expected to have.

The Pembina report notes, in the assumptions for it's first scenario (which is that McGuinty is re-elected and Pembina and Green Energy Alliance co-conspirators continue to write government policy in Ontario), “as additional renewable supply comes on line and demand grows, the gas share of the generation mix decline from roughly 15 per cent in 2010 to 8 per cent by 2030.” They fail to account for the low capacity factor in pricing, and in emissions, forecasts. Page 17 (26 of the .pdf) shows a list of natural gas generating sites, 5 of which are the CCGT group I have noted as contributing to the excessive price of natural gas supply in Ontario,¹  as the contracts awarded them carry a Net Revenue Requirement of $7900/MWmonth.  The less we use these suppliers, the more expensive supply, per MWh, is. Additionally, CCGT is not constructed to do what Pembina is proposing it must do. The emissions from generation at 8% are likely to be far, far, greater than they have modeled.², The Appendix has a number of tables loaded with figures that make it clear the authors of the report cannot responsibly estimate pricing, or emissions, with the assumptions they've erred in making.

The assumptions for the second scenario, (McGuinty loses and the GEA, and the FIT programs, are put to an immediate death) are worse. Pembina mistakenly claims “However, both hydropower and — to a much larger extent — natural gas increase their installed capacity as well as their output relative to Scenario 1 as they largely replace wind and solar.” This is nonsense. All the capacity to back-up intermittent wind and solar is already in the natural gas generation capacity.  The replacement is running the CCGT as the intermediate source it is constructed to be, not as the inefficient and costly peaking source, diminished to a supporting role to service intermittent and unreliable generation sources, it is currently forced into.³

The IESO prepares an 18-Month Outlook that will help people understand that, at most, 20% of wind would need to be replaced with additional natural gas capacity. Table 4.1 of the supporting spreadsheet shows winds 'forecast capability at summer peak” to be 189MW, out of 1334MW of installed capacity.  That 14.2% is actually about the mean for wind production during the peak summer months, so the IESO forecast is likely to be optimistic half the time. It is an act of self-delusion, or deliberate deceit, to claim wind capacity would need to be replaced in order to meet demand requirements.

The net impacts on pricing that are predicted in the Pembina report should be ignored, and the report itself can be viewed along with the recent propaganda piece prepared for CANwea, which inadvertenly indicated an increase in emissions after 2015, as Ontario once again drops to become a net importer of electricity.⁴ This is a strange goal for 2018 - in a report justifying the excessive costs of unreliable generation. Pembina is more careful, but in the end their claims will have the same results. 

The strategy is to add so much generation in the short run, that the economics of adding new baseload sources, especially nuclear, will make the projects unthinkable. They are not only being successful on that front, but a beneficial side affect, for Albertans, has been the blossoming of Alberta's energy interests in Ontario's electricity system. In 2009 and 2010, over half of the wind and CCGT projects the IESO notes as being added to Ontario's generation capacity, are owned by TransCanada, Enbridge or TransAlta:

	MW Capacity	Owner
Portlands Energy Centre	550.0	TransCanada Energy Ltd (partner with OPG)
Halton Hills Generating Station	641.5	TransCanada Corporation
Enbridge Ontario Wind Farm	181.5	Enbridge
Talbot Windfarm	98.9	Enbridge
Wolfe Isand Wind Project	197.8	TransAlta Energy

It isn't difficult to see where these 'stakeholders' identified by Ontario's Liberal government are based. All of these projects are protected from the uncertainty of market forces through the lucrative contracts gifted by the McGuinty regime. It is remarkable in a North American electricity environment where prices are so depressed that Ontario has chosen to spend so much on not only unneeded intermittent generation, but more remarkably, Ontario has found the ability to drive up the cost of natural gas generation for it's citizens.

This the Ontario Pembina warns should not change tack.

Everything you need to understand about the Pembina study is on the front page of their report.

Pembina is an oifield.

1 Page 15 of this RPP document 

2 There is some debate, and a wealth of information supporting this statement, at bravenewclimate. Pembina shows emissions figures in the Appendix on page 46, but the figures are useless without calculation at different capacity factors (California is the source of their figures and capacity factors there are not 8% - they are around 30%)

3 Note in figure 10 (pg 18), generation capacity exceeds 40000MW, due to the need to duplicate capacity for renewables as figure 9 (pg 16), shows where peak load kicks in around 20000MW (since 2008, Ontario exceeds 20000MW in demand about 6% of the time - less in 2011 than in the history of the IESO data). Figure 11 should be far lower than figure 10.

4 Drop in accepted emissions estimated for coal and natural gas generation into Appendix 1 of their report.

Ontario's Electricity System Halfway into 2011

Ontario's electricity sector experienced more of the same during the first half of the year - which continues to betray the ongoing mistakes of the government and the Ontario Power Authority (OPA).

The headline figures for the first half the year, when June's numbers are finalized in a couple of weeks, should be anemic demand growth accompanied by inflation in pricing of almost 10%. But the same headlines should have been written one year ago. Instead, Ontario's residents continue to be subjected to errant implications an insatiable appetite for ever more electricity is driving the price hikes.

With supply mix issues in the forefront, including the demon wind and the sale/disposal of AECL this week, I thought I'd review what the supply mix actually was, in terms of production, over the first half of this, and past, years. The quick visuals show that the big growth stories (since 2004) have been nuclear, and natural gas - with coal the obvious target of reductions.

The government has been fairly consistent in noting a desire for about 50% of the supply being provided by nuclear power. The supply mix I've shown is production, which includes electricity that gets exported. In the first half of 2011, nuclear power generated about 42.5 TWh of electricity, and Ontario consumed about 70.2 TWh - so nuclear production was over 60% of Ontario consumption.  I am a strong supporter of nuclear, and I invite readers to view Donald Jones' Alternative Long-Term Energy Plan, but currently only 2 reactors at Bruce B are consistently used in demand response actions by the IESO.  There is a flexibility issue with output from our current nuclear, and that is why the plans kept it at 50%.  I'd prefer the flexibility issue was addressed, but that's a separate issue.

To understand how we got to the elevated share of nuclear, it's important to note the government's agencies' belief in what was going to happen with demand, and illustrate that against what did happen. I would argue 2011 is likely to come in below 2010 levels, so we see that in 2004 forecasts were too high, just as they were in 1989, when Ontario Hydro prepared “Providing the Balance of Power”. That document should have provided a warning as it wrongly predicted annualized growth of 2.2% over the 25 years to 2014. In 1989 Ontario's demand was 140.7 TWh, which is right about where we are heading in 2011.

The problem with the inability to accurately foresee the future is the planning for the future which fails to account for the possibility of error. We see this in numerous ways. One of those frequently noted on this blog is the desperate need to dump exports. I noted yet another indicator of this trend the other day in looking at data changes since 2005 - the year of peak electricity demand in Ontario. This graph shows 12-month running totals where the growth in exports (shown as negative imports) end up almost exactly matching the decline in Ontario demand over that time - so cuts in demand are not met with cuts in overall production, but through increased exports.

The problem with this need to export is it has come at a time when the price of electricity is very depressed not only in Ontario, but in our primary export markets, which also saw demand peak in 2005 (although their declines have been less severe). I've been tracking, again as 12-month running totals, the difference between what export markets pay for Ontario electricity, and what Ontario residents/businesses would pay for the same amount of electricity. I've defined that as a subsidy. One notable from the first half of 2011 is this figure is at a new all-time high.

There are 2 factors that have driven the estimated annual 'subsidy' back up above half a billion dollars. The volume is one, and the other is the amount of the global adjustment. Almost all Ontario supply is contracted (one reason it can't be easily cut), but the IESO does operate a market, and the market price has indicated supply gluts as the Hourly Ontario Energy Price (HOEP) has dropped. The difference between the contracted totals, and the totals recovered by the HOEP pricing, comprises the bulk of the amount charged back to the customers of Ontario's Wholesale Market as the Global Adjustment (GA) - so export customers pay only the HOEP, and Ontario customers pay the HOEP plus the Global Adjustment.

Reducing emissions has  been the target of Ontario's electricity policies. Estimating emissions related to electricity generation, we see emissions have been reduced, and it does relate to the reduction of coal use.

Again the figures are relative to the peak demand year of 2005, and the chart indicates the variance to that (earlier the same dataset showed the relationship between declining demand and growing exports). These are my own lame estimates, of only CO2e based on 0.85MT/MWh for Coal, and 0.5 MT/MWh for gas. Unfortunately, this method matches up pretty well to the figures for Ontario emissions shown in Canada's GHG reporting. The reason for that is we don't actually measure emissions at the source, despite the increasing body of evidence that more intermittent generation (wind and solar) increases the emissions intensity of the natural gas back-up systems. GE is now targeting the performance, as back-up to intermittent sources, in its latest natural gas turbine designs, while across the world natural gas lobby groups are targeting governments to provide 'capacity' payments as they sell a blend of wind and gas supply.

It is in the relationship of intermittent, or 'green', generation sources, and natural gas back-up supply, that we have received the large price increases in Ontario, even as we have seen demand crumbling. Ontario could be cited as a world leader for its contracts with the big 5 CCGT installations that became operational since 2007, all of which basically receive capacity payment. Earlier this year a leading US electricity executive declared his company “almost as dependent on natural gas prices for earnings and growth as a gas exploration company.” Shortly thereafter another former executive was noting depressed prices were a market signal that no new generation should be built, and that gave way to a big push for 'capacity' payments, or subsidies, by the natural gas industry in North America; a call now being echoed across the Atlantic. If other jurisdictions are duped, Ontario will prove to have been a world leader as it figured out how to pay over $100/MWh for natural gas generation while less enlightened jurisdictions paid less than half that amount.

The other 'forward thinking' accomplishment of the first half of the year was the IESO's establishing methods to pay wind producers (and perhaps solar in the future) not to produce electricity. Because of the aggressive targets for adding wind - unneeded and unwanted - the IESO recognized we would increasingly have too much power, contracted by the inept OPA, and the threats to the grid required some action.

In fact they required the opposite of action.

They required the procurement of more supply to stop until there was a plan to avoid paying suppliers not to supply.
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One stat I omitted when first posting, that I think is extremely relevant, is the number of hours of 'high' demand is falling consistently since 2005's peak.  From a supply mix point of view, quite frequently nuclear is providing over 10000MW, hydro is capable of over 5000MW much of the day, and gas should be able to deliver another 5000MW (including over 4000MW of CCGT supply built in the past 4 years).   The law of declining returns is kicking in extra hard as the coal use we are attempting to avoid is necessary fewer, and fewer, and fewer, hours almost every year.