Green Is The Old White

News last week that The European Parliament cancelled their delegation to the UN's Rio+20 summit on sustainable development.  The reason being that the brutish Brazilians didn't know how to host a conference properly:

“The Brazilian government should have taken action to avoid hotels abusing their position. That's also part of the responsibility of hosting such a large conference,” said Dutch Liberal MEP Gerben-Jan Gerbrandy, who was to lead the delegation.

The first Earth Summit, hosted in Rio de Janeiro in 1992 - with Maurice Strong as Conference Secretary General, is remembered for creating a couple of notable things, including; the United Nations Framework Convention on Climate Change, the Convention on Biological Diversity, and the fabled Agenda 21.
It is not remembered for the cost of hotels.

Another article on the European Parliament dropping plans to attend Rio+20 explores more plausible reasons for the European Parliament's actions, including the push-back from poorer nations:

...there is growing evidence that carbon markets are not a solution to tackling the climate crisis or moving towards a low-carbon, sustainable economy. In most cases, the ETS fails to make countries take responsibility for their own emissions, instead allowing them to offset emissions by buying permits from countries from the South.

Relatively small Europe has a couple of world-view adjustments to make.  The first being recognition that being the representative body of roughly 400 million eligible voters won't mean a whole lot in a world where China's middle class exceeds 1 billion people, and India's is close behind.  These large poorer countries have been getting richer while growing emissions, while many rich countries are in the midst of financial crises while constraining emissions.  It's not a political environment old powers are readily adjusting to.  The developing world doesn't want offset dollars - they want power (energy that is).

Table from Outside the Beltway

We hear a lot more about the emissions scorecard than the poverty scorecard, where things appear better (much, much, better) in much of the world, with one notable - I hope - exception, in Sub-Saharan Africa.
Some big issues can be forgotten.

Jo Leinen, member of Social Democratic group at the European Parliament, is quoted as stating:

'The EU must be better, in reducing resources consumption, in improving solidarity with the developing world ... But European governments now have other urgent problems to solve.'

He's not talking about solutions for finding food, or raising a billion people out of poverty.

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Locally, for me:
The latest panel on energy announced, in Ontario, contained 14 names.  I was unable to locate images for 2 members of the Ontario Clean Energy Task Force, Gregory Scallen and James Murphy, but the other 12 don't look, collectively, representative of Ontario's, and particularly Toronto's, diversity.

Without tinted glasses, the new green just looks white.
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A Pale Blue Imitation of Ernie Eves

Tuesday, May 15th, 2012 saw 3 related events:

• former Premier Ernie Eves has his portrait hangedat Queen's Park
• the current government released the first accounting of the residual stranded debt since prior to Eves' Premiership
• the current PC party released a white paper, Paths to Prosperity: Affordable Energy, outlining directions for electricity policies in Ontario.

"Those who don't know history are destined to repeat it."

-Edmund Burke

Ernie Eves became Premier April 15, 2002, after winning the leadership of the PC Party of Ontario; some weeks later he'd win a by-election to gain a seat in the legislature.  The PC leadership campaign was quite divisive - with Eves running against Jim Flaherty (now Finance Minister federally); Flaherty referred to Eves as "a pale pink imitation of Dalton McGuinty," during that campaign.  The only general election contested with Eves leading the party was lost to current Premier McGuinty's Liberals.  Federally Ontario's PC Party would soon disappear, with it's membership primarily moving to the right with the new Conservative Party of Canada.

Between his swearing in April 2002 and the electoral loss October 2, 2003, Premier Eves would deal with the Walkerton crisis, the summer of SARS, and rising hydro rates - but not all his troubles were inflicted by the actions of others.  The 2003 budget was delivered outside of the legislature, at Magna International (coincidentally - or not - where Eves' predecessor would become Chairman of the Board).  The 2003 budget connected job growth with tax cuts - particularly corporate tax cuts.

The summer of 2002 had seen high demand and low supply drive up pricing in Ontario's new wholesale market for electricity:  Eves would take control of the electricity file, freezing rates in December 2002 (retroactive to the start of the market in May 2002), and appearing regularly during the summer of 2003 to update Ontarians on the situation with supply.  During that time he allowed the privatization of Hydro One to die.  

On May 15th, as Eves's image was being hanged, the current government released retroactive calculations indicating Ontario’s Residual Stranded Debt (RSD); a release that featured an enormous $4.4 billion spike between April Fools’ Day 2003 and March 31, 2004.  The actual accounting details were not shared, but they should relate to reduced expectations, during that period, of financial performance at Hydro One and Ontario Power Generation (OPG), or reduced expectations of taxation revenues (I wrote "Retire the Debt Retirement Charge" (DRC) in August 2011, which described revenue streams to retire stranded debt).  

Eves' sole budget, as Premier, did reduce corporate tax rates (presumably reducing PIL expectations), yet it's likely the big jump had more to do with revenues expected from, particularly, OPG.

The introduction of a competitive market, in May 2002, had featured a "Market Power Mitigation Agreement" (MPMA) limiting OPG's rate - and therefore it's market control (in 2001 OPG had generated over 140TWh - which is about our annual consumption now - so there was a control put on their market pricing power) .   The commodity price of electricity is the last price accepted in a reverse auction (IESO description of the process).  Functionally, OPG would not set rates when the price was above levels set in the MPMA agreement - the smaller market participants would.  As rates went up after the market began in May 2002, OPG would get the higher wholesale rate, but be required to rescind that MPMA amount; OPG's 2005 annual report indicates that over the first 36 months of the market:

"earnings and liquidity were severely impacted by the requirement to rebate a significant portion of its revenues under the Market Power Mitigation Agreement. In total, the Market Power Mitigation Agreement rebate amounted to $4 billion over this period.

This is where Eves' rate freeze enters the picture - about 6 months into the competitive market smaller consumers were guaranteed lower rates to appease their anger over what were, in hindsight, normalized rates.  The average wholesale market price for May-Dec 2002 was $55.92/MWh.  For 2011 it was $71.95/MWh (including the global adjustment).  That increase, of about 30%, is about average in US states.  But 5.6 cents/kWh was judged, by the Eves regime, as too rich for Ontario's voters.  The solution was to abandon the market at the consumer level by setting rates as low as 4.4 cents/kWh .  The difference between the wholesale market cost, and the consumer's lowered payments, became the responsibility of the Ontario Electricity Financial Corporation (OEFC).  The OEFC 2004 Annual Report noted figures for the program designed to handle the financing of the price freeze:

Expenditures from the Fund during the year amounting to $643 million (March 2003 - $1,461 million) have been reduced by a portion of the rebate from OPG due under the Market Power Mitigation Agreement (MPMA) in the amount of $390 million (March 2003 - $796 million) leaving a net cost in OEFC of $253 million (March 2003 - $665 million).

What Eves did was to rescind to taxpayers all of the MPMA pot, plus another $918 million of debt.     When the MPMA collections exceeded the OEFC's obligations the following year, the moneys were rebated to consumers, instead of paying down portions of the debt created by the program!

While the residual stranded debt accounting could be distrusted, as it comes 8 years late, it seems plausible in less than 1.5 years in office, Premier Eves did burden Ontario with billions of additional debt in pandering to consumers.

The Premier presiding over the hanging ceremony, of the Eves portrait, has done the same; with the new accounting showing the residual stranded debt rising from April 1, 2009 to March 31, 2011.  Eves' corporate tax cuts were brought back in McGuinty's 2009 budget with a coincidental increase in residual stranded debt for the same period now being indicated (presumably reducing PIL expectations).    Now, as then, OPG is funding others, as it's production is resold for far more than it receives for it.  The main difference is that whereas the early years of the market saw the difference go to the smallest consumers, the difference now goes, via the Global Adjustment mechanism, to pay far higher contracted rates with private producers (see Duncan's Grow-Op is Stealing Hydro).  Aside from the corporatist's twist on redistributing wealth from pubic OPG to private producers, Premier McGuinty's introduction of a 10% discount through a deceptively named "Ontario Clean Energy Benefit" (OCEB) takes approximately $1 billion a year from the treasury to discount residential and small  business electricity bills - eliminating the pay-as-you-go electricity principle with taxpayer subsidized usage.   The forward forecast for the reduction in the residual stranded debt is similar to the expected costs, to the treasury, of the OCEB.

The third event on May 15the was the release of the PC's white paper on Affordable Energy.  The paper is not comprehensive, and the headline associated in the reports it did receive was on the partial privatization of Hydro One and Ontario Power Generation - described in the paper as a path to "monetize OPG and Hydro One."  I'd suggest selling public assets is not necessary to realize monetary value from them; the first step would be not to intentionally devalue them - as Eves and Mcguinty have been doing to OPG for the past decade.

There wasn't a lot of detail in the white paper, there was enough to indicate PC leader Hudak remembers back a decade, to his days flipping pink waffles in supporting Mr. Flaherty's campaign to lead a conservative party.

Before a pale pink premier ... succeeded by a pale blue one.

Not the News: The Toronto Star's Electricity Sector Coverage

On the day Ontario's official opposition party, Tim Hudak's Progressive Conservative Party, released a white paper on energy policy, the Toronto Star published, as front page news, a story that seemed to be about the expensive nuclear generation in Ontario – although it didn't actually provide a price figure. The Star report is structured as if it was built around the Power Advisory report cited in the article; a report created for the Ontario Energy Board. That report is dated April 20th, 2012 – and contains no information created after 2010.

The report provides figures for nuclear units operated by OPG for 2008-2010, and those figures show declining performance. The report does note that OPG's reporting had attributed the reduced performance factors in 2009 and 2010 to Vacuum Buildign Outages (VBO – 2009 at Darlington and 2010 at Pickering). The Power Advisory report didn't note that any idiot could confirm that ... nor did it confirm it.

49 days prior to the date on the Power Advisory (PA) report, on March 2, 2012, Ontario Power Generation released it's 2011 Financial results.  Using some of the figures available in that report, I can come up with a pretty good estimate of 2011 to add to the stale-dated Table 2 in the PA report: 

		Darlington	Pickering A	Pickering B	Totals
Capacity (MW)		3512	1030	2064	6606
	2011	29.3	6.1	13.8	48.6
Net Generation (TWh)	2010	26.5	5.5	13.7	45.7
	2009	26	5.7	15.1	46.8
	2008	28.9	6.4	12.9	46.8
	2011	95.2%	67.9%	76.2%	84.0%
Unit Capability Factor	2010	87.6%	62.4%	76.3%	80.1%
	2009	85.9%	64.2%	84.0%	81.9%
	2008	94.5%	71.8%	71.4%	83.7%

2011 looks like a better year than any of the 3 preceding years – and the value of reporting based on aged data that, based only on 3 years,  including two years with vacuum building outages (which occur once a decade, per site), is questionable.

The report does note Benchmarking reports done by ScottMadden Inc. The second of these was filed with the OEB, as EB-2010-008, on May 26th, 2010 (although the report was delivered to OPG).  This valuable ScottMadden report provided the following figures: 

Metric	Best Quartile	Median	Pickering A	Pickering B	Darlington
3-Year Total Generating Costs per MWh ($/Net MWh)	$28.66	$32.31	$92.27	$58.68	$30.08
3-Year Non-Fuel Operating Costs per MWh ($/Net MWh)	$18.06	$21.28	$82.62	$50.95	$25.10
3-Year Fuel Costs per MWh ($/Net MWh)	$5.02	$5.37	$2.64	$2.68	$2.62
3-Year Capital Costs per MW DER	$32.79	$46.22	$32.07	$32.44	$18.79

This table (which is actually for even older data) shows the basis for The Toronto Star's claim: “Pickering A’s cost per megawatt hour was close to triple the industry median. Pickering B’s costs were nearly double the industry standard.” It's worth noting that even at 3 times the price it was cheaper than the new supply being procured in 2010, and with 1/3 of the Pickering units at $93/MWh and 2/3 of the units at $59, the average price was around $70 for Pickering – which isn't far off Bruce A's figures, and what Ontarians paid for what they consumed in 2010.

Is it strange John Spears didn't note the high price was $92.27/MWh, in a province where new procurement has been starting at $135 despite a glut of supply – or that he failed to note the improved 2011 results?

I don't think so.   I think it's disappointing the article tackled the issue pointlessly instead of finding an opportunity to report on the benchmarking that occurred being followed by a movement in the right direction on production, OM&A expenditure, and profit metrics.   It also is surprising that Mr. Spears actually ignored the point of the Power Advisory report - which was to explore mechanisms the Ontario Energy Board might use to set rates for Ontario Power Generation (OPG).  OPG's output is now sold for about $2 billion more, each year, than they are paid for it's production (noted here); it's not the area I'd prioritize for controlling costs.  Regardless, the reason the Power Advisory report existed wasn't part of the news report citing it.

I doubt the point of John Spears' “Pickering nuclear units among the most expensive, least reliable in the world" was to report the news.

Quite the opposite. It seemed timed to distract from news ... of the Ontario PC's position paper.

Monthly Ontario Electricity Export Figures

Every month Ontario's Ministry of Energy puts out an offensively dishonest misinterpretation of our electricity export profit/loss ledger.
It is here for April now:

Electricity Exports Continue to Generate Revenue:

"Ontario's electricity market generated over $20 million in April by exporting electricity to other states and provinces, bringing total net export revenues to over $75 million this year.
This revenue helps Ontario:

• Keep costs down for families
• Build and maintain a clean, reliable and modern electricity system"

Here's a shorthand way to calculate how this absolutely does not "keep costs down for families."



"Total Market Demand" includes both Ontario Demand, and exports.  The value of 1 MWh of electricity, within that market, is the average Hourly Ontario Electricity Price (HOEP).  The amount recovered by the HOEP is not enough to meet Ontario's contracted obligations to suppliers (and the OPA), so the difference is collected through a mechanism called the Global Adjustment (GA).

Total Market Value = [Total Market Demand]*[HOEP] + [GA]

For April, the Total Market Value demand is estimated as $796.1 million, with 209.3 of that from the market HOEP, and the remainder from the Global Adjustment.

Average Price = [Total Market Value]/[Total Market Consumption]

For April, the total market demand was 12.16TWh, so the average price was $65.45.  This is the amount all consumers would pay if all consumers paid the same.
But they don't.  Large industrial users now get a break, but the big difference is that export customers don't pay the global adjustment portion.  For April, that means the average price paid was $65.45/MWh, but export customers paid $17.21/MWh

Export Subsidy = [Total Net Exports]*[Average Price] - [Total Net Exports]*[HOEP]
For April, Net Exports of 1.05TWh had a value of $69 million at the  Average Price , but were sold for around $20 million, so the other $49 million has to be paid by somebody else.

Specifically, Ontario families.

The figures on export sales are estimates based only on the HOEP (hourly Ontario Energy Price) - in actuality export customers pay different rates.  Because Ontario's market pricing is lower, sometimes much lower, than adjacent jurisdictions, it appears from both the ministry 'news' releases, and National Energy Board reporting, we generally export power about 10% above the HOEP rates.  The above formula's yield a figure of $18.15 million for the net export amount the ministry provides as "over $20 million".

Looking at some other figures from the same dataset, we'd expect to see the retail price plan moving away from the Average Price I have calculated for the entire market - and we do.   The graph shows consumer rates start far below market rates (during Ontario's peak demand year of 2005), but since 2010's arrival, the combination of removing Ontario's largest industrial customers from the full impact of the traditional global adjustment mechanism, and the inability to curtail cheap exports, are moving rates higher for "Ontario families" even as the Average Price, taking into account all market segments, has been relatively stable.

That stability is unlikely to continue.


The google spreadsheet, including the graphs, is here

Surplus Baseload Generation, and Supply Curtailment

Ontario's electricity supply challenges include curtailing supply when it is too abundant, and Ontario's Independent Electricity Supply Operator (IESO) has been working towards better management of the supply through better information.  This short post is a question for the IESO; readers of this blog may feel compelled to request similar information.

Ratepayers have been charged to set up central wind forecasting. I was of the understanding that the "Forecast Surplus Baseload Generation Report" changed with the introduction of this central forecasting.

• Forecasted weather is used to determine Ontario Demand and Wind Generation as part of the SBG calculation. 
• The following assumptions are made when forecasting SBG: 
• Baseload energy is the sum of all available nuclear, must-run hydroelectric, self-scheduling, commissioning and intermittent generators.
• The Export Forecast is based on available tie-line capacity and historical exports.
• The must-run hydroelectric is an estimate arrived at from information provided by the Generators. 
• Only surplus generation is displayed in the report.
• Minimum Generation Alerts are indicated up to four days in advance of real time when SBG is expected to exceed forecasted exports for more than 2 hours (Days 1-2) and 4 hours (Days 3-4). See SSR and SAA for additional information including Minimum Generation Event notifications.

The report for May 3rd showed alerts for May 4th and 5th and 6th.   Coincidentally, there appears to have been some non-utility generators idled, presumably at a cost, from late Friday evening to Monday morning (the 4th -7th of May).

The SBG report for the 3rd, seemed to call for this action, because it showed alerts for the 4th, 5th and 6th.  I've highlighted hours where "SBG is [was] expected to exceed forecasted exports"

Date	Surplus Baseload Generation for Hour
	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19	20	21	22	23	24	Export Forecast	Min Generation Status
2012-05-04	2202	2409	2401	2253	1761	995	654	616									247	553	1140	1128	1511	1633	1294	1405	1700	Alert
2012-05-05	1195	1291	1472	1262	1122	1000	468	403	215	241	363	457	587	548	637	1117	1293	1544	1533	990	840	1234	1760	982	1700	Alert
2012-05-06	1367	1539	1744	1733	1598	1739	1425	1350	1103	1195	1101	991	1123	926	664	1093	1219	1560	1741	1331	865	1464	2181	1324	2200	Alert

Supply was curtailed entering the weekend, presumably based on Surplus conditions, but the conditions that are stated to cause an Alert were not present on either the 5th or the 6th.

I would appreciate the IESO clarifying;

• Was the "Alert" status for the 5th and 6th in error
• Is supply curtailment action instigated by SBG alerts
• Is the "Alert" status programmed, and, if so, how does the program trigger the 'Alert' status (clearly it is not as described on the cited web page)

My guess is that available export possibilities are shrinking, and if that is the case forecasting involved in SE-91 talks would be impacted (as curtailment will be necessary more often).
Transparency on this matter may allow investors to curtail spending on generation which will have lower utilization rates than previously anticipated.

Dead for Left: Greenpeace has a new lie

"Nuclear Main Source of Increased Electricity Prices In Ontario" was posted to the Greenpeace Canada site yesterday, by Shawn-Patrick Stensil.  The piece was timed to defuse the news around price hikes effective May 1st, and coordinated with remarks by the formerly socialist NDP party's marginal leader Andrea Horwath.   Green Party leader Mike Schreiner was parroting the message, "OEB report reveals nuclear causing electricity rates" on Twitter, and Energy Probe's Norm Rubin was on one site bleating he was "impressed with SP Stensil's recent analysis of OEB reports showing OEB's nukes are responsible for way more of our rate increase than the FIT renewables."  It's a lot of support for an idiotic spin either done deliberately to deceive, or simply out of ignorance and a fear of big numbers.

The premise of Greenpeace's position is that the Global Adjustment (GA) is the increase in electricity bills - with a figure from the OEB's Market Surveillance Panel's latest report.  On page 59 the MSP report states 45% of the GA is attributable to nuclear units, and on the next page states 6 percent is attributable to 'renewable assets.'  Stensil stupidly opens with "Nuclear has been responsible for 45% of recent increases on your electricity bill. Meanwhile, the impact of renewables on your electricity bill has been minor – about 6%."  

The global adjustment (GA) is one component of the commodity charge on many bills in Ontario; the other being the Hourly Ontario Energy Price (HOEP).   Because most supply is guaranteed a price in advance, much of it on a must-take basis, at the end of the month the difference between what was paid at the market, HOEP, price, and what was paid to suppliers, must be recovered from Ontario's consumers - the Global Adjustment is the mechanism to do this.  But the total of HOEP recoveries, and GA recoveries, is what is relevant.  As the first chart, of 12 month moving average show, the total value of the commodity charges from the entire market is currently a little over $10 billion - and less than it was at the end of 2005.  The HOEP has been recovering a diminishing amount of that total, so the global adjustment is recovering more.

Most people equate electricity pricing with $/MWh - which is, for those capable of thinking about it, a fraction.  The denominator hasn't moved much, so if the figure has changed, clearly the denominator has.  The graph shows the 12-month moving total market demand, and a price calculated by taking all market and global adjustment charges and divided by the total market consumption.   Notice the price is currently around $66/MWh.  Average residential and small business/commercial pricing, from the OEB, moved from $75.65 in April to $80.69 in May.  The difference between the $66 and $76 is actually the point of the OEB report Greenpeace so deliberately misunderstands - it's about the cost to the rest of Ontario of the removal of Ontario's largest electricity consumers from the previous global adjustment model, which shrinks the denominator, and therefore inflates the rate, for the rest of the province.

Demand peaked in 2005, and when it started to drop, total pricing (GA plus HOEP) corrected and consumers benefited.  When demand collapsed in 2008/09, pricing continued inflating, and that is because of over-contracting of supply.  The contracted supply during this period is renewables and natural gas - the natural gas having net revenue requirement (NRR) requirement because they don't run as much as those in a competitive market would (they are to back up the renewables).  During this period, it is the increased supply and decreased demand that not only has driven up prices, but prevented consumers from recognizing savings in reduced consumption (which is a bizarre thing for environmentalist to oppose, and something socialist should support).

The growing impact of the global adjustment does impact Ontario's electricity sector a number of ways.  The one I write most frequently about is that export customers aren't charged it.  Over the most recent 12-month period, this means we've averaged $66/MWh in expenses, and exported at a little over $26/MWh.  That results in a loss of $526 million.  Again the cost isn't easily attributed to a single generation type, but a general procurement orgy that has bred too much supply.

The OEB article is about the shrinking of the group that the global adjustment is applied to.  John Spears "You Pay higher hydro bills, big business pays less" dealt with the same OEB MSP report, and the cost impacts of the GA changes were best dealt with long ago by Aegent Energy Advisors -and also recently on this blog.

It isn't interesting that Greenpeace is afraid of big numbers - it's especially understandable given their inability to comprehend them.
It is disturbing that Ontario's traditional left-wing party has abandoned the lower income households in Ontario in order to wage Greenpeace's war on nuclear ... and truth.

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The spreadsheet with data, and graphs, used in this entry is here