Spin, Spin, Spin: A Star Embarassment

Multiple Toronto Star writers made statements that deserve repudiation yesterday.

Liberal party propagandist Metro Martin Regg Cohn concluded "Where would Tim Hudak take Ontario?" with:

Whether your policy is colour-coded white, green or Tory blue, to lead is to choose. And disclose.

With no undue respect for Mr. Hudak, it's a remarkably stupid statement to be made after the non-disclosure, to the legislature, that would have brought an end to the Liberal government if Mr. Hudak and Ms. Horwath enjoyed respecting the electorate more than they enjoy bitching.  Mr. McGuinty was elected in part on the promise to eliminate coal by 2007 and a promise not to raise taxes.
We know that defined policy is irrelevant to electoral success in Ontairo.  Metro Martin is one explanation of how that is possible.

I follow The Toronto Star's Tyler Hamilton, and often find interesting tidbits is his articles in the Star and on his blog.  Like all entrenched in urban Toronto's fashionable green scene, he's also capable of saying incredibly stupid things.  

Last night, as Sandy was having her way with New York city, Mr. Hamilton tweeted:

Heavy winds good for something. Wind is supplying 7.5% of Ontario electricity demand right now, more than twice what coal is contributing.
— Tyler Hamilton (@Go2CleanBreak) October 29, 2012

If you think more than twice is good, you'd have to be really impressed with 1431 times the output of coal, which is what the IESO's output and capability report shows in Hour 1 of Friday the 26th, when the Hourly Ontario Energy Price was negative $128.09/MWh , and we were purchasing about 1431 MW of wind at around $135/MWh and exporting about 2254MW.
That's a hit of ~$375 thousand dollars.

Mr. Hamilton tweeted during an hour of peak demand (7 pm - although the IESO data must have been showing the 17th hour data still if wind was doubling coal).  By 11 pm the price had gone negative and wind continued producing anyway.  By hour 24 wind was producing 19 times what coal was, purchased for about $155 thousand and sold at a loss of $155 thousand.  Combining the cost of purchases with the costs of sales, from hour 23 of the 29th to hour 6 of the 30th the cost to Ontarians is approximately $2 million.

If wind had been curtailed, at a minimum the $800 thousand of negatively priced exports could have been avoided.  In many parts of the world the dispatching down of wind is done from a distant control room - occasionally the control room of the system operator.

Not here.

That system operator is currently feigning a process on redoing a stakeholder group with the intent of reducing consumer representation and increasing embedded (read solar) representation.  This follows the disappearance of their will to protect consumers in their process for establishing standard operating procedures in curtailing supply during surplus generation events.

The $2 million loss over 7 hours last night is a direct result of the unwillingness of the mainstream media to recognize the issues surrounding the procurement of intermittent generation.

The Canadian Wind Energy Association (CanWEA) was on Twitter the hour after pricing turned positive:

The current wind output in Ontario is 1,262 MW -- Thats enough to meet the electricity needs of Mississauga!
— Canadian Wind Energy (@CANWindEnergy) October 30, 2012

It may have been enough to meet the electricity needs of Mississauga - most of Ontario has one billion reasons not to worry about how the southwestern GTA gets supplied.

It's more likely it was enough to meet the needs of Ann Arbour, Dearborn, and Erie - at that hour exports to the US were 1453MW.

The Weekend: Electricity Facts And Queen's Park Commentary

Quick comments from my review of data for the 42nd week of the year (ended Oct. 23).

Coal: Up - again (7th consecutive week)
Gas: Down
Nuclear: up.
Demand: Flat
Market Pricing: Down

One new thing is a surge in daytime imports from Quebec which, along with a drop in gas generation,  might indicate Quebec is now exporting at prices below the fuel component of gas generation.

In the press this week, efforts to close the door on the gas plant scandals lest the issue drags on and forces journalist to actually learn something about it..

Here's an excerpt from one report that was passed - as analysis of the downfall of Energy Minister Bentley:

By the standards of ministerial accountability, this one could be pinned more directly on Mr. Bentley, and there is some question of whether he waited too long to acknowledge what had happened. But it seems more or less to have been a case of bungling by mid-level bureaucrats at the Energy ministry and the Ontario Power Authority.

 Adam Radwanski

Blaming current events on "mid-level bureaucrats" is too nonsensical to ignore.
So is pinning the burden of responsibility on Minister Bentley.

Let's revisit September 24th: the day the relocation of the Oakville Generating Station was announced.

Minister Bentley's official statement included 2 reference to $40 million:

• The total costs that cannot be repurposed at the new site are approximately $40 million. This includes all payments made in relation to the original site, including the cost of engineering design and permits.
• Over the coming days and weeks you will read and hear lots of numbers related to the cost of the plant relocation. The only accurate cost to taxpayers for this relocation is $40 million.

I've spent a couple of hours surfing through the documents released related to the relocation, and both these statements may well be true, despite being misleading.  Bruce Sharp's $733 million estimate is the best out there, but $693 million of that may be paid by ratepayers (in rates for electricity).   Bentley uses the term "taypayers" and narrows down the description of what constituted the $40 million.

Conversely, the Mississauga plant was stated to cost $180-190 million, and that money was coming out of taxpayers - not ratepayers in the rates they will pay for electricity.

So Mr. Bentley chose his words carefully. 

Premier McGuinty wrote in the Toronto Star, that same day:

This week, our government announced we are relocating a gas plant from Oakville to eastern Ontario. The total cost of the relocation is $40 million. This follows another settlement to move a natural gas plant from Mississauga to Sarnia. The cost of that relocation was $190 million.

There's no carefully chosen words there.
It's dishonest.
The cost is far higher, but it will mostly be paid through higher rates.

Tom Adams has posted searchable versions of released documents related to the scandal of cancelling/relocating the plants.  My first impressions from jumping about with searches - and exchanging some e-mails:

The Oakville plant cancellation was going to cost, and the OPA folks wanted to get some value by awarding a sole-sourced contract to TransCanada for a generating station needed in the Kitchener-Waterloo-Cambridge area.  TransCanada didn't like that option, and the idea was probably dead once Mississauga plant cancellations swung to the Lambton site (both the envisions KWC plant and Mississauga/Lambton are SCGT peaker plants, not directly comparable to the role a CCGT plant, which Oakville was awarded as, would fill.

The stalemate was not broken by mid-level bureaucrats, with the first reference I found to the eventual solution coming from the OPA Chair (pages 303-304 of this .pdf).  Parker Gallant has written the released documents indicate this generating station is anticipated to run at a capacity value of 10% - my work shows if this plant operates that infrequently the cost per MWh will be around $260, while comparable US plants will be producing at around $80/MWh (assuming gas at $7/MMBtu).

The solution announced is not only the responsibility of the top-level politicians and bureaucrats, they forced it upon lower level bureaucrats.

There is no reason to assume that hiding documents for another 2 weeks was not also forced by high level mandarins and politicians - particularly as it has been reported that the Premier knew of the omitted material weeks before the legislature was notified of their existence.

Is it the position of the Globe and Mail that 'mid-level bureaucrats' were muzzling the Premier?

The High Costs of Ontario's very provincial electricity debacle

Ontario's latest electricity sector fiasco is being credited as a major factor in Premier Dalton McGuinty's announcement that he is proroguing the legislature (done), and resigning (not done).  There are some important lessons the global community can learn from the poor example Ontario has provided.

Many regions of the world are struggling with an electricity sector design that can maintain sufficient reliable capacity to meet demand at all times while encouraging intermittent generation from renewable sources that may, or may not, be present when demand is.  The debate on how best to accomplish that in other jurisdictions exists - in Ontario it does not.
While globally jurisdictions weigh the pros and cons of an emergency reserve option, (such as in the Nord pool market), the option of capacity markets (used fairly widely in the United States), or more rigorous attempts at allowing a market to co-ordinate supply and demand (such as in Texas), Ontario displayed it's family compact heritage in providing secretive private contracts that guarantee a monthly net revenue to the lucky recipients of the contracts.
The Net Revenue Requirement (NRR) is a form of capacity payment.

Ontarians should get a full accounting of the cost of moving the plant, but that's not the big cost of the energy policies.

Other jurisdictions should review the tale of a province which embraced capacity payments to find, predictably, that the power generation industry stopped being about the efficient generation of power and became entirely focused on producing contracts that are profitable regardless of whether or not power is produced.

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The Plant That is Relocating a Premier

This week, our government announced we are relocating a gas plant from Oakville to eastern Ontario. The total cost of the relocation is $40 million. 

-Premier Dalton McGuinty, September 24th

The cost of just the move is best estimated at almost 20 times that amount:
The most credible estimate of the cost of relocating the plant is $733 million, as presented by Bruce Sharp.

The government continues to be under well deserved criticism for the costs of relocating the natural gas generation station - both in terms of the actual expense and in terms of hiding the expense from the legislature.  I'll quickly review the history, and note some various figures on the cost being presented, before sharing estimates of the ongoing costs of the electricity plan that has natural gas-fired generation facilities with Net Revenue Requirement (NRR) contracts as a core component.

OPA Graphic: 4 qualified bid locations

• On April Fool's Day, 2009, the Ontario Power Authority (OPA) announced four firms had qualified "to bid on a new natural gas power plant to serve the electricity needs of the rapidly growing southwestern GTA area."
• On September 29th, 2009, the OPA announced, "it will sign a contract with TransCanada Corporation to design, build and operate a 900 megawatt (MW) electricity generating station in Oakville to provide a new, cleaner source of electricity for the growing southwest Greater Toronto Area. This new natural gas power plant will maintain local supply reliability and replace the coal-fired Lakeview generating station."  (note: the original bidder was Portlands Energy L.P. - which is 50/50 Transcanada and Ontario Power Generation partnership).  
• On October 7, 2010, the government announced the Oakville Power Plant would not be moving forward with the explanation, "When the need for this plant was first identified four years ago, there were higher demand projections for electricity in the area."
• On September 24th, 2012, the Minister of Energy announced "an agreement has been reached between the Ontario Power Authority and TransCanada Energy to relocate the proposed 900-megawatt natural gas plant originally planned for Oakville to lands at Ontario Power Generation’s Lennox Generating Station site near Bath, in eastern Ontario’s Lennox and Addington County."

To recap: a plant was sought for one of the few areas of the province still growing demand (demand in Ontario peaked in 2005).  The plant was cancelled with the explanation that demand in that area is now not growing very much.

Your first loss is your best loss

I think many in Oakville would be familiar with this investment saying.  

The relevant, fair, question to ask is what is the cost of this relocation, including the annual additions to the cost of electricity in Ontario, versus the cost of paying the penalty and cancelling the plant.  The cancellation liability rumoured at the time of the cancellation, in 2010, was $1 billion (here).

The plant is now reportedly guaranteed a Net Revenue of $15,200/MWmonth.  For a 900MW plant that equates to $164 million each year, or "$3.28-billion over the 20-year life of the contract." [here]
If the plant is not needed, the cost of relocation and ongoing subsidizing of the plant is far worse than the cost of cancellation.  The argument provided, that the plant is no longer needed to service growth in the southwestern GTA, is supportive of an argument that the plant is not needed - not that the plant should be located elsewhere.

The announcement on the Oakville plant relocation costs emphasized the NRR for the new project had been negotiated down to $15,200/MWmonth (~$2000 more than the fleet average of two months earlier) - down from $17,277 under a 2009 contract that was was negotiated at the height of the recession as Ontario demand was collapsing.  The announcement should have raised some eyebrows in that it followed, by only two months, communication that the average Net Revenue Requirement (NRR) for Ontario's gas fleet was $13,187/MWmonth, and the most recently contracted simply cycle gas turbine (SCGT) supply was contracted at $12400/MWmonth.  At $2000/MWmonth above the average NRR the TransCanada Oakville contract is over $20 million a year richer, and at $2800/MWmonth above the recent SCGT NRR, the contract is $30 million a year richer.

A more desired statistic, to most, would probably what the cost is per MWh.
This number was not released, and it's not particularly clear if the government is even capable of estimating it.

Levelized Unit Energy Costs - Scenarios

For the most basic estimation of an average price per MWh for the output from the plant, there are two variables in addition to the capital and non-fuel operational costs (which are conveniently included in the NRR): the capacity factor (CF -simply the percentage of theoretical maximum annual generation that is produced), and the cost of the fuel (which we assume to be 7.5 times the price per MMBTU of natural gas).

I have highlighted estimates at a variety of CF's which are calculated from forecasts for generation capacities in Ontario's Long Term Energy Plan (LTEP), and forecasts for production from Clearsky Advisors (page 38 here), the Pembina Institute, the US Energy Information Administration (page 48 here), and a US EIA levelized cost figure shown by the Ontario Power Authority in their system planning (slide 39 here). [1]

Production from Ontario's existing fleet of combined-cycle gas turbine (CCGT) generators with Net Revenue requirements over the previous 12 months has been at a capacity factor of approximately 35%, with gas pricing near historic lows - but that can't be interpreted as meaning the price to Ontarians, inclusive of the Net Revenue Requirement, is only in the $82/MWh, because much of that generation was sold in export markets at far lower rates ($25-30/MWh).  Attributing all net exports that could be attributed to the output from these generators (Portlands, St. Clair, Goreway, Halton Hills and Greenfied), almost half of all the generation can be considered for export. [2] 

The reason for the export is the net revenue requirement, which allows generators to bid into the market at any price that covers the incremental cost of generation (the fuel itself). Ontario has been a net exporter since 2005, which was the year demand peaked. The exports are broadly assumed to be in off-peak hours due to Ontario's large baseload generation capacity, and the accompanying surplus baseload generation (SBG) issue, but net exports have actually grown the most in the higher demand hours.

The range of forecast generation from natural gas is likely due to models that exclude exports and those that include exports despite the likelihood exports will remain close to the cost of fuel, while the capital costs will be paid entirely in Ontario through the net revenue requirement (via the global adjustment mechanism). The real capacity factor to utilize in estimating levelized unit costs for Ontarians, over the past 12 months, is ~20% (filtering out the exports). In the past year that means Ontarians have paid about 13 cents/kWh for the output of the NRR generators, while export customers have paid under 3.

The recovery of the cost of capacity payments is problematic for free and fair trade of the electricity commodity - transferring the generator's capital cost recovery to only the domestic ratepayer.   With the additional 900MW added to the total contracted capacity of NRR generators, there will now be approximately 5,830MW of contracted capacity at an average $13,457/MWmonth, for a total of about $940 million each year.  This is a very significant distortion to Ontario's market which should spill over into adjacent markets.

The Net Revenue Requirement does make one truth particularly clear - to get cheaper unit output, generating capacity  needs to be more productive.

Cost Will Continue To Increase If Ontario's Long-Term Energy Plan Is Implemented

Examining Ontario's planned supply mix it is apparent that a planned 10700MW of renewable capacity (8000MW wind and 2700MW solar) is not expected to have a significant capacity value - which means that Ontario is procuring the renewable supply and, concurrently, natural gas generation to ensure supply that can meet demand.

Currently solar capacity is slightly over 500MW, with wind around 2000MW.   If these figures grow the capacity factor of the gas plants will continue to drop.  

Utilizing a model I built based on a study in the UK (background here), it's possible to produce some figures to demonstrate the massive expense involved in providing feed-in tariff contracts to 'renewable' sources, where all supply must be taken, coupled with granting net revenue guarantees to dispatchable generation to run only as necessary.

This model is imperfect, but it does illustrate the cost of producing with renewables while natural gas-fired generators are idle. [3]

$3 billion a year.

That's a significant figure in a market that is currently about $10 billion a year.

It's notable that even in the scenario where no renewables are present, the natural gas facilities are still below the productivity level of CCGT facilities in the United States, where lower gas prices have seen a switch from coal to gas-fired generation that has brought fleet capacity factors up to where, I'd estimate, they are now over 50%.  Ontario is making it's natural gas generators a source of inflation where elsewhere on the continent they are acting to moderate pricing.

Assumptions stated in this post allow for estimating costs, but they are not entirely realistic.   The most significant issue is that the higher the production of intermittent generation on the grid, the greater the need to have traditional generators ready to adjust along with changes in output.  There are significant implication of that which include the wisdom of using CCGT plants at all.  Coal units are proving to be more complimentary as they provide far more peaking depth.  Gas turbine developers are attempting to deal with that challenge: only days after the Ontario government agreed to purchase the turbines TransCanada had hurriedly ordered for an Oakville facility that was unlikely to ever exist, GE started marketing a turbine with much greater operating range and ramping speed.

TransCanada will be guaranteed healthy profits to build a 2010 Oakville facility in 2017 Bath.
The losses from that decision will continue for 20 years.

Notes

[1] Most figures in this post are contained in this spreadsheet, including a more complete version of the $/MWh spreadsheet embedded in this post.
[2] Net Exports are attributed to the generation for the NRR plants noted if the generation from those plants exceeds net exports; if net exports are less than the production from those plants, the production from the plants is considered exported.  This is entirely theoretical - but the theory is that when these units are running they are the marginal supply and therefore the price setter - with exports reflecting customers who take that price.
[3] The figures used in the spreadsheet are $500/MWh for solar, $135/MWh for wind, an NRR of $13457/MWmonth, natural gas supply at $7/MMBtu, a heat rate of 7.5, and greenhouse gas emissions from natural gas-fired generation of 398 kg/MWh

Weekly Ontario Electricity Summary: We are getting coaled - and snowed

I updated my weekly reporting yesterday (Oct. 10- 16), and was presented with a familiar pattern in the graphing on the year-over-year generation/demand changes.

The growth of coal.

Coal-fired generation was up for the 6th consecutive week, repeating the performance seen in the spring.

Despite over 20% of Ontario's coal capacity being removed from service at the end of 2011 (Nanticoke units 1 and 2), the year-to-date total coal production is now up over the same period in 2011.

The Ontario government's mantra that 'wind is replacing coal' is increasingly farcical.  Germany is increasing coal builds; 4 times more hard coal-fired capacity is planned than natural gas capacity  (BNetzA .xls), and the boasts of the flexibility of their newest coal-fired units must create envy in Ontario's System operator (IESO) as they lament the planned elimination of flexibility in Ontario.


The desirability of the coal units is in their peaking depth - meaning a hot coal-unit offers a far greater operational range (20-100%) than the CCGT plants Ontario has contracted, expensively.  Coal did serve an intermediate supply function in the past (matching the higher demands of the day, and being removed at night), and that role could be filled by CCGT plants, but ... in the shoulder seasons the intermittent wind and solar supply negate the need for intermediate supply, and what is needed is the peaking depth of coal to accommodate the intermittent generation.

As expected, the chart shows coal-fired generation has been down in higher demand weeks (cold winter and hot summer) where gas could displace the intermediate role; and coal has been utilized more during lower demand periods, where intermittents negate the intermediate role and necessitate more peaking.

Notes. 

This article should not be seen as critical of the IESO - quite the opposite.  Despite the inflexible supply they are presented with, there were no notable curtailments in the week (although we wouldn't know if Pickering units were offline due to excess supply), nor was there significant negative pricing

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Donald Jones noted the issue with peaking capacity (not using that term) a couple of years ago in an article here.

His latest article notes some of the engineering challenges that should be met to allow nuclear to provide more flexibility - flexibility that will be increasingly precious as Ontario continues to phase-out coal.

Comments on OEB Release of Winter Electricity Rates.

Some good news, of sorts, as rates for electricity in Ontario actually drop in November; from an average of 8.069 cents/kWh to an average 7.932 cents per hour.  Although this is a decline from October's Regulated Price Plan (RPP) rates, it is an increase of 0.367 cents/hour over November 2011, which is about 4.9%

The reason for the decline rests primarily in a variance account.  Without the benefit of the a positive variance  created by excess charges in the May-October RPP period, the increase would be approximately 10%: one year ago the variance clearance decreased the RPP costs by 0.006 cents/kWh (page 19 here), and this year the benefit was .41 cents/kWh (page 20 here).
One year ago the amount of the variance account surplus was $3 million, in April it was $56 million and the figure noted for the end of October is $230 million.  I must note the increase in the variance  seems matched by the overestimation of the global adjustment charge for July , with was $177.3 million.

My suspicion is the rates are held down because the anticipated expenses related to the settlement costs in transferring the gas plant from Oakville to Lennox were shifted to taxpayers from ratepayers.

I can't argue with that - the decisions were entirely political.
I can say this pause in rate increases is temporary.  The respite is only due to excessive hikes in the previous period, a hot summer, and Ontario's quirky faux market design that sees high usage rewarded with lower rates.

Related: Better Ontario Electricity Estimates For August



Additional notes.
If the forecast was perfect, over 6 months the RPP rate should average the Class B rate - clearly over the past 6 months the RPP rate far exceeded it.  Note January 1st 2011 saw both the introduction of "Class A" rates that essentially transferred costs to RPP and Class B customers, and the introduction of the Ontario Clean Energy Benefit (OCEB) to hide that impact by discounting 10% of each electricity bill.

Graphing the estimated moving 12-month average pricing for Class B customers (which should equate to RPP rates over 6-month periods), it's both clear there is an inflationary trend, and that it paused over the summer.
I suggest the pause is due to high usage during a hot summer with little wind- in Ontario the end price drops when usage is high.

Thoughts on McGuinty Exit: Ms. Horwath, meet Mr. Hudak ...

Some quick thoughts upon news that Ontario's provincial Parliament has been prorogued until such time as the Ontario Liberal party has selected a new leader and that new leader has decided to reconvene the legislature.
The NDP leadear and the Progressive Conservative leader should find a way to put together a temporary government and set an election date for a time in 2013 that allows the Liberals to select a new leader (I'd suggest March).
There is not little doubt that the government will accomplish little in the intervening period regardless, so I think the relevant point is whether our democracy in Ontario - and democracies in B.C., and Canada in general - is well serviced by the cult of personality extending to leaders being able to discard the daily rituals of the democracy.

To be clear, all 3 of our traditional parties did poorly last election.


Ms. Horwath, you brought your NDP to their best performance since the NDP lost government in 1995 - but you were well behind that Rae loss as a percentage of eligible voters - as a percentage of the potential vote only Howard Hampton has performed more poorly than you did last election.

Mr. Hudak, you managed to eclipse the performances, by the same metric of share of eligible voters, of Frank Miller, John Tory, and the first election with Mike Harris as leader (1990).  I suppose there is some solace in that.

Accompanying these poor performances was the performance of the victorious Liberals, who collected their lowest share of eligible voters in the past 7 decades.

The decline in voter participation illustrated by these poor figures is a problem for democracy, and that problem is exacerbated by rogue prorogues.

Enough with the blather about respecting democracy and compromising.
Do so.

History indicates that party leaders general fail at achieving government in their first election - so the odds are one of you will be the next Premier of Ontario anyway.
Prepare for that eventuality jointly, from the government perspective.

Get together and enter a caretaker government agreement until the next election - not because you'll accomplish something as a government, but because you will have accomplished something by doing so.

Developing A Culture of Incompetence in Ontario's Electricity Sector

On October 12 the Ontario Power Authority (OPA) released 20000 pages of documents related to the 'relocation' of a gas plant to service the southwestern GTA; from the southwestern GTA to hundreds of kilometres from the southwestern GTA (story here).  The 20000 pages are now added to the release of a number of heavily redacted documents weeks ago in what was, up until 20000 more pages,  a comprehensive sharing of documentation.  The interesting question, from my perspective, is not how 20000 pages were missed, it is how a culture came to exist where 20000 pages can be missed.

I'll start exploring that culture with some timely data following the latest meddling in Ontario's electricity market design.

Ontario's Independent Electricity System Operator (IESO) passed a rule change, effective October 1st, 2012, to prevent exporting electricity at negative prices.  Operators at the IESO had already been having some success at curtailing generation to control the occurance of negative pricing.  The most recent 12 month period (Oct. 1, 2011 to Sept. 30, 2012) had about half the number of hours with negative pricing as the same dates 3 years earlier.  The average negative price was 5 times greater [1]  than 3 years earlier, but still, in a market valued at roughly $10 billion per year, negative exports likely cost about $12 million.  There is no new market impetus for a new policy, and the stakeholder group exploring the issue did not suggest this policy.
It is another policy made for political reasons - in this case to avoid to optics of paying neighbours to take excess generation.
.
We've had 3 instances of negative Hourly Ontario Energy Price (HOEP) since the rule was to be effective - in each instance supply was curtailed by dispatching down nuclear units:

• Oct. 1, hour 4, the price dropped to -$29.17/MWh.  Bruce B Unit 8 was dispatched down until hour 7
• Oct. 4, hour 24, the price dropped to -$51.91/MWh, Bruce B Unit  7 was dispatched down until hour 6 of the 5th.
• Oct. 9 hour 23, the price dropped to %-10.24/MWh, Bruce B Unit 7 was dispatched down until hour 4 of the 10th, and Pickering unit 4 suddenly dropped offline during that time.

Negative pricing has been studied in depth by the Ontario Energy Board (OEB) market surveillance panel (MSP - see page 32 of their latest report).  The OEB MSP is very informative on the technicalities and market mechanisms, but generally the negative pricing is simply attributable to demand being lower than anticipated, supply higher than anticipated, or committed 'baseload' supply exceeding the ability of the market (including export customers) to consume it.  In all 3 hours noted above, there was essentially no coal or natural gas generation that could be curtailed (the gas generators online at the times were primarily must-run sites), and there were no imports to curtail.

The negative pricing on the 1st appeared to be due to a sudden drop in export levels.  

The negative pricing on the 4th and the 9th occurred as Ontario demand was dropping rapidly (885 MW from hour 23 to 24 on the 4th, 1263MW between hours 22 and 23 on the 9th); during both periods wind generator output was high (1096MW and 1356MW).

The reason the wind generators carry on while nuclear units are maneuvered is noted in the previously cited MSP report, on page 36:

With SBG conditions throughout most of the night, the IESO changed wind generator offers in pre-dispatch from -$1/MWh to -$2,000/MWh

Ontario's market structure was intended to work off accepting the lowest bid, so dropping the bid to the ridiculously low price is preventing wind from being dispatched off.  The mechanism allows contracted generators to cross their arms, set their feet, drop their chin into their chest and say "No - I'm not gonna" when curtailing supply is required for the good of the system.

The long weekend saw very high surplus baseload generation (SBG) - although curtailments seemed to have remained below noticeable levels as exports remained possible.  The negative pricing on the 9th put an end to the luck with export markets accepting the surplus supply that had seen the system operator generate SBG alerts for all days since October began.
On October 9th the next 3 days had alerts but on the 10th, with Pickering Unit 4 suddenly offline, the alerts ceased.

The problems with dispatching off nuclear units include increased greenhouse gas emissions (slides 11 and 12 of this IESO presentation), and the financial considerations.  The IESO's stakeholder initiative is defining “Flexible nuclear generation” as "flexibility for reductions due to changes to the operation of condenser steam discharge valves (CSDV)" - this is the maneuver the Bruce units undergo to avoid generating electricity. The IESO noted possible implications of the maneuver:

... can lead to increased costs associated with inspections and repairs. The primary function of the CSDV is to bypass steam to the condenser under turbine load rejection conditions and not unit manoeuvring. Using the CSDV for something other than its intended purpose may result in increased risk of equipment failure.

The same IESO analysis also lists the implications of dispatching off wind turbines:

None

Considering generators as assets also seems to have been forgotten.  The IESO board's rash order is a temporary measure until they deal with another stakeholder initiative's conclusions regarding minimum bid pricing for different groups of generators.  While the -$2000 looks insane, the newly proposed minimum price of -$10 will accomplish the same trick most of the time because the proposed minimum for nuclear is -$5, so the "flexible nuclear generation" would still be dispatched first.  If nuclear "flexible" generation is one choice, dispatching off units at Pickering appears to be another (if the surplus will extend into the daytime hours).

This means that nuclear assets are required to adjust prior to assets with a fraction of their value.

Wind contracts pay ~$135 (earlier contracts may pay less, but with adjustor clauses may not), and Bruce B nuclear units have a floor price of ~$52/MWh.   In a reverse market, wind should be dispatched first (thus the game of setting the bid price to -$2000).  In meddling with regulation to prevent a functioning market, the curtailment in economic intelligence is more important that the curtailment of the electricity supply.

It does not seem anybody considered the impact on the cultural environment in the public sector of being forced to equate $135 with -$2,000, or of dispatching off billion dollar assets with full knowledge of negative implications instead of million dollar assets without negative implications, but it is within that cultural environment that a CCGT generating facility for the southwest GTA can end up hundreds of kilometres away from there, 20000 pages can be forgotten in releasing all documents, and a lowball figure of $40 million can be provided as a total cost, when the total cost of the relocation is more credibly estimated at nearly 20 times that amount.

Still, the added cost of relocating the plant are not the only substantial costs of the decision to relocate it.

I'll explore the ongoing costs of that decision in a future post.

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Note:
[1]  This origally read that the average HOEP was 5 times "lower" than 3 years ago - which is exactly the opposite of being correct.
On a positive note, the IESO initiative setting minimum pricing may reduce the extent of the negative pricing, which is the aspect of the problem that is growing (the average negative price in 2012 is $51.96/MWh; in 2009 it was only $8.42/MWh).

Thanks for the plentiful bounty of electricity, but ...

The Thanksgiving holiday arrives in Ontario accompanied by lots of electricity supply - so much that the system operator (IESO) has surplus generation alerts posted throughout the long weekend.

Oct. 5 SBG report

Surplus baseload generation (SBG) is a problem that received notice in Ontario with the recession in 2009.  We've continued to commit to new supply since 2009, as demand remains stagnant, and consequently the Hourly Ontario Energy Price (HOEP) has dropped to new lows, with the 12-month moving average now under $25/MWh.

I've previously covered three methods the IESO uses to curtail generation when the supply committed to exceeds the ability to consume it.  My preliminary reporting for September (here) showed the the past two weekends the IESO has removed supply by curtailing production from non-utility generators (NUGs).  That will likely also be true this weekend.

Graph from Shadow Weekly Reporting

In addition to the NUG curtailment, my programming indicates some turbine output is being redirected to Quebec again - this was very common a year ago, but hasn't been as significant in 2012..

The third method I attempt to track is the curtailment of output at Bruce B (and soon also Bruce A) nuclear units.


I graph the curtailment estimates along with the output of industrial wind turbines in part due to my work that predicts much of the wind production will either bump other firm contracted generation, or be dumped on export markets.  Over the past 52 weeks the total curtailment is ~1.55 million MWh (1.55 TWh), with the curtailments heaviest in the fall, and also common in the spring.  The two weeks with the largest curtailment include Christmas' week, and the second highest wind production month in Ontario's history.

This graph indicates we are hitting the peak season for curtailments.

It's also a peak season for wind.

Adding wind output to these figures I compute how much wind was producing while these curtailments occurred (up to 100% of the curtailment), and I give that figure as a percentage of all wind generation for the week.  For 1.55TWh of apparently necessary curtailment, wind could have been curtailed, instead of NUG, hydro or nuclear generation, for as much as 1.2TWh.  

Overall, wind produced 4.6TWh, so this 26.4% of all wind production didn't supply Ontario, but dispatched other supply Ontario was also committed to purchasing, or clean hydroelectric generation Ontario owns.  The figure I posted for 2012, in September 2011, was 28.2%.  So these figures support the work I've previously done.

Estimates from September 2011

That work estimated capacity costs for the natural gas generation required to accompany intermittent renewables too.  I'm further off there because I estimated the values using a $7900/MWmonth valuation, but the Minstry of Energy has since communicated the average value is $13,187/MWmonth.  In addition to the capacity costs being 67% higher than anticipated 1 year ago, the time-frame for adding renewables to a total of 10700MW is now earlier.  The "other" costs I argue are part of the wind experiment, if not altered by sober thought (for a first time), will exceed $1.5 billion within half a decade.

These costs must be understood.  Saunders hydroelectric output is sold at a regulated rate of ~$35/MWh; Bruce B nuclear at ~$52/MWh and the NUG's at ~$110-120/MWh.   The average cost of the curtailed supply is ~$57/MWh, but the cost of the curtailment is not that $57, it's the $135 paid for wind instead.  At 1.2TWh of wind supplied during curtailment, that cost is ~$160 million over the past 52 weeks before accounting for the production that was dumped on export markets well below cost.

One ray of hope has been the inaction on the feed-in tariff program, and the lack of clarification of wind producers rights in terms of payment when the system can't accept their output.  I asked in June, "Will Mr. Bentley commit Ontario ratepayers to spending ~$1 billion a year for dispatched off, or dumped, FIT contracted energy?"

So far he has not.  

While the government has not announced a way forward which shows consideration for ratepayers, under Minister Bentley a cabal of special interests no longer seem to be typing out government policy.

I can be thankful for that.

Bunking with Gipe: about Germany's Electricity Revolution

Paul Gipe is out with a particularly misleading post:  German Coal-Fired Generation of Electricity Falls While Renewable Generation Rises: Debunking Another Myth about Germany's Electricity Revolution:

The latest talking point is that Germany is burning more coal than ever because of all the intermittent renewables that have been added to the system.
So, let's have some fun with numbers and separate fact from fiction.
First, the source. All the data I'll use comes from the Work Group on the German Energy Balance (Arbeitsgemeinschaft Energiebilanzen) and can be downloaded from their web site.

Let's not have some fun with numbers.
Let's do some honest work with them instead.

The first point would be including natural gas and reporting on all fossil fuels in any analysis.  Using the AGEB data referenced by Gipe, the graph shows remarkably little movement - the totals for 1990 and 2010 are almost identical.

These figures don't capture an entire 12 months of data since March 2011, when German took offline a number of nuclear reactors.

See Footnote 

Using monthly figures from ENTSOE, graphing the moving 12-month total, the picture of what is happening as nuclear is removed is clearer - about half of the lost generation has come from fossil fuels (ENTSOE data doesn't completely break down the fossil fuels into components) [see footnote] .  An official list of planned capacity additions show the majority of new supply will be fired by hard coal (BNetzA .xls).

Mr. Gipe would like you to note the growing output of renewables, and he'd like to leave out the growth of natural gas altogether.

Increasing renewables should be a distant secondary goal - but selling things is Gipe's goal as it is the source of his funding (some background on his patron Blittersdorf)

Reducing emissions should be a primary goal.

The reasons for Germany's numbers are very obvious.  Intermittents replace baseload, and in replacing nuclear baseload it means you can have more renewables but you'll have more fossil fuel production when it isn't sunny or windy ... and adding wind and solar capacity beyond total system demand means frequent dumping of excess in exports (ENTSOE data shows net exports now above 12TWh on an 12-month running total basis, and by the end of 2012 they'll be right back where they were before the nuclear capacity was removed - at 4 times the emissions intensity of neighbouring France).

In the next month the revision of the EEG, Germany's renewable surcharge, should be announced, and it is widely expected to be a steep increase for Germany's residential and smaller business operators.

I'd suggest people concerned about the topic impacting the US presidential election concentrate on rising sea levels or disappearing ice ... because when they hear in Ohio German households are headed to a renewable energy surcharge that's almost as much as their entire charge, I don't think they will care about which fossil fuels Germany is using -- especially if they are among those who realize they are reducing emissions quicker than Germany is.

FOOTNOTE ADDED MAY 14th, 2013
Well, this is a correction - with an explanation.
At some point between March 6 and May 14th, 2013, ENTSOE updated it's monthly data for Germany (these figures were pulled form the "Country Data Packages" section).  I had noticed some time ago the renewables data was unreliable - but at not time did I expect that the fossil fuel data was also unreliable.
I created a spreadsheet capturing the changes between my March 6 download and the download on the 14th, and it shows fossil fuels dropped 39,531GWh with renewables bumped up 38,162GWh.
Comparing the annual totals to the other data source in this post, the revisions do bring the two data sets into agreement.
The revised chart therefore appears as:

While this graph certainly eliminates the argument that nuclear was, in the short term, replaced by coal/gas, the other arguments in the post are unchanged.

From the updated ENTSO-E data, we see that net exports did accelerate along with the output of variable Renewable Energy Systems (vRES) - and the renewable surcharge did escalate to over 5 euro cents/kWh effective 2013.

As I stated would be the case in this post, at the end of 2012 Germany was back to high export levels, market prices remained depressed, and the amount of fossil fuel based generation was little changed, despite another year of growth for vRES.

In defense of Christopher Bentley

The Ontario legislature has just passed a motion of contempt against Minister of Energy Christopher Bentley (here).  The motion deals with the release of documents, .demanded by a legislative commitee, related to the cancellation (or relocation) of a natural gas-fired generation facility in Oakville.  The plant was cancelled before Mr. Bentley became the Minister of Energy.

The motion is justified in respecting both the power of the legislature and historical respect for ministerial accountability, but there are reasons the matter should now be settled as quietly as possible.

The Ministry of Energy has not been stable since Premier McGuinty first won office.  The only Minister with over 2 years in the portfolio was Dwight Duncan - the architect of the global adjustment scheme that I argue is transferring the value of Ontario's public generation assets to private parties favourable to the government.

The next longest-serving Minister of Energy is the hapless Brad Duguid - pronounced "do good".  He didn't do much - aside from cheerleading existing policies.  Documents that were released under pressure from the opposition parties reportedly indicate Duguid wasn't in the loop on negotiations with TransCanada Energy.

Duguid took over a file crippled by the lightly educated George Smitherman.  The Smitherman era is where the Oakville TransCanada disaster originates.  On April Fool's Day, 2009, the OPA announced 4 locations were eligible to bid for work on a generating plant in "southwestern GTA:"

From the OPA site

The plant will be located in Mississauga or Oakville. It will provide rapid, on-demand power in an area where the OPA predicts that the ability of the existing infrastructure to supply area needs will fall short by 2015, despite aggressive conservation measures and increased renewable energy sources. Generating power locally ensures a secure and dependable supply.
The plant will also support the province’s phase out of coal-fired generation – the single largest source of air pollution in Ontario – by the end 2014. As well, it will complement an increase in renewable energy because of its ability to respond quickly when variable sources like wind or solar power are not available.

We now know the plant that is the end result from this process is to be located 277 km away.
We know that is ridiculous in terms of the original process.

The opposition wants documents to show how this feeble minded stupidity occurred.
Nothing is going to explain it, nor is anything likely to appropriately tally the costs of replacing professional planning with crass pandering politics.

But ...
It's been known for a very long time that there is resistance to new locations for new power plants.  One reason provided for the Oakville/Clarkson plant was the removal of service of the Lakeshore Generating Station in 2005, and subsequent promise, from Smitherman, no new generating station would be built there.  When the closure of that plant was planned, by a PC government, a replacement was planned for the site.

The debacle is not Bentley's fault, but I suggest Bentley may have played a very bad hand as well as the electorate could hope for.

For starters, he's relocated both the Etobicoke sites and the Oakville plant to existing generating sites.  That should have been the policy (and that should have been known for well over 2 decades).
He also is likely to have utilized the delays in Bruce A refurbishments at units 1 and 2 to extract concessions from TransCanada (owners of slightly under 50%).

He's held off on both a new round of FIT contracts for unnecessary wind turbines, and on granting guarantees of payment for the large amount of currently contracted wind output that the grid will be unable to accept.

The new solar FIT program is saner than the previous one (with real protections for some farm lands, and some encouragement for garnering community support).
and ... as much as it pains me to say ... commodity rate increases have slowed considerably.

Some of that is luck.  There will be some upward pressure on rates as Bruce A units come online along with more solar and wind contracted before he became minister.  
I think it preferable to allow Mr. Bentley to run the Energy portfolio instead of gambling on a replacement from within the Liberal ranks.

If the NDP and the PC's want to elevate this from grandstanding to emphasize the supremacy of the legislature ( a valid concern ) to a feudal call for a sacrificial head, I hope they see an option to capably replace the minister.

I don't.