Growing the Global Adjustment

By Parker Gallant

January 10, 2012

 

The Independent Electricity System Operator (IESO) issued a news release January 6, 2012 in which they disclose how much electricity Ontario produced and consumed in 2011. They also included the supply mix of that production. During 2011 we produced 149.5 terawatts (TWh) or put another way 149.5 billion kWh (kilowatts) and we consumed 141.5 TWh of that production, down slightly from 2010 when we consumed 142 TWh. The most dramatic shift was in our production of electricity from coal which fell from 12.6 TWh in 2010 to 4.1 TWh which was partially offset by increased production from nuclear, (+2.4TWh) hydro (+2.6 TWh) and wind (up by 1.1 TWh)

 

Year	Nuclear	Hydro	Coal	Gas	Wind	Other
2011	85.3 TWh	33.3 TWh	4.1 TWh	22.0 TWh	3.9 TWh	1.2 TWh
	56.9 %	22.2 %	2.7 %	14.7 %	2.6 %	0.8 %
2010	82.9 TWh	30.7 TWh	12.6 TWh	20.5 TWh	2.8 TWh	1.3 TWh
	55.0 %	20.4 %	8.3 %	13.6 %	1.9 %	0.8 %
2009	82.5 TWh	38.1 TWh	9.8 TWh	15.4 TWh	2.3 TWh	1.2 TWh
	55.2 %	25.5 %	6.6 %	10.3 %	1.6 %	0.8 %
2008	84.4 TWh	38.3 TWh	23.2 TWh	11.0 TWh	1.4 TWh	1.0 TWh
	53.0 %	24.1 %	14.5 %	6.9 %	0.9 %	0.6 %

 

The most alarming aspect of the one page media release however is not contained in the chart above, and is instead found in the penultimate paragraph where IESO tell us that the total cost of power in 2011 was 7.16 cents per kWh up 9.8% from 6.52 cents per kWh in 2010. IESO further break that down into the two categories that make up this price; the hourly Ontario energy price (HOEP) commonly referred to as the “market price” and the Global Adjustment (GA). The HOEP dropped 16.9 % from 3.79 cents a kWh to 3.15 cents a kWh but the GA went up 46.9% as it increased from 2.73 cents a kWh to 4.01 cents a kWh.

 

The increase per kWh in the GA may not seem big but the difference of 1.28 cents a kWh added $1.471 billion to the GA. In just three years the GA has grown from about $590 million for 2008 to $5.1 billion for 2011. The GA includes all of the new FIT and MicroFIT renewables, the spending on conservation, various programs for the Aboriginals, Co-operatives and Municipalities, costs of OPG keeping the coal plants available as peaking power, gas generators idlying payments, constrained power for certain generators and many other spending programs that are unrelated to the actual production of electricity.

 

Based on the IESO increase in the cost of electricity of 9.8 % from 2010 to 2011 we should anticipate rates to rise May 1^st and November 1^st sufficient to cover that increase.

 

It didn`t take long for the clawback of that 10% Ontario Clean Energy Benefit!

 

Electricity and the Liberals Hansard History Chapter 4

This is the next chapter in this look back at the promises made by the McGuinty Liberals in 2004 following their first majority government. In this review we see how the Liberals developed their electricity policy and how it affected the maufacturing sector in the province. The Ontario Legislature’s sitting on May 3, 2004 had a robust question period about this policy development with lots of cut and thrust queries and responses as noted in Hansard.

 

MPP Howard Hampton in questioning the Energy Minister zeroed in on an issue of his concern referring to the sale of Ontario Hydro assets to Brascan; “That was a great deal for Brascan, but a terrible deal for Ontario electricity consumers. Minister, will you confirm today that you will not sell any hydro generating stations to Brascan or any other private power company?”

 

The response from Dwight Duncan, Minister of Energy was unequivocal: “We will not sell off assets like the Tories did. We will also not jump into the harmful policies of the Tories and the NDP. Our government is taking a balanced approach to energy policy.” He went on later after further questioning, to state;

 

“We already launched an RFP last week for 300 megawatts of renewable energy, the first time in Ontario’s history, and soon we’ll be launching an RFP for 2,500 megawatts of new electricity in this province to help address the problem that was left by previous governments.” and delivered a sharp rebuttal as the following attests;
“That member and his policies were rejected by the people of Ontario last fall. Dalton McGuinty and his government are taking reasonable steps to ensure that adequate, fair and affordable electricity is available for all Ontarians.”
Looking back at Minister Duncan’s remarks that day in the Legislature it is interesting to note the co-incidence between the 2500 MW announcement and the 2500 MW deal that another Energy Minister negotiated (George Smitherman) a few years later and yet another Energy Minister, Brad Duguid signed. The latter 2500 MW is the controversial Samsung contract.

The OPA did eventually get their marching orders in September 2004 from the Minister and executed most of the contracts to fufill the first 2500 MWs that Minister Duncan announced on May 3, 2004. Most of the contracts signed were gas related and included the Mississauga gas plant which was mentioned in the OPA’s 2005 annual report. This plant was cancelled by the Liberals mid September 2011, just two weeks before voting day, in an effort to save two Liberal seats. The ratepayers and taxpayers of the Province are still waiting to find out what that will cost.
On the Minister’s promise to “ not sell off assets” Dwight Duncan was certainly truthful however, those assets have been weakened substantially as the OPG’s generating capacity and output have dropped (refer Chapter 3) thereby reducing OPGs value.
As ratepayers and taxpayers we must take issue with his comment referencing “fair and affordable electricity is available for all Ontarians” as we have had to endure rising electricity prices and their effects on the Ontario manufacturing sector.
Just over one year after Duncan’s address in this sitting the foregoing was brought to light by the Economics Division of the Parlimentary Information and Research Service as they delivered a report dated September 22, 2005 to Parliament that contained the following;

“Ontario is Canada’s industrial heartland and long-time economic engine. To a large extent, that engine is powered by the supply of relatively cheap, reliable electricity, which has played a key role in the development of the province’s energy-intensive sectors such as manufacturing, chemicals, paper and metals.Today, there is growing anecdotal evidence that the lack of a reliable and low-cost supply of electricity [emphasis is the writer’s] is becoming a competitive disadvantage for many businesses operating in Ontario. For example, the Ontario Minister of Natural Resources’ Council on Forest Sector Competitiveness has warned that rising electricity prices are putting enormous pressure on the province’s already beleaguered forest industry. This industry, which employs some 85,000 people and is described by the Council as the economic bedrock of northern Ontario, has long depended on low-cost electricity, since electricity can account for up to one-third of operating costs.The Government of Ontario has pledged to close all existing coal-fired generating stations by 2009 in an effort to clean up Ontario’s air and reduce greenhouse gas emissions, which are linked to climate change.
Most environmentalists and health care professionals strongly support the government’s plan to phase out the use of coal by the beginning of 2009. But electricity experts are concerned about the impact this rapid change could have on the reliability of Ontario’s electricity grid.The IESO has characterized this initiative, the cornerstone of the government’s electricity strategy, as the “largest and most significant electricity system change ever undertaken in Ontario,” as it will remove 6,434 MW of generating capacity from the grid, representing approximately 21% of the current total.“

So a little over a year after Duncan’s remarks in the legislature, the Federal Government received a disconcerting report that Ontario, Canada’s “long-time economic engine” was in danger because of the lack of a reliable supply of relatively cheap electricity. That damning report and the concern expressed therein did not alter the drive by the Liberals to continue their push for expensive intermittent electricity-instead they subsequently passed the Green Energy Act which has futher accelerated the drive to create an uncompetitive environment for industry.
As further evidence the Ontario Forest Industries Association in their January 2011 pre-budget appeal to Minister of Finance, Dwight Duncan had this to say as a “Made in Ontario challenge”;

 “Despite the anticipated recovery of global markets, and the desire to put Ontario’s wood back to work, Ontario’s renewable forest sector continues to face numerous, significant “home grown” made in Ontario challenges. The continuous loss of industrial wood fibre through untested public policy, uncompetitive electricity rates, and government red tape have all contributed to the creation of an uncompetitive economic environment in Ontario.”

Elsewhere in the report they make this observation; “All of these regulatory and policy initiatives have sent a clear and unfortunate message to industry – Ontario is not open for business. Instead of developing policies that stimulate growth and incite investment, the Ontario government has focused its attention over the past several years almost exclusively to protectionist agendas and unnecessary and untested initiatives that instead have only served to create considerable uncertainty, stagnate development and reduce economic investment.”
Looking further the Canadian Federation of Independent Business in it’s presentation to George Smitherman July 13, 2009 noted “Fuel, energy costs” as their # 1 concern and made three recommendations:

• “Price matters! It should not be a “given” that electricity costs are inexorably rising. The Global Adjustment Mechanism must not be allowed to grow out of control.”
• “Lots of onservation programs-not many suited to the SME sector. Allow businesses to choose programs that are suited to them, as opposed to having them imposed by LDCs or the OPA.”
• “Ensure RPP and TOU fairness for small business. CFIB continues to warn that implementing TOU without understanding impacts may endanger businesses and jobs.”

The foregoing hard evidence from two of Ontario’s biggest group of employers supports the premise contained in the Auditor General’s report of December 5, 2011 wherein he states: “We also noted that studies in other jurisdictions have shown that for each job created through renewable energy programs, about two to four jobs are often lost in other sectors of the economy because of higher elec­tricity prices.”
The Auditor General’s report had this to say about the Global Adjustment:

“By 2014, the GA is expected to be 6¢ per kilowatt hour (kWh)—almost two-thirds of the electricity charge—and will be almost two times more than that year’s projected HOEP. Based on our analysis of OPA data, renewable energy contracts will contribute significantly to increases to the Global Adjustment. As illustrated in Figure 3, the total GA is expected to increase tenfold province-wide, from about $700 million in 2006 to $8.1 billion in 2014, when the last coal-fired plants are phased out. Almost one-third of this $8.1 billion is attributable to renewable energy contracts.”

Premier McGuinty and his Liberal Ministers have failed to deliver on his promise to bring “fair and affordable electricity” to Ontarians and instead has changed the “ anecdotal evidence” cited by the Federal report of almost 6 years ago into hard evidence that the Liberal policies have cost Ontario good well paying jobs in the manufacturing and forest product sector.
Some legacy!
Parker Gallant,
January 7^th, 2012

OSEA’s mini FIT

by Parker Gallant
The Ontario Sustainable Energy Association’s Executive Director, Kristopher Stevens on Monday morning will launch OSEA’s 3^rd Annual Community Power Conference and glancing at the program one can detect a sense of concern. This is reflected in Steven’s message in the programme brochurewhich contains this reflective bon mot; “The green energy sector in Ontario has been threatened by uncertainty in recent months due to the provincial election and the highly anticipated Feed-in-Tariff (FIT) review. Developers, manufactures, government and investors are concerned about what may happen to the industry, their projects and businesses. Residents and communities are concerned whether clean air and water, newfound well paying jobs, local project ownership and hope, will be yanked from underneath them.  Ontario’s green energy sector is entering its next phase and it is yet unknown what this new chapter will look like and how industry participants and communities will operate in the new climate.”

There is lots in this claim by Stevens to take issue with, particular with the claim about the “residents and communities” concerns. How a change in the FIT program would affect our air or water or those reputed “well paying jobs and hope” is an incredible stretch of imagination on his behalf. Those “residents and communities” are concerned that their quickly growing electricity bills will drive them into energy poverty in order to support the visions expounded on by Stevens and his groupies.

It is noteworthy that some of the Conference’s previous sponsors have not reappeared this year however we can still find many taxpayer or ratepayer funded institutions that are front and centre as well as those institutions and companies benefiting from the Green Energy Act. Among the sponsors one finds, the Ontario Power Authority, the City of Toronto, York University, CMHC, the Community Power Fund, TREC (Exhibition wind turbine and recipient of hundreds of thousands of dollars from the taxpayer owned Toronto Atmospheric Fund ), the World Wind Energy Association (who awarded former Energy Minister, George Smitherman with the “World Wind Energy” award in 2009) and Toronto Hydro. In the latter case we find this testimonal from Joyce McLean, Director, Strategic Issues on the Conference site; “As one of the early supporters of community power in Canada through our relationship with TREC/WindShare, Toronto Hydro appreciates the enthusiasm and energy needed to grow the community power sector in Ontario. We support OSEA’s efforts in leading the way.” Ms. McLean spent time with Greenpeace, as Chairperson and Director of CanWEA and was the founding Chair of the Community Power Fund (which dispenses grants provided by the OPA and paid for by ratepayers-they recently granted OSEA $125,000).

The “Keynote” sponsor of this conference is listed as the Ontario Power Authority and Colin Andersen, the CEO, is down as a “Keynote speaker” along with the newly appointed Minister of Energy, Chris Bentley. The ratepayer ultimately pays for the privilege of putting Mr. Andersen in this position as the sponsorship is part of the OPA’s budget.

The taxpayer is also paying for the sponsorship of CMHC and YorkUniversity, the latter a hotbed of environmentalists with a Faculty of Environmental Studies that numbers 41 Professors, Assistants and Associate Professors. Graduates of Yorkinclude Kristopher Stevens and Brent Kopperson both of whom claim involvement in the creation of the Green Energy Act (Act). Kopperson is listed as a presenter/speaker at the conference as is Marion Fraser, yet another who also jointly claims responsibility for the Act’s creation. These speakers and more then half of the others scheduled as presenters/speakers are dependent on the largesse of the ratepayers and taxpayers of this province to ensure they maintain their jobs. Those jobs are designed to raise the price of electricity by pushing wind and solar generation.

The Conference program devotes most of the first day to pontificating on the election results and the potential impact on sustainable energy as well as the upcoming review of the FIT program.

The following excerpt from the program is an indication of the hand wringing going on; “ Election uncertainty has left champions of conservation and renewable energy, community and commercial developers, manufacturers, suppliers and investors wondering what’s next for Ontario?”

Looking at this from the perspective of a ratepayer; the “champions” in this session may now know what the 4.5 million ratepayers in the province have been going through since the Act was passed.

Who was our champion while the Conference attendees were using taxpayer and ratepayer funds to push their agenda forward while IWTs were springing up throughout the province damaging our health, killing wildlife and causing our electricity rates to jump by over 100%?

Perhaps it is now the ratepayers who have some hope, hope that the insanity of the Act will be discovered for what it is.

Parker Gallant,
November 11, 2011

Ontario ratepayers subsidize taxpayers

Posted on November 15, 2011 by Probe International

(November 15, 2011) Ontario ratepayers are helping to hold down municipal taxes and the provincial debt, says Energy Probe director Parker Gallant.

The Ontario Energy Board (OEB) requires the 80 local distribution companies (LDC) in Ontario to send detailed financial and ratepayer information annually and OEB assembles it in the “Yearbook of Electricity Distributors”. The information is presented in a consolidated and individual basis so viewing it provides a myriad of facts including statistics on the number of kWh purchased, km of overhead lines, etc. It gives collective and individual average delivery costs per customer and a financial picture of each LDC. As an example, Hydro One’s distribution arm collected an average of $949 per customer (year ended December 31, 2010) for “delivery” of electricity whereas clients of Kitchener-Wilmot Hydro ($423) or Toronto Hydro ($752) paid less. Capital expenditures made by your local utility company are also included.

On the latter point Hydro One increased annual capital expenditures from 2005 by $406 million (+142% ) to $574.00 per customer. The other 79 LDCs increased capital spending by $583 million (+91%) to $310 per customer. A major portion of those expenditures reflect the installation of “smart meters” ($2 billion + or -) but why Hydro One’s expenditures are so much more is not explained. Hydro One’s spending does not include capital spending for transmission builds associated with renewable connections such as the Bruce to Milton line at a cost of $700 million.

Why it costs a Hydro One ratepayer 124% more and a Toronto Hydro ratepayer 77% more for delivery then a Kitchener-Wilmot ratepayer calls for an explanation and an examination however, this issue doesn’t receive attention from our political leaders in either provincial or municipal politics. It also doesn’t appear to be a part of the OEB regulatory process except peripherally in setting the allowed Return on Equity formulae.

The yearbooks’ posted on OEB start with the year ended December 31, 2005 and finish with the 2010 year end. If you view the collective net revenue (excluding the cost of purchased power—up by only $9 million as consumption has fallen) which effectively is the “delivery” line on your hydro bill; you note that it increased by $572 million or 23% . Net profit after PIL (payments in lieu of taxes) was up $145 million or 44.3%. The difference ($427 million) between net revenue and the increase in net profits went principally to pay the increasing OMA (operations, maintenance & administration) costs which increased by 35.6% (6% annually) or $355 million ($206 million from Hydro One) over those 6 years.

Collective profits after PIL, of the 80 local distribution companies for the 6 years was $2,303 million however the equity of those 80 LDCs only increased by $1,116 million. The difference of $1,187 million ended up as dividends (51% of net profit) and was paid to the municipality that owned the LDC. Local politicians used those dividends to reduce municipal tax increases (except for Hydro One who paid dividends to the Province), thereby allowing them to defer making tough choices on other services that the municipality might have to reduce. Reflecting further on this, the local municipal government would have less call to demand financial support from the Province helping to keep provincial debt levels lower. As noted above the bulk of gross profits of the LDCs went to pay for OMA as the unions were successful at gaining above market salary and benefit increases.

The result of the foregoing is that the LDC’s infrastructure has suffered from a lack of funds to upgrade or replace it, pushing those costs forward. Those costs will bite the ratepayers severely in the next few years. As an example Toronto Hydro has two rate applications before the OEB presently. The first filed in 2010 seeks an increase in their “service charge” for a residential client of 14.8% and a 16.4% increase in their distribution charge. The 2011 rate application filed in August 2011 seeks double digit increases for distribution for 2012, 2013 and 2014 of 9.7%, 12.4% and 12.6% along with “rate rider” increases of 18.7%, 12% and 12% for those same years.

So municipal and provincial taxpayers have benefited from ratepayers paying above market rates that have not been utilized to refurbish the utilities infrastructure and that same ratepayer will continue to suffer, large rate increases over the Energy Minister’s forecast of 46% in our electricity bills as LDCs now upgrade both their deteriorated capital equipment and continue to spend money on those mandated Green Energy Act directives.

While some in the energy sector have suggested that the taxpayer is picking up some ratepayer costs (via the “Ontario Clean Energy Benefit”) it might in fact be quite the opposite. Ratepayers have helped keep both the local municipal taxes and the Provincial debt lower!

Perhaps the Liberals have simply found a new way of taxing us and we didn’t even know it!

World Wind Potential Wrong by 2 Orders of Magnetude

Global wind power potential: Physical and technological limits

Cite: De Castro C. et al. 2011. Global wind power potential: physical and technological limits. Energy Policy. Doi:10.1016/j-enpol.2011.06.027

Received 5 November 2010; accepted 13 June 2011. Available online 29 June 2011.

Abstract:
This paper is focused on a new methodology for the global assessment of wind power potential. Most of the previous works on the global assessment of the technological potential of wind power have used bottom-up methodologies (e.g. Archer and Jacobson, 2005, Capps and Zender, 2010, Lu et. al., 2009). Economic, ecological and other assessments have been developed, based on these technological capacities. However, this paper tries to show that the reported regional and global technological potential are flawed because they do not conserve the energetic balance on Earth, violating the first principle of energy conservation (Gans et al., 2010). We propose a top-down approach, such as that in Miller et al., 2010, to evaluate the physical-geographical potential and, for the first time, to evaluate the global technological wind power potential, while acknowledging energy conservation. The results give roughly 1TW for the top limit of the future electrical potential of wind energy. This value is much lower than previous estimates and even lower than economic and realizable potentials published for the mid-century (e.g. DeVries et al., 2007, EEA, 2009, Zerta et al., 2008).

Our conclusions:

The global assessment of the technological potential of wind power to produce electricity, based on the top-down approach, shows quite different results to those of previous works. The technical assessment potential that has been obtained is one or two orders of magnitude lower than those estimated by other authors. This means that technological wind power potential imposes an important limit on the effective electric wind power that could be developed, against the common thinking of no technological constraints by economic, ecological or other assessments.

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Read summary here: http://www.theoildrum.com/node/8322