The costs might be high and the need questionable, but Ontarians signed up to buy a lot more renewable power last week when Ontario’s Independent Power System Operator (IESO) announced the outcomes from the province’s latest procurement. The new deal brings “low prices” for new solar and wind power generation, says Ontario Energy Minister Bob Chiarelli.
No, not “low” like Ontario’s dysfunctional market price for electricity, that was under two cents/kilowatt-hour (kWh) over 1 / 2 of all hours in 2015. And never “low” like the average 1.2 cents/kWh rate that electricity bound for New York and Michigan who has sold for this year. Once the Ontario government says “low,” it means seven to 14 times as much as that, with the IESO reporting the weighted-average price of the new wind power at 8.6 cents/kWh and new solar at 15.7 cents/kWh.
But the effective cost to consumers for the new power, taking into account the portion of the total output that Ontario consumers will in fact use, is going to be much higher compared to costs the federal government quotes in its press announcements.
Ontario’s power system is … flooded with far more renewable power than it can use.
The system operator’s announcement relies on the fallacy of relative privation. Quite simply: “this unreliable power is not as costly as some other unreliable power you have been stuck with.” For instance, the operator’s press release proclaims, “For context, these costs are less than the Feed-in Tariff (FIT) rates…”
That’s not saying much. The non-competitive FIT solar and wind power program started in 2010. Recall this year Ontario’s auditor general warning the province was paying one of the highest FIT prices on the planet. Revisiting the problem last year, a subsequent auditor general said the program would add vast amounts of dollars to future bills in comparison with contracting solar and wind power purchase agreements through competitive bidding.
But instead of heed such warnings, the federal government barges on. Underneath the current form of the FIT program, the government will buy wind power from small projects at a 50 per cent premium within the competitive wind price, and solar energy at a 30 to 90 percent premium over competitive solar prices. Other bonuses available to FIT producers permit them to add even higher charges towards the bill by, for instance, finding First Nations to accept ownership positions using their projects.
Whether procured competitively or non-competitively, payments to generators for solar and wind power production are just the beginning of the ratepayer impact.
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New wind and solar contract holders will probably be paid not just based on how much power they actually generate, however for a substantial part of their “deemed generation” – that is, what they didn’t produce but might have had the grid had the opportunity to accept all their production, but instead ended up “curtailed” because the grid was oversupplied.
Limiting generators’ contact with potential curtailment is an excellent method to draw in more solar and wind investment (it had been made retroactive to contracts that originally only covered actual generation). When there’s no wind with no sun, such producers aren’t much good, obviously. But, now when the wind really blows or it’s brilliantly sunny, Ontario’s power product is increasingly flooded with much more renewable energy of computer may use. The IESO manages this excess production by selling its capacity to export markets (with Ontarians subsidizing American power). But even so, the transmission system is often unable to manage carrying the whole surplus away. That leads to nuclear, hydro-electric, wind, and solar production being curtailed, while generators receive money anyway for what they did not produce. In 2015, the auditor general found that from 2009 to 2014, Ontario consumers paid generators $339 million for curtailment. And also the more solar and wind power power we add, the bigger these expensive surpluses become.
Using the most recently available data, the quantity of potential production from nuclear, hydro-electric, and wind sources that had to become curtailed in 2014 to handle excess supplies amounted to five times the total amount these new contracts will produce. Curtailments in 2015 were increased but the official figures haven’t yet been reported.
The new procurements also reflect a continuation from the government’s negligent practice of ignoring the transmission consequences of its contracting. Of the 300 MW of recent wind power, a lot more than one-third is going to be sited in Chatham-Kent, an area of the province already experiencing higher-than-average wind curtailments.
Not only are Ontario ratepayers burdened with payments to generators not to generate, but as the auditor general has pointed out, our losses on exporting surplus power carry on growing. Net exports in 2014 equalled 10 per cent of Ontario usage – more than half of Toronto’s total usage, sold towards the U.S. at a fraction from the price that actual Torontonians paid. In 2015, net exports hit 12 percent of Ontario’s usage.
Figuring out how much all of this new procurement will cost, taking into account indirect impacts like curtailment and exports, would require intensive analysis. Attempting to convince Ontarians that the costs are “low” gives no indication this kind of evaluation occurred. What we do know is the fact that Ontario just signed up for yet more costly, unreliable and unnecessary energy.
Tom Adams is a Toronto-based energy consultant. Scott Luft is a data analyst and writer.
