Why the need to export electricity subsidized by the Ontario consumer?

By: Donald Jones, P.Eng.
 
Ontario exports large amounts of electricity to neighbouring jurisdictions day and night. Exports occur for technical and financial reasons. Ontario presently has an excess of baseload generation so it makes sense to export the surplus. In the immediate future there will be many thousands of megawatts of installed wind power on the grid and exporting will be the only way to maximize its accommodation on the grid while maintaining grid reliability. Since supply contracts with the non-utility gas generators apparently mean that consumers pay whether the generation is needed by Ontarians or not, it makes some sort of misguided sense to export at a subsidized price and get at least something for it. 
 
At times of the year, usually the shoulder seasons of spring and fall, the province presently has a surplus of baseload generation. This Surplus Baseload Generation (SBG) occurs when baseload generation, from nuclear, must-run hydro, combined-heat-and- power, and wind, that cannot be reduced for technical or contractual reasons, exceeds demand. If an export market is available of sufficient capacity this will prevent powering down or shutting down nuclear units that could be offline for up to three days leaving gas and coal to take up the slack. In this case it makes sense to export even at negative prices if it prevents manoeuvring our present nuclear units.
 
Wind is a take-when-available energy source and has priority to the grid during SBG periods ahead of nuclear but the latest wind contracts with the Feed-In Tariffs, signed in early 2010, provide financial incentives for future wind generators to curtail production during SBG periods (although such incentives are not provided for the 1,400 or so megawatts that will be on the grid from the earlier Renewable Energy Standard Offer Program-RESOP). For example the feed-in-tariff of 13.5 cents/kWh for on-shore wind is reduced a cent for every cent/kWh the electricity price goes below zero but wind generators will get paid the full cost of forecast production if they voluntarily curtail production when requested to do so by the Independent Electricity System Operator (IESO). For wind generators installed under the old pre Feed-In-Tariff (FIT) program, RESOP, the wind has priority to the grid over nuclear unless there are technical or reliability reasons to prevent it. The IESO cannot dispatch wind off for economic reasons under either program, only for technical or reliability reasons, although it is trying to be allowed to do this.
 
The governments Long-Term Energy Plan calls for 12,000 MW of nuclear capacity to provide just 50 percent of total generation, since anything more than 50 percent causes concerns about nuclear turndown in low demand periods. For details see, “Ontario Needs More Than 2000 MW of New Nuclear”  By 2018 there will be 10,700 MW of installed wind, solar and bioenergy – let us assume 8,500 MW of installed wind – and 9,000 MW of hydro, including run-of-the-river and storage. The gas-fired generation will be maintained at its current level of over 9,500 MW – say 10,000 MW – and there will be 1,000 MW of Combined Heat and Power added to the baseload supply.
 
If we assume the maximum available 10,000 MW of dispatchable gas generation is on line and that it is all combined cycle and that it can get down to, say, 50 percent, then it can integrate 5,000 MW of wind. The 50 percent is an average figure since some plants may be kept at the bottom of their dispatchable range while others may be down at say 20 percent with some turbines in a multi-gas turbine plant shutdown. The other 3,500 MW of wind would have to be integrated by reducing hydro generation by 3,500 MW. If hydro can be dispatched down to the must-run hydro minimum of around say 2,000 MW it means that there must be at least 5,500 MW of hydro on line to accommodate the remaining 3,500 MW of wind. 
 
This shows that there could be potential concerns during a day when gas and hydro are operating at less than their maximum capacity (which is most of the time) and wind kicks in since all the installed wind generation would not be able to be accommodated on the grid. However if there were high levels of export much more of this wind could be accommodated. This also has technical advantages since the combined cycle gas turbine generators on the grid might not have to be powered down below their dispatchable range of around 70 to 100 percent of full power. When in their dispatchable range the units can respond appropriately to dispatches sent every five minutes by the IESO. When operating below their dispatchable range they might not be able to raise power quickly enough if the wind suddenly drops, putting the grid at risk. The safe and reliable operation of Ontario’s nuclear units depends to a certain extent on the reliability of the grid to which they are connected. In the future, without exports, there could be insufficient dispatchable gas and coal-fired generation available on the grid that could be powered back to accommodate the potential wind generation. Exports maximize the amount of wind that can be integrated into the grid and improves the grid reliability.  This is explained in detail in, http://coldaircurrents.blogspot.com/2011/01/more-wind-means-more-risk-to-ontario.html
 
Minister Duguid recently said that “exporting Ontario power at prices lower than those paid by the province’s consumers makes sense”.  Exporting at prices that do not include the Global Adjustment (GA) charge that Ontario consumers pay does not make sense. In a properly run system this would not happen. The only possible rationale for this is that the gas-fired non-utility generators have been contracted by the Ontario Power Authority to supply a certain amount of megawatt hours per year, for many years, and they get paid even if their supply is not needed by Ontarians. Without this type of contract the generators would only produce what was needed and consumers would save on the GA charge and less fuel would be burned with less accompanying pollution. The financial saving is shown in the lowest plot on http://morecoldair.blogspot.com/2011/01/mcguinty-thinks-this-is-fun-it-hasnt.html  Something is better than nothing in Minister Duguid’s case only because of the poor management of the electricity system.  
 
This shows that rather than the IESO trying to minimize the output of gas and coal-fired generation, technical and financial issues will increase the output, burning more gas and producing more Ontario pollution. With controversial unconventional shale gas becoming more of the mix, gas prices are surely to rise. With large amounts of installed wind coming on to the grid, and without exports, the grid reliability will be reduced. So, poorly thought out supply contracts with the gas-fired generators mean Ontario must export, even at subsidized prices, at the same time making more room on the grid to accommodate more expensive unnecessary wind generation.  

14 thoughts on “Why the need to export electricity subsidized by the Ontario consumer?

  1. Page 12 of the CANWEA booklet “Windvision 2025” explains why McGuinty wants to install Wind as an electrical generator…….. To export electricity to the U.S.

    http://www.canwea.ca/windvision_e.php

    Ontario is to become a U.S. Electrical Supplier ………….feeling “warm and fuzzy” yet?

  2. This all assumes that US jurisdictions do not add their own wind generation beyond present capacity.

    As New York and Ohio add more wind (courtesy of massive federal subsidies) Ontario will run out of places to dump energy.

  3. Excellent suggestion, Lynne – out of the shadows into the pure, clean, unadulterated air of truth.

  4. I have a simple to solution to this problem which, not strangely enough, was created by simpletons:

    Cancel these “take or pay “contracts!

    Now would be a good time!

    Honesty was the only thing Mike Harris had to employ to fix whatever was wrong with the old Ontario Hydro. Breaking it up in a futile attempt at “efficiency thru privatization” was just that – Futile.

    Yes it absolutely would have meant an increase in power rates, no one who is familiar with the situation would argue that, however, the resulting rates needed to pay the “real price” for electricity in Ontario would still have been one helluva lot less then what we are now paying for Dalton’s green fantasies!

    Privatization simply means “for profit” and no one is going to build massive generation assets if they cannot be guaranteed a return on their investment.

    Although arguably true for many things, privatization is not the answer to all government created debacles!

    Electricity at cost is perhaps the best example of this!

    We need to remove the politics and more importantly the politician’s from Ontario’s electricity supply and this needs to happen yesterday!

    B.B.W.

  5. The import/exporting of electricity has always been a mystery to me. Is there a website that shows how much we buy and sell electricity to the US or other provinces?
    Joseph

  6. “exporting Ontario power at prices lower than those paid by the province’s consumers makes sense” So exporting at negative prices is supposed to make sense? What kind of plan is that for Ontario? Does Duguid believe what he said?

  7. The buying and selling of electricity between Ontario and U.S. states began after Ontario changed from 25 cycle to 60 cycle power which was about the mid-1950’s. Prior to this time electric trade was not possible between Canada and the U.S.

    Much of the buying and selling is based on demand/need for power between the two countries or the other provinces. Excess supply is sold where it is needed among the trading partners. So if it’s real hot in Toronto but cooler in Detroit then Detroit can sell surplus power for Toronto. Electricity can also be sold to New York and so on.Same thing for buying power.

  8. B.B.W.,

    Just what is cost? If one company can sell at cost and another company can sell the same product for their cost which happens to be lower than the first company, then cost is relative to a particular company’s cost to produce.

    So telling Ontarians that they are getting their electricity at cost while true might not mean they are getting cheaper power than can be produced by another provider.

    This is what people need to know and then decisions can be made on the basis of the facts.

  9. There is no such thing as “green energy”. All industrial energy projects have some negative financial or environmental impacts. The devil is in the details. Community_power = Sustainable_power

  10. Joseph Martins, there’s a couple of links that you might find helpful.
    Annual totals for imports and exports are at the bottom of http://ieso.ca/imoweb/media/md_supply.asp

    Monthly totals are in their market reports at http://ieso.ca/imoweb/marketdata/marketSummary.asp – page 18 of these reports contains figure 6.10, which is a graphic representation of where the movement is between the markets (for instance, as the OCAA increasingly calls for imports from Quebec, most of our imports have switch to come from Michigan – and Quebec became our largest export market). This is the only location I’ve found showing what markets are involved.

    That same IESO page has daily market summaries which are a little clearer on import and export.

    And for us true data geeks, the text files, available at the right of that page, will show the hourly figures – these figures are the basis for all the summary reports previously noted.

    The last piece of the IESO puzzle is the Global Adjustment data at http://www.ieso.ca/imoweb/b100/b100_ga.asp. While not specifically about exports, the figures in the global adjustment reflect the difference in what we paid suppliers and what the market price (HOEP) recovered. This figure is added to bills, either embedded in the regulated price plan (RPP), time-of-use rates (TOU), or specifically added to other retail, and wholesale plans. But it isn’t added to exports – so it also shows how much more a customer in Ontario pays for Ontario supply compared to what a customer in another jurisdiction pays of Ontario supply.

    I do some analysis on my blog, including the latest at http://morecoldair.blogspot.com/2011/02/january-record-month-for-global.html

  11. All of this McGuinty nonsense is costing us dearly. The Global Adjustment is now at 4.21 cents/kwh, which is higher than the market price most of the time.

  12. Barbara:

    So long as the “for profit” private sector is involved in a big way providing electricity, we will be paying well above market rates for power in Ontario. In Ontario’s electricity market there is no competition that may drive down prices. Private generators know upfront how much power they will produce over the life of their assets and exactly how much they are going to get paid for it. This is in the form of long term “take or pay” contracts and is known before construction commences. The market price for electricity in Ontario has nothing to do with the Ontario market. The market price is what we buy and sell power for from and to neighboring jurisdictions.

    If these contracts didn’t exist, neither would the private generators. The only way around this is to have an entirely self-funded public utility or private not-for-profit generators or a combination of both.

    In no scenario should politicians be allowed to meddle for political gain!

    The politicization of Ontario’s electricity supply and distribution system is the ONLY problem it ever had and continues to have to this day.

    No system can work efficiently or survive for very long if it needs to be protected/funded in whole or in part by taxpayers money. This has been a failing of Ontario’s electricity system since before the first nuclear reactor was built.

    We need to put a choker on this now before it gets more out of hand then it has already!

    B.B.W.

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