Ontarians just signed up for more expensive, unreliable electricity they don’t need

The costs may be high and also the need questionable, but Ontarians agreed to purchase a lot more renewable power a week ago when Ontario’s Independent Power System Operator (IESO) announced the results of the province’s latest procurement. The new deal brings “low prices” for brand new solar and wind power generation, says Ontario Energy Minister Bob Chiarelli.

No, not “low” like Ontario’s dysfunctional selling price for electricity, that was less than two cents/kilowatt-hour (kWh) over 1 / 2 of all hours in 2015. And not “low” such as the average 1.2 cents/kWh rate that electricity bound for brand new York and Michigan who has sold with this year. Once the Ontario government says “low,” this means seven to fourteen times around that, using the IESO reporting the weighted-average price of the brand new wind power at 8.6 cents/kWh and new solar at 15.7 cents/kWh.

But the effective cost to consumers for that new power, considering the portion of the total output that Ontario consumers will actually use, is going to be higher compared to costs the federal government quotes in its press releases.

Ontario’s power system is … flooded with far more renewable power of computer can use.

The system operator’s announcement depends on the fallacy of relative privation. Quite simply: “this unreliable power is not as costly as another unreliable power you’ve been stuck with.” For example, the operator’s press release proclaims, “For context, these costs are lower than the Feed-in Tariff (FIT) rates…”

That’s not to imply much. The non-competitive FIT solar and wind power program started in 2010. Recall in 2011 Ontario’s auditor general warning the province was paying among the highest FIT prices in the world. Revisiting the issue last year, a subsequent auditor general said this program would add vast amounts of dollars to future bills in comparison with contracting solar and wind power purchase agreements through competitive bidding.

But rather than heed such warnings, the federal government barges on. Under the current form of the FIT program, the government will buy wind power from small projects at a Half premium over the competitive wind price, and solar power at a 30 to 90 percent premium over competitive solar prices. Other bonuses open to FIT producers permit them to add even higher charges towards the bill by, for instance, finding First Nations to accept ownership positions with their projects.

Whether procured competitively or non-competitively, payments to generators for solar and wind power production are only the beginning of the ratepayer impact.

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New wind and solar contract holders will probably be paid not just for how much power they really generate, but for a substantial part of their “deemed generation” – that’s, what they didn’t produce but may have had the grid been able to simply accept all their production, but instead wound up “curtailed” because the grid was oversupplied.

Limiting generators’ exposure to potential curtailment is an excellent method to draw in more solar and wind investment (it was even made retroactive to contracts that originally only covered actual generation). When there is no wind and no sun, such producers aren’t much good, obviously. But, now once the wind really blows or it’s brilliantly sunny, Ontario’s power system is increasingly flooded with much more renewable energy of computer can use. The IESO manages this excess production by selling its capacity to export markets (with Ontarians subsidizing American power). But even then, 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 get paid anyway for what they didn’t produce. In 2015, the auditor general found that from 2009 to 2014, Ontario consumers paid generators $339 million for curtailment. And also the more wind and solar 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 which had to be curtailed in 2014 to manage excess supplies amounted to five times the amount that these new contracts will produce. Curtailments in 2015 were even greater however the official figures have yet to be reported.

The new procurements also reflect a continuation from the government’s negligent practice of ignoring the transmission consequences of their contracting. From the 300 MW of recent wind power, more than one-third is going to be sited in Chatham-Kent, a region from the province already experiencing higher-than-average wind curtailments.

Not only are Ontario ratepayers burdened with payments to generators to not generate, but as the auditor general has stated, our losses on exporting surplus power carry on growing. Net exports in 2014 equalled 10 per cent of Ontario usage – more than 1 / 2 of Toronto’s total usage, sold towards the U.S. at a fraction of the price that actual Torontonians paid. In 2015, net exports hit 12 percent of Ontario’s usage.

Figuring out how much all this new procurement will cost, considering indirect impacts like curtailment and exports, would require intensive analysis. Attempting to convince Ontarians that the prices are “low” gives no indication this kind of evaluation occurred. What we should do know is the fact that Ontario just signed up for yet more costly, unreliable and unnecessary energy.

Tom Adams is really a Toronto-based energy consultant. Scott Luft is really a data analyst and writer.