Monday, October 3, 2016

Ontario suspends procurement of renewable electricity generation

Ontario's suspension of procurement programs for more renewable energy is big news. I'll cite various views on it here, but also editorialize after quoting from the government's press release - with some emphasis added.
Ontario will immediately suspend the second round of its Large Renewable Procurement (LRP II) process and the Energy-from-Waste Standard Offer Program, halting procurement of over 1,000 megawatts (MW) of solar, wind, hydroelectric, bioenergy and energy from waste projects.
This decision is expected to save up to $3.8 billion in electricity system costs relative to Ontario’s 2013 Long-Term Energy Plan (LTEP) forecast. This would save the typical residential electricity consumer an average of approximately $2.45 per month on their electricity bill, relative to previous forecasts. No additional greenhouse gas emissions are being added to the electricity grid.
On September 1, 2016, the Independent Electricity System Operator (IESO) provided the Minister of Energy with the Ontario Planning Outlook, an independent report analyzing a variety of planning scenarios for the future of Ontario’s energy system. The IESO has advised that Ontario will benefit from a robust supply of electricity over the coming decade to meet projected demand.
Before listing mainstream media articles of interest covering the announcement, I'll emphasize this "Cold Air Currents" blog was created to post articles I found interesting - while my "Cold Air" blog was entirely my original work. On this topic, I am an expert, so I'll be both editorialize more than usual, and probably be a little scattered as this announcement touches on many broad themes that deserve (and mostly have) independent articles.
I wrote the last procurement would add $100 million to Ontario ratepayers bills each year, for 20 years - which makes the government's new $3.8 billion savings claim seem reasonable. I was more generous than the government's new press release in attributing minor carbon reductions, with an implied cost of $446/tCO2e.

Following is a summary of press coverage - ordering the sources from most reputable on the topic, to least.

The Financial Post has been a leader in covering the costs, perhaps most significantly in providing space for work from Parker Gallant, Tom Adams, Bruce Sharp, Ross McKitrick and Brady Yauch. From Terence Corcoran: Ontario Liberals’ huge green energy about-face shows renewables aren’t so doable after all
The decision to stop buying more wind and solar is also an abrupt about-face for a government that had turned doable renewables into a religious mission. The planned new capacity — including 600 MW of wind and 250 MW of solar—had only been ordered by ministerial directive last April. Known as Large Renewable Procurement II, the new plan follows LRP I, which set out earlier to contract 300 MW of wind and 145 MW of solar. Those projects have not yet started.
The surplus electricity capacity means that nuclear, gas, hydro, wind and solar power producers are often paid not to produce electricity. At other times, surplus power is exported at cheap prices to neighbouring states.
That surplus, and related costs is a huge, and still growing, cost to Ontario's ratepayers. To establish my bias in this post, I must note in July 2011 Parker Gallant and I attributed the growing surpluses to 2 factors (in the Financial Post),
...losses are mounting as more and more surplus wind and solar energy is added to the system.
The cause of this now well-known financial foolery is a sharp drop in demand due to the economic slowdown and Ontario’s 2009 Green Energy Act (GEA). The GEA established a feed-in-tariff (FIT) program for wind, solar and other renewable power sources.
Back to the past week, I'll put Lorrie Goldstein in the number 2 slot as the next reputable on the topic (for length of concern with the topic). From Wynne's axing of future green energy projects too little, too late:
Of all the spending scandals Ontario’s Liberal government has been involved in since 2003, none has been bigger than its mad pursuit of expensive, unreliable and unneeded wind, solar and biofuel energy.
No other scandal — eHealth and Ornge pale by comparison — has cost present and future generations of Ontarians more money.
Tuesday’s announcement that Premier Kathleen Wynne is cancelling all future large-scale wind, solar, biomass (and, irrelevantly, hydro) projects — about 1,000 MW of excess capacity given the province’s huge energy surplus — is too little, too late.
The two spot was a tough call, because the media outlet I feel most responsible for the government finally acting to cease, or at least stall, the contracting of unnecessary supply to reach a completely arbitrary goal, is Global News. Recent reports from Shirlee Engel, and Brian Hill worked in conjunction with the steep rate increases of 2016 to elevate public disgust with the government's electricity policies. From Global News : Ontario cancels plans for more green energy, citing strong supply of electricity

Global News' latest reporting included words from Keith Brooks at the disreputable Environmental Defence, and Eli Angen of the drink thank Pembina Institute - an original member of the Green Energy Act coalition and producer of junk studies used to justify its continuation. One lesson others should take from Ontario's surging rates is that a legal status and letterhead doesn't make anybody an expert in anything except acquiring legal status, and letterhead.

This week the Global News site included Canadian Press work by Keith Leslie, who found the man most responsible for Ontario's soaring rates - although it was presented differently:
Former energy minister George Smitherman, who introduced the Liberal’s Green Energy Act, said on Facebook that “the cancellation of the renewable procurement program makes it a scapegoat for pricing.”
Mr. Smitherman, the father of Ontario's juvenile Green Energy Act, and related feed-in tariff (FIT) programs has an interesting perspective which I'll return to. However, It's clear that wind and solar generation added around $2.7 billion to electricity costs in 2015, and the IESO's Ontario Planning Outlook, referenced in the government's press release on the suspension of procurement, shows that in real 2016 dollars cost for all generation rose $4.5 billion from 2006 to 2015 - so well over half could be attributed to due Smitherman's solid gold scapegoats.


The Toronto Star's column on the cancellation of the contracting was written by it's best journalist covering Queen's Park, Rob Ferguson. He covered some other entities ordained as "green" in Ontario government scraps plan for $3.8 billion in renewable energy projects:
Green Party Leader Mike Schreiner said “the Liberals have chosen the wrong target,” echoing comments from the David Suzuki Foundation and Environmental Defence that the renewable cancellation is “short-sighted.”
“If you’re concerned about cost, you do more renewables and less nuclear,” said Gideon Forman from the foundation, noting the suspension will cost jobs in the green energy sector.
The Canadian Wind Energy Association warned cancelling the renewables will make it harder for Ontario to meet its greenhouse gas reduction targets in the battle against climate change.
Interesting state of journalism these days - happily quoting people with no credentials other than business cards, on facts nobody even attempts to validate, and are contradictory to the government's press release. It should be noted many studies have shown jobs in the energy sector (which are expenses) generally lead to job losses outside of the energy sector (where energy is an expense).*

Surprisingly the bottom rung of the journalism ladder, on this topic, is occupied by the Globe and Mail. That paper still employs an advocate-tech writer on what might be called "clean tech" (as the Star once employed Tyler Hamilton). Richard Blackwell produced Ontario Liberals put brakes on renewable-energy projects:
...John Cook, president of Toronto-based clean-tech investment firm Greenchip Financial Corp., said many Canadian power producers have already shifted development plans from Ontario to provinces that are moving away from coal-fired electricity production, such as Alberta.
Mr. Cook said it is important that Ontario residents realize green energy was responsible for only 5 per cent of the total increase in the price of electricity for the past five years. “The real cause of [higher] electricity prices has been nuclear refurbishment, transmission upgrades, the HST, and debt retirement,” he said.
5% is obviously not a figure that was fact checked by Blackwell or anybody else.

However, on Twitter I did get a sense of where the ideas driving the nutty statements of the green crowd originate. While many people that read my blogs will be alienated by them, they deserve to be shown.

Shawn Patrick Stensil posted a graphic on his twitter feed captured from documentation from a never seen 2011 Integrated Power System Plan that followed a 2011 Long Term Energy Plan. The graphic shows the now defunct Ontario Power Authority cognizant of coming surpluses, given the orgy of contracting following the passage of the Green Energy Act, if the Pickering Nuclear Generating Station (PGS) continued operating:

I don't want to appear to agree with the argument Pickering should close, or to imply costs are significantly due to its continued operation. In 2015 Pickering produced far more power than wind and solar (and biomass) for far less cost (I estimate $1.3 billion less). Pickering's units also have a capacity value, or credit, far in excess of whatever it could be deemed wind has.

Now that Pickering is mentioned I'll have to touch of the government's press release claiming a robust supply of power well into the future. I don't agree this is so. Ontario's system operator noted, in a December 2015 Long Term Reliability Assessment posted by North American Electric Reliability Corporation (NERC), a shortage of capacity reserve loomed by 2021 in  a "prospective" scenario that is likely the case where Pickering ceases operation:
Since I noted the 2013 Long-Term Energy Plan hid a capacity shortage for that period (describing it as "planned flexibility"), plans to extend the operation of Pickering beyond 2020 were announced. A January 2016 news release included:
The Province has also approved OPG's plan to pursue continued operation of the Pickering Generating Station beyond 2020 up to 2024, which would protect 4,500 jobs across the Durham region, avoid 8 million tonnes of greenhouse gas emissions, and save Ontario electricity consumers up to $600 million.
The $600 million claim seems to originate in a November 2015 report by Strategic Policy Economics.

Shutting Pickering does not appear to be an option unless new firm capacity is built - and even were Pickering not competitive on price, the government sabotaged the likelihood of building peaking natural gas plants as necessary when it caved to local concerns (during an election campaign) and moved planned relatively benign plants away from it's voting base in Toronto.

It is likely the growth in renewables was intended to make nuclear's baseload supply appear impractical - but the gas plant scandal made eliminating nuclear an even less attractive choice. Wind, and now incremental solar, in Ontario should be seen as displacement sources of energy - they displace fuel from gas- and coal-fired generators, but not the generating units. Ontario now has very little fuel uses in the generation of electricity to displace. From this perspective, the government would be wise to not only cancel future procurement, but get out of previous contracts - particularly where a notice to proceed with construction is yet to be given.

One other fascinating, and I think entirely factual, insight from Shawn Patrick Stencil on Twitter:
  • in 2007 a Liberal government put out an Integrated Power System Plan (IPSP) prior to an election to show professionals (at the Ontario Power Authority) were now replacing political planning
  • in 2011 a Liberal government sat on an IPSP and campaigned on their political Long Term Energy Plan (LTEP) as if it were professional planning.
The 2013 LTEP can be viewed as an election platform, and preparing a 2017 LTEP puts it in the same cycle - coming for the 2018 election. Prior to last week's cancellation of future procurements, the government has already reset its agenda with a Throne Speech promising to move some costs of electricity from ratepayers to taxpayers (in removing the provincial portion of the HST). The Premier dutifully tried to sell that on talk radio shows, but being booed at a plowing match may have pushed her into this latest action - which I consider a political gamble as it threatens to upset an urban elite that has been the key element behind 13 years of Liberal rule.

The government also appears to me to be getting some very unseemly support for holding rate increases down prior to 2018's election from OPG's bizarre rate increase application currently being evaluated at the Ontario Energy Board. OPG currently receives a $10.84/MWh rate rider for its nuclear output on top of a $59.29/MWh base rate - for a $70.13/MWh total. They propose to move that rate up $5.77/MWh (8%) for the 2018 election year, and then steeply increase it $24.01/MWh (34%) in the 3 years following 2018's election.
from OPG rate presentation (slide 15)
If the OEB allows OPG's illogical, politically pandering, rate application, the current government may recover from the anger at it over electricity cost increases by 2018 - and eliminating the poor optics of ordering more supply during that period will help too.

Neither really does much about long-term price pressures though. OPG rate hikes will be planned, and the government has so far only suspended the procurments. Until the staff at the IESO that handle procurement are eliminated, this should be seen only as a temporary measure.

Endnote:

*some notes I have accumulated on the topic of employment, and "green" jobs, starting with Ontario references, then noting studies from elsewhere:
  • The Auditor General for Ontario’s 2011 report stated that “no comprehensive business-case evaluation was done to objectively evaluate the impacts of the billion-dollar commitment. Such an evaluation would typically include assessing the prospective economic and environmental effects of such a massive investment in renewable energy on future electricity prices, direct and indirect job creation or losses, greenhouse gas emissions, and other variables.” (Auditor General Report 2011, p. 89.)
  • "... similar concerns were raised about the Ontario job projections in a report by the Task Force on Competitiveness, Productivity and Economic Progress of the Rotman School of Management at the University of Toronto. The report noted that it is unclear what the jobs estimate includes, because it has offered neither a definition of green jobs nor a transparent calculation of how the 50,000 figure was arrived at. The report also said that it is unclear whether the 50,000 estimate is a gross or net number of jobs. The report further noted that even if 50,000 new jobs were created, the higher energy costs attributable to renewable energy might result in job losses elsewhere in the economy, particularly in industries that use large quantities of energy” (Auditor General 2011, p.118.)

Studies

Verso Economics, March 2011
The report’s key finding is that for every job created in the UK in renewable energy, 3.7 jobs are lost. In Scotland there is no net benefit from government support for the sector, and probably a small net loss of jobs.

Luciano Lavecchia and Carlo Stagnaro, Istituto Bruno Leoni, May 2010
The only scope, and we dare to say the only result, of our study is to show that green investments are an ineffective policy for job creation. Regardless to their other merits, that we have not reviewed in this paper, to the extent that the “green deal” is aimed at creating employment or purported as anti-crisis or stimulus policy, it is a wrong policy choice.

Gabriel Calzada Ãlvarez, Universidad Rey Joan Carlos, March 2009
Optimistically treating European Commission partially funded data1, we find that for every renewable energy job that the State manages to finance, Spain’s experience cited by President Obama as a model reveals with high confidence, by two different methods, that the U.S. should expect a loss of at least 2.2 jobs on average, or about 9 jobs lost for every 4 created, to which we have to add those jobs that non-subsidized investments with the same resources would have created.

This study is the one that is often claimed to have been refuted - partly due to a response from the US National Renewable Energy Laboratory (August 2009)
The recent report from King Juan Carlos University deviates from the traditional research methodologies used to estimate jobs impacts. In addition, it lacks transparency and supporting statistics... Finally, differences in policy are significant enough that the results of analysis conducted in the Spanish context are not likely to be indicative of workforce impacts in the United States or other countries.

Following the tepid rebuttal, rumours of an internal study for Spain's government confirming the original study accompanied the cutting, and eventual ending, of subsidies (Leaked Document Shows Spain's Green Policies are An Economic Disaster)

Manuel Frondel, Nolan Ritter, and Christoph M. Schmidt

A forerunner to all these studies was Germany's Solar Cell Promotions: Dark Clouds on the Horizon back in 2008:
...the promotion of renewable energy technologies is often justified by the argument that it would create jobs. Similar to the EEG’s environmental impact, however, gross and net employment effects should be distinguished. When the German Federal Ministry of Environment, Nature Conservation, and Nuclear Safety (BMU 2006:84-89) reports that 17,400 people were employed in the PV sector in 2004, this figure clearly reflects gross employment effects, since opposing impacts are ignored. Yet, apart from direct crowding-out effects on conventional energy production and indirect negative impacts on upstream sectors, supporting renewable energy technologies ultimately raises the price of electricity. The resulting drain of purchasing power and investment capital of private and industrial electricity consumers causes negative employments effects in other sectors. This casts doubt on the ministry’s claim that the EEG can be called a job machine.

Since that report the German Council of Economic Experts flagged the costs and the government pulled pack massively on contracting expensive feed-in tariff procurement. 


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