base load to base cost - and back again?

This week the government of my province, Ontario, released its latest Long-Term Energy Plan. There's not much in it that I haven't commented on before, rather specifically, so in this post I'll discuss some international energy events of the past month to try and put Ontario's decisions in a broader context - not for the benefit on Ontario, but for the jurisdictions copying mistakes made in the past decade around the world.

The Cost of Energy Review produced by Dieter Helm notes the 2008 CCA "commits the UK to reduce emissions by at least 80% by 2050."

The review will provide recommendations as to how best to minimise the costs of energy consistent with the overarching objectives, taking account of the costs and benefits of the recommendations. It will set out options for developing and enhancing energy policy.

The very meaty meat of the lengthy report's digestible Executive Summary:

The measures necessary to reduce the costs include: the unification of the capacity and FiTs [feed-in tariffs] and CfDs [contract for difference] auctions on the basis of equivalent firm power (EFP); the gradual reforms of the structure of FiTs and CfDs in the transition to their eventual abolition; and further enhancements to competition in the wholesale and balancing markets. There should be significant reforms of the regulation of transmission and distribution focused on the role of system operators at the national and local levels, and the replacement of the specific licences for distribution, supply and decentralised generation with a general licence. A default supply tariff should be required and the margins published. Finally, carbon prices and energy taxes should be harmonised. 

19. This package of measures is a major shift from the original market design and regulation model at privatisation, and moves on from EMR. It would create a simpler, more competitive structure fit for the new purposes. Instead of low-carbon technologies being grafted onto the fossil fuel-based system, the new world is radically different, backed up by new smart technologies, data and smart energy networks and services. A common carbon price would significantly lower the cost of decarbonisation and greatly enhance incentives.

The bombshell there is "equivalent firm power" being valued.

Transcanada sell-off of Ontario solar assets an ugly reminder of FIT debacle

TransCanada had issues a press release announcing it's disposal of solar generation assets in Ontario:

TransCanada Corporation (TSX:TRP)(NYSE:TRP) (TransCanada) today announced that it has entered into an agreement to sell its Ontario solar portfolio comprised of eight facilities with a total generating capacity of 76 megawatts to Axium Infinity Solar LP, a subsidiary of Axium Infrastructure Canada II Limited Partnership, for approximately $540 million. The transaction is expected to close by the end of 2017 subject to certain regulatory and other approvals as well as customary closing adjustments.

It's not uncommon to read of really low prices for solar somewhere in the world (an example), so I thought maybe displaying the price for specific projects in Ontario might be an interesting contrast.

The 76 megawatts of solar capacity being sold are:

regarding flexibility

There is a lot being written electricity storage these days, and capacity markets, and the integration of variable renewable energy resources. Most of the material originates with lawyers, philosophers, sales people, consultants, politicians and other economists. I invite you to listen to a professional engineer and system operator, very carefully, for 10 minutes.

The system operator is Leonard Kula P. Eng.,Vice-President, Market & System Operations and Chief Operating Officer of Ontario's IESO. If low greenhouse gas emissions are a genuine goal, the messages are pertinent far beyond Ontario. Over the first 7 months of 2017 the IESO shows ~2.8 terawatt-hours (TWh) generated by natural gas-fueled suppliers, which is only about 3.5% of all generation. The output from gas is down over 60% from the same period in 2016, which should push the greenhouse gas intensity of IESO grid generation down to around 15 kilograms CO2e per megawatt-hour - superb for grids that aren't entirely in jurisdictions blessed with plentiful hydro-electric generation sites. From a low emissions standpoint Ontario's system operator might be considered THE system operator.

Lower gas use is one characteristic of Ontario's electricity system of late.

A less positive characteristic is rising curtailment of contracted supply - notably from wind.

While most curtailment looks to be due to surplus generation, either globally or in particular regions of the grid, there is another operational aspect of curtailment closely linked to the decline in gas generation.

Earlier this year I ended a post, Can Wind and Solar be significant contributors to a low emission electricity system, with:

...many commentators...have been skeptical about the ability to operate the grid with little of the gas generation (and previously coal) online, and ready for ramping. I believe Ontario's actual operators of the system - the ones who do it on a daily basis - have a story to tell. That story would likely include improved forecasting, revised wind turbine (and perhaps solar panel) regulation to provide a programmed reactive power element, and rationalized market bid rules forcing the curtailment of wind and solar output prior to impacting nuclear units.
It is variable renewable energy systems that need to be flexible.

Kula indicates the way to make variable renewable energy systems flexible is by curtailing their output.

We added the ability to dispatch the variable generation facilities that are connected to the grid in 2013, and they are very fast acting resources. At times we have to reduce the output of these facilities to go ahead and manage congestions and/or surplus conditions, and once they dispatched down they are very quick and flexible to be dispatched back up.

The IESO's Kula spoke at the 2017 Stakeholder Summit. The IESO requires you register before viewing the recordings (it's a painless process). The section I am addressing is the panel on "Building Flexibility into the Electricity System". While I highly recommend the 10 minutes at the start of the panel in which Kula delivers his presentation , Rob Coulbeck is also worth listening to, as is the Q & A session.

Diesel and coal; standards and bans

Alberta's coal-fired power plant operators are planning to cheaply convert plants to burn natural gas. National emissions standards should not be relaxed to extend the life of what will still be high-emission power plants.

Europe votes for stricter pollution laws on power plants | Power Engineering

Power plants in the EU will have to cut the amount of toxic pollutants such as nitrogen oxides they emit under new rules approved by a majority of member states.

Friday’s decision imposes stricter limits on emissions of pollutants such as nitrogen oxide, sulphur dioxide, mercury and particulate matter from large combustion plants in Europe.
The European Power Plant Suppliers Association (EPPSA) said they welcomed the move by the Industrial Emissions Directive (IED) Article 75 Committee members on the Best Available Techniques Reference Document for Large Combustion Plants (LCP BREF).
...
Several countries which are heavily reliant on coal, such as Poland, Bulgaria, Germany and the Czech Republic, were opposed to the changes.
...
National authorities will be able to use a derogation, or form of exemption, when costs would be disproportionate compared with the environmental benefits, while respecting environmental safeguards

...EPPSA also said it believes that for most of the existing LCPs, the implementation of the conclusions are economically and technically feasible through the state-of-the-art technologies currently available in the market.

Some history from the United States indicates the saving of some emissions reductions, such as mercury, may not justify the costs, whereas the reduction of others do - often in conjunction with reducing mercury. Courts ruled the Environmental Protection Agency (EPA) had not properly considered compliance costs, in 2015, but did not require the rule rescinded and subsequently rejected attempts to nullify the standard. Meanwhile, most plants had complied with the rule - or closed.

aside: India also introduced standards - but not the enforcement of standards.

The new EU power plant emissions regulations appear to borrow wisely from the American experience.

For an example of negative outcome due to policies designed solely to encourage one fuel/outcome, one might look to Europe's experience with diesel in automobiles - as Maximilian Auffhammer has done in Save the California Waiver! How a “little” California vehicle standard prevented an urban “airmaggedon”:

California politicians propose new emissions pricing regime for 2020

Making sure the climate transition benefits low-income neighborhoods and communities of color isn’t just the right way to pursue climate policy. In California, where policies to price carbon require a two-thirds vote before becoming law, it may turn out to be the only way.

The quote is from Danny Cullenward, which is a name I found in the first article I saw on a new proposal that would replace California's current cap and trade carbon pricing program (to which Ontario is linking). From the Wahington Post's As Trump reverses climate actions, California considers a bold new step:

...a new proposal, announced Monday, would replace California’s current cap and trade carbon pricing program, its flagship effort to reduce the state’s greenhouse gas emissions, with an updated — and, according to supporters, more socially progressive — scheme. 

“The state and the federal government were until recently working hand in hand on these issues,” said Danny Cullenward, an energy economist, lawyer and research associate with environmental research organization Near Zero, who helped advise the development of the new proposal. “In an era of the Trump administration, carbon pricing is one of the few tools that the state has to whatever the federal government does.”

...
The new proposal establishes another cap-and-trade program — which will extend either until 2030 or until the state meets its 40 percent emissions reduction goal, whichever comes first — with some notable updates intended to make it more effective and more socially responsible.

News from Ontario's electricity bureaucracies, and more

A news day at Ontario's Electricity System Operator (IESO) and its nominal sector regulator, the Ontario Energy Board (OEB). 

The most anticipated news came from the OEB's announcement of rates to be introduced for May 1st. From the Regulated Price Plan Price Report | May 1, 2017 to April 30, 2018

...the OEB has historically included a portion of significant price changes that may occur in the forecast period because of the smoothing benefits for customers. [emphasis added]

In keeping with this practice, the OEB has considered it appropriate in this price setting to take into account a portion of the estimated impact of the government’s proposed Fair Hydro Plan. The OEB has done this by way of a reduction in the forecast amount of the Global Adjustment of approximately $1B, which represents 50% of RPP consumers’ estimated portion of the proposed refinancing of the Global Adjustment.

There's a lot of questionable assumption, some conflicting with other OEB practices, in this paragraph - but jumping to what will be of immediate concern to those only interested in immediate concerns...

The forecast average price prior to the OEB considering new government interference is $114.90 per megawatt-hour (MWh), or 11.49 cents per kilowatt-hour (kWh), which is up about 3% from a year earlier (roughly the inflation rate). For sketchy reasons the OEB has reduced that average rate to $97.62/MWh (15%), reflecting their anticipation of what could comprise the government's boot the cost down the road (BCDR) plan  - also known by the government's spin as the Fair Hydro Plan.

The 1.7 cent/kWh reduction the OEB is making is half the cut in bill mock-ups by big new local distribution company Alectra from the very day the government announced the BCDR policy. It was as if they knew what was coming. Coincidentally the IESO today announced Peter Gregg as its new President and Chief Executive Officer, noting "recently he was President of Alectra Energy Solutions."

Tribes and Sustainability Assessments

There is a lot of news to note regarding energy, environment and politics. This blog attempts to note such things on the assumption knowledge was important. Today it's probably more important to note that assumption is highly questionable. Hopefully I can write entertainingly so as to get readers through to the ridiculous conclusion of this post on sustainability science -ishness, and disposal of nuclear waste.

Some very quick background before discussing the fall-out from two reports put out over the past week from bodies attached to the federal Ministry of the Environment and Climate Change.

Canada's second Prime Minister Trudeau reportedly hand-picked Marlo Raynolds, a former head of the Pembina Institute (an industrial wind lobbying organization that has historically marketed itself as an environment organization), to be the head of staff for the lawyer, Catherine McKenna, appointed Minister on Environment and Climate Change. It would be hard to find two individuals to better characterize the stereotypical image of an "environmentalist" imagined by the all-important affluent, urban voter.

In August 2016 the Minister appointed a panel composed of bureaucrats and lawyers "to review and restore confidence in Canada's environmental and regulatory processes." The "Expert Panel" was headed by Johanne Gélinas, a former Canadian Commissioner of the Environment and Sustainable Development. In 2007 The Toronto Star referred to her as "Environment Czar" in writing of her firing by a Conservative government. The article included, "John Bennett of the Climate Action Network said it was a sad day for the environment."

Knowing the personalities is really all one needs to know the conclusions, but since the rejection of expertise is, it seems to me, generally a malady attributed to those on the right skeptical of most apocalyptic claims, it may prove antidotal to review this other tribe's tripping.

This past week the Gélinas panel provided the report everybody expected them to - criticizing the processes of the previous government and suggesting more study and consultation, etc. The objects of those processes were pipelines and nuclear projects, making the bodies being judged the National Energy Board (NEB) and the Canadian Nuclear Safety Commission (CNSC).

The report's first priority is the need for a new acronym:

...We believe that Canadians deserve better and that it is entirely possible to deliver better.

... in our view, assessment processes must move beyond the bio-physical environment to encompass all impacts likely to result from a project, both positive and negative. Therefore, what is now “environmental assessment” should become “impact assessment” (IA). Changing the name of the federal process to impact assessment underscores the shift in thinking necessary to enable practitioners and Canadians to understand the substantive changes being proposed in our Report.

I can think of some barriers beyond the admittedly huge "EA" acronym/obstacle preventing practitioners, and Canadians, from understanding the substantive changes being proposed. Chief among them, a process discussion not being considered a vehicle for substantiation:

We also outline that, as we listened to presenters and read the many submissions presented to us, we came to understand that any new effective assessment process must be governed by four fundamental principles. IA processes must be transparent, inclusive, informed, and meaningful.

The current processes are transparent and inclusive - which is a problem in having them perceived as informed and meaningful. Professional agitators are participating specifically to avoid meaning being found through the process. Politics means this review existed solely because the existing process was introduced by a Conservative government, and therefore opposed by the Liberal party that later defeated it.

The major problem with the old EA process was it had outcomes the Liberal's allies (tribe) disliked.

Accounting for $50 billions dollars - and more

On March 2nd, in announcing a plan to push electricity costs off into the distant future, the 63.8 year-old Premier of Ontario stated:

In the past few years we've invested more than $50 billion in electricity infrastructure -- new dams in the south, new towers in the north, $13 billion to refurbish nuclear power plants alone and billions more to ensure new transmission and distribution lines everywhere. These are enormously important assets that meet the demand for cleaner and reliable power everywhere in the province. These are assets that belong to all the people of Ontario and that will serve us for many decades to come.

Since that time a lot has been written on the Premier's plans. This post will note works I found substantial, particularly those that try to account for the $50 billion "we've" invested. One other aspect that has to be mentioned in discussing the Premier's "Fair Hydro Plan":

We needed to rebuild the system and so we went to the bank for that money. But the terms that were set weren't fair -- particularly the amortization. Instead of paying off the mortgage over 30 years, we agreed to a term of 20.
In effect, this generation has been subsidizing not just those who came before, but those who will come next. That's not right -- and it has been notably unfair on today's hydro users. So we're fixing that. We're refinancing the mortgage and setting a new term that stretches over a longer period. Over time, it will cost a bit more. And it will take longer to pay off. But it is fairer

To ground the information on some fact, I'll start with slide 7 of an IESO presentation accompanying the Ontario Planning Outlook delivered in September 2016.

The chart shows currently operating capacity (likely as of the end of 2015) still anticipated to be "under contract" in 2035: most is hydro, and most of that is publicly owned OPG's generators. Adding recently re-contracted Mattagami sites to OPG's 100% public generators explains 94% of the waterpower shown for 2035. The nuclear showing in 2035 is Bruce Power's refurbished units 1 and 2.
I've now explained 93% of all the generating assets that were in service (likely at the end of 2015) that will remain "under contract" by 2035.

Of the contracted sites, Bruce nuclear reactors are contracted for an expected 31 year life, and the Mattagami waterpower sites have 50 year contracts. Of the generation assets that will still be under contract or owned in 20 years, most were built by generations that preceded the Premier's, and those that don't already have longer payment periods factored into existing contracts.

China bans wind due to Ontario-like curtailment levels

A report from China contains data on industrial wind that should be compared to similar Ontario data, so...

New wind power projects banned in 6 regions | China.org.cn

The National Energy Administration (NEA) has issued red alerts, or the highest warning, in six provincial regions where new wind power projects will be prohibited this year...
The six restricted regions include Heilongjiang, Jilin and Gansu provinces, as well as Inner Mongolia, Ningxia Hui and Xinjiang Uygur autonomous regions...
Large amounts of wind power were wasted in these regions last year...
According to official data, last year the waste proportion of these regions were Gansu (43 percent), Xinjiang (38 percent), Jilin (30 percent), Inner Mongolia (21 percent), Heilongjiang (19 percent).

Wind power facilities generated 241 billion kilowatt hours of electricity in 2016...
However, close to 50 billion kilowatt hours of wind power was wasted, up from 33.9 billion kilowatt hours a year earlier, due to distribution of wind resources and an imperfect grid system.

In Ontario, the IESO doesn't seem as advanced as the Chinese NEA so is yet to release an official curtailment figure, but I've got estimates!

Extend and pretend: Ontario government acts to lower electricity bills

The Premier of Ontario, and its Minister of Energy, held a news conference today in which they promised to cut electricity bills by 25 per cent - on average, inclusive of an 8% sales tax rebate already introduced. A Fair Hydro Plan is touted as offering these "new" things:

Starting this summer, electricity bills will be reduced by 25% on average for households across Ontario. Many small businesses and farms will also benefit from this cut.
And bills won’t increase beyond the rate of inflation for at least four years.
People who live in eligible rural communities and those with low incomes will see even more reductions to their electricity bills.
Taken together, these changes will deliver the single-largest reduction to electricity rates in Ontario’s history.

I found none of the government's posted material informative.

Ontario consumers, particularly those of Hydro One, are advised to skip government explanations and go to Hydro One's examples of cost impacts for different customers. Hydro One summarizes changes:

• Reducing the Global Adjustment charge by 20 per cent,
• Lowering the delivery charge for low-density customers,
• Accelerating the move to more fixed delivery charges,
• Introducing an affordability fund to help those customers in need, and
• Introducing a First Nations electricity rate.

The move to fixed delivery charges is one I approve of, but it may be of limited interest as it impacts individual consumers (the higher consumption user, including farms, benefit at the expense of low consumption residences).

In the remainder of this post I'll pull some evidence together to speculate on how the government intends to reduce the global adjustment charge by 20 per cent, and the implications of doing so.

Ontario electricity campaign positions take shape

Today the leader of Ontario's NDP unveiled a plan to "cut hydro prices." With the NDP position tabled, it's probably fair to speculate on the electricity policies the 3 main parties will campaign on in 2018's election.

The PC Party of Ontario has indicated they have 3 focuses: cancel the Green Energy Act, stop the privatization of Hydro One, and control public sector electricity salaries. While I agree the GEA is the single largest driver of high costs in the province, the other 2 pillars are populism - pure and simple.

The NDP's new paper indicates their priority is reversing the share sales of Hydro One.

The first bill tabled by an NDP government would return Hydro One to provincial ownership and control.

The paper implies a return to public power.

Direct the hydro system to provide reliable low-cost, environmentally responsible power for all Ontarians instead of profits for private companies

I felt the paper avoided the anti-nuclear rhetoric that can push people like me away from the NDP, but others find it in the sub-text.

Regardless, this strikes me as a basic socialist document that believes in public power.

The government/Liberal position is likely to be as able managers of a very clean system - and the PC's populist stance leaves them open to being the champion of market solutions.

Can Wind and Solar be significant contributors to a low emission electricity system?

...there is a substantial body of evidence that variable renewable integration costs are hugely dependent on the flexibility of the system to which they are being added.

So claims a new report from a UK Energy Research Centre, which lists many studies after opining on them in The costs and impacts of intermittency – 2016 update. Integration costs are important and I'll write on some of the content of the UK paper in paragraphs below, but first I want to discuss the bias of the work, and a great accomplishment in Ontario.

Taken together, the full range of impacts add weight to the message that electricity systems and markets need to adapt and be reorganised to incorporate large proportions of variable renewable generation most efficiently. 

systems and markets may not be what "need" to adapt.

The key challenge facing policymakers, regulators and markets is how to ensure delivery of a flexible, low carbon system that makes maximum use of variable renewable generation whilst minimising overall cost and enhancing security and reliability. 

It is wrong to state a low carbon system maximizes "use of variable renewable generation."

My estimates indicate in January - usually one of the highest demand months of a year - Ontario generated less electricity with fossil fuels than in any month since at least 1973. Probably the least of any month in my life (I was born the day Dylan shocked Newport with an electric performance).

"I believe we have market failure"

South Australia has been a vocal point for watchers of the renewables experiment - this story struck me as extraordinary in exposing the themes of a final tale everywhere low capacity credit supply is prioritized.

SA heatwave: Blame game begins as state faces further power cuts

South Australian Premier Jay Weatherill promised to "intervene dramatically in the electricity market"...
Mr Weatherill's promise followed comments from Prime Minister Malcolm Turnbull earlier this morning, placing the blame for South Australia's blackouts entirely on the State Government.
"It has created a situation where that state has the most expensive and least reliable electricity in Australia," Mr Turnbull said.
"That is a fact. Of course they want to blame it on everybody else.
"When they have the biggest heatwave there is no wind and when there is no wind, all of their windmills are not generating electricity.
"They haven't planned for that."

Ontario's IESO steps off the gas

On New Year's Day, 2017, Ontario saw lower total generation from natural-gas fired facilities that it likely has on any day in over two decades.

Over the first 20 days of the year electricity produced from natural gas is down 48%, leaving electricity generation producing about 1/3rd of the emissions it did during the first 20 days of 2014, following the end of coal-fired generation at Lambton and Nanticoke (as 2013 ended). The year-to-date average I estimate at 21 grams CO2 equivalent emissions per kilowatt-hour (CPIK).

Judged only on emissions, this is an impressive accomplishment. Those concerned with Ontario's electricity sector may wonder what it cost, and if there are negatives associated with the changes. I will explain why emissions are dropping, and although it's not possible for me to cost out the changes, or specify the negatives, I'll demonstrate why the IESO should reveal these.