Ontario buys ‘renewable’ power for dollars, and sells it for pennies
BY ANDREW ROMAN, Dec. 3, 2022, Andrew’s Views
Renewables advocates have been claiming that solar and wind generation are now the least costly form of generation, and therefore, should replace all fossil fuel generation as quickly as possible. Is this correct?
A number of energy analysts have reminded us that weather-dependent wind and solar generation are necessarily intermittent, requiring costly backup when the wind isn’t blowing and the sun isn’t shining. However, few commentators have examined actual operating experience in as much detail as Parker Gallant, a retired international banker. A large part of this blog post is based on Mr. Gallant’s analysis, for which I thank him.
Using Ontario statistics, he has demonstrated in recent blog posts (such as this one) that these forms of generation, and particularly wind turbines, are extremely costly to both consumers and taxpayers, often inconveniently providing high output when not needed and providing next to none when needed.
This results in:
- paying these generators high prices even when their energy it isn’t needed;
- exporting surplus generation to neighbouring US states or Canadian provinces at low or zero prices; and
- importing electricity from neighbours at higher prices at peak times, when wind and solar often generate almost nothing.
Ontario’s Independent Electricity System Operator (IESO), which operates the electricity grid, provides daily statistics, for each hour of the day, e.g., on:
- how much electricity the province generated to meet hourly demand;
- by what methods it was generated;
- how much was imported or exported;
- at what prices.
This permits us to examine the efficiency and cost to Ontario electricity customers and taxpayers of each method of generation, including wind and solar.
Although all Canadian provinces and territories will have different mixes of generation methods, all are committed to increasing the percent of wind and solar generation in their generation mix: this is to try to reduce their CO2 emissions to net zero. Therefore, the Ontario data can provide a useful base for examining the costs and benefits of renewables elsewhere, with necessary adjustments for the generation mix and the output of renewables in different geographic areas.
November 28, 2022, a Typical Late Fall Day in Ontario
As Ontario approaches its winter season its peak electricity demand will often be over 20,000 megawatts (MW). On November 28th, 2022, Ontario’s peak demand for electricity was 19,360 MW at Hour 18 (the hour ending at 6 PM). But wind turbines generated almost nothing at that hour.
At Hour 18, when the wind wasn’t blowing, wind turbines were able to deliver only 1% (200 MW) of that peak demand. That is only 4% of the wind turbines’ total rated capacity! (The rated capacity is the theoretical maximum output if the wind was blowing hard.) On the other hand, during the early morning hours from 1 AM to 7 AM, when demand was as low as 12,990 MW, they generated 13,524 MW, more than was needed, on top of all the other generation that was then available.
For the remaining 17 hours of the day, as demand was rising to the peak, wind turbines generated only 6,862 MW, an average of only 8.2% of their rated capacity. As we can see, they generated twice as much electricity at the off-peak hours when it wasn’t needed and half as much when it was, as the system approached peak.
This is Not a Low-Cost Way to Generate Electricity
Ontario charges electricity rates that vary considerably at different times of the day, to encourage off-peak use. Ontario consumers paid 15.1 cents per kilowatt hour (kWh) at peak (when the wind generators were barely working) and 7.4 cents/kWh at off-peak times (when they generated more than necessary).
As Ontario’s nuclear generation cannot simply be switched off and on quickly like gas generators, whenever the total system generation would become higher than demand the excess has to be either exported or curtailed. When the IESO curtails wind and solar generation, the owners of the wind generators are still paid for generating nothing under the take-or-pay contracts that the Ontario government has given them. (Such contracts are common, by no means unique to Ontario. As well, renewables are given preferential rights to generate into the grid, ahead of fossil fuels.)
For those first seven hours of the day the IESO had to sell the surplus power to Michigan, New York, and Quebec for as low as $5.84/MWh. For the 17 hours following, however, IESO purchased power from New York and Quebec for prices that reached $86.31/MWh at Hour 18. This huge $80.47 spread shows how volatile prices can often be when unpredictable, weather-dependent supply is far above or far below demand.
The wind generators connected to the IESO grid were paid $135 per MWh for those first 7 hours and almost all of the 13,524 MW they generated were sold to our neighbours for an average price of 0.27 cents per MWh – about ¼ of a cent. Yes, you read that right, buying wind generation at $135 and selling it for ¼ of a cent — almost giving it away. The result? Ontario’s electricity system lost approximately $1.8 million in just those 7 hours of that one day.
And there are many similar (or worse) hours and days throughout the year. Again, Ontario is not unique, this is the result of the typical wind energy contracts in many provinces and in other countries.
In addition to generators connected to the IESO grid, Ontario also has 600 MW of wind generation and 2,200 MW of solar that is not connected to this grid, but connected within local distribution systems, many of which are municipally owned. Most rooftop solar generators are paid an astonishing $800/MWh and ground mounted solar receives $400/MWh. But there is no disclosure of how much these non-IESO generators actually generate, at what time of the day, or what ratepayers pay for that annually.
What Is the Benefit of All This High Cost?
Canada’s electricity generation already includes a high level of hydroelectric and nuclear generation that have zero CO2 emissions. In total, for 2019, 80% of Canada’s electricity generation was non-emitting, of which solar and wind together represented only 5%. (See Canada’s statistics.) Increasing that 5% to 100% is not going to happen by 2030 or 2050.
In Ontario, electricity generation is already over 92% emissions free, a mere 8% from net zero. Very few other jurisdictions in North America or Europe can match that. When Ontario has to import electricity from Michigan or New York their levels of CO2 emissions at most times of day will be higher than Ontario’s, making Ontario’s net contribution to global emissions higher than it would be without such imports. Ontario is spending – or you might say wasting – billions of dollars annually to nudge itself ever so slightly closer to eliminating that last 8% of emissions.
As I have explained in in a previous post, all that glitters isn’t green, or renewable!