More on Ontario’s Exports

After my first posting on Ontario’s Exports, where I asked why Ontario was still burning coal when every bit of it was being exported, I received a note from Donald Jones, who has done a lot of digging into the details of Ontario’s operation.  Here’s his letter, which gives you an idea of just how screwed up Ontario’s electricity system is, and why renewable energy (and wind turbines specifically) are making the problems worse.

Re your latest post on Ontario’s Exports. An earlier version of what follows is on the WCO website and on the Cold Air Currents website. Coal is a mystery although little is used right now. If too many MWh of gas generation were contracted and need to be exported why use coal at all when they could be using up contracted gas? There may be technical reasons like voltage control in local areas but I am not an IESO power system engineer so I don’t know. In the past during periods of SBG coal has been completely shutdown. Of course coal is cheaper than gas but that is not a consideration anymore, “health concerns” are!

Why Ontario has to export electricity

In January this year there was a furor in the media about Ontarians subsidizing electricity exports to other jurisdictions. Ontario exports large amounts of electricity to neighbouring jurisdictions day and night. Exports occur for three reasons that are based on technical and financial concerns. First, Ontario presently has an excess of baseload generation so it makes sense to export the surplus rather than power down nuclear units. Second, 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. Third, since supply contracts with the non-utility gas generators mean that consumers pay whether the generation is needed by Ontarians or not, it makes some sort of 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 may make sense to export even at negative prices if it prevents manoeuvring down our present nuclear units. The dollar amount involved is relatively small, around $6 million for 2010. If Bruce B has to power down nuclear units, because of SBG or for transmission bottlenecks, it gets paid for the energy it could have produced without the constraints, deemed generation. It is the Bruce B units that bear the brunt of SBG.

Adding thousands of more megawatts of wind to the grid without exports will cause problems. 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 this will be wind. There will be 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 it will be 10,000 MW – and there will be 1,000 MW of gas-fired 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 (around 70 percent of full power) 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 coldaircurrents.

The major financial reason for exports is gas-fired non-utility generators being contracted by the Ontario Power Authority (OPA) to supply a certain number of megawatt hours per year for the life of the contracts and getting paid even if their supply is not needed. Consumers take or consumers pay. Since the OPA has contracted for more megawatt hours than Ontario needs the surplus has been exported. The wholesale cost of electricity depends on the Hourly Ontario Energy Price – HOEP (the market price) –  and on the Global Adjustment (GA) charge. The GA is necessary because of the fixed dollars per megawatt hour price contracts with energy suppliers, hydro, nuclear, gas, wind etc, and it may be positive or negative. If the market price is less than the contract price the GA is added to the market price and vice versa. The GA is not part of the price paid by the jurisdiction receiving the exports but is paid by the Ontario consumer, in effect subsidizing the export. Without this take-or-pay type of supply contract the generators would have only produced what was needed so consumers would not have had to pay the GA charge on exports from a “contracted surplus”. Less fuel would have been burned with less accompanying pollution. The GA money from the Ontario consumer to subsidize the export would likely be the megawatt hours of electricity exported minus the amount imported multiplied by the GA charge. This dollar amount is shown in the lower plot in this analysis of IESO data and shows the amount of money involved over the last few years.  In 2010 the GA was around $420 million, on exports of $300 million minus the $6 million paid to get rid of the SBG.

This shows that rather than the IESO trying to minimize the output of gas and coal-fired generation, technical and financial issues made it increase the output, burning more expensive 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 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, at subsidized prices, at the same time making more room on the grid to accommodate more expensive unnecessary wind generation. Even after the present take-or-pay supply contracts have expired exports, including wind energy that cannot be accommodated on the Ontario grid, will have to be subsidized. It will be interesting to see how the IESO handles all this.
Donald Jones, P.Eng.

2 thoughts on “More on Ontario’s Exports”

  1. “The dollar amount involved is relatively small, around $6 million for 2010”

    I’m not sure about this.

    It is my understanding SBG exports on Jan 1, 2011 cost the ratepayers of Ontario 5 million in that single day and over 60 million just in the month of December!

    I have seen other analysts put the SBG dollars lost for all of 2010 at well over 400 MILLION!

    It was postulated that the SBG losses for any given hour equal the difference between the market rate for electricity and the “global benefit” we are forced to pay here in Ontario for all those “take or pay” contracts. This difference is then applied to all exported electricity in any given hour to ascertain how much money we are spending to subsidize these exports.

    Someone with better analytical skills then mine may want to confirm or refute this.


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