Ontario lost more than $500 million exporting clean energy in 2016

Following a detailed analysis of data issued by the Independent Electricity System Operator (IESO) and the Ontario Energy Board (OEB), the Ontario Society of Professional Engineers (OSPE) reports that in 2016, the province exported 14.6 terawatt-hours (TWh) of clean electricity at a net financial loss of more than $500 million.

What does a financial loss of more than $500 million mean?

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“This represents a year’s worth of power for more than a million homes, that Ontario has sold to other jurisdictions for less than it costs us to produce,” said Paul Acchione, P.Eng., energy expert and former President and Chair of OSPE. “Ontario ratepayers are essentially subsidizing hydro bills in places like Michigan and New York to the tune of $500 million per year.”

This news comes just months after OSPE reported that in 2016 Ontario wasted (dumped) 7.6 terawatt-hours (TWh) of clean electricity, an amount equal to powering more than 760,000 homes for one year, or $1 billion – a 58% increase over 2015.

Since 2014, Ontario has exported surplus hydroelectric, wind, and nuclear generation to adjoining power grids at a significantly lower price than the cost of production. This occurs because the province produces more clean electricity than it can use, so it is sold to neighbouring jurisdictions at a discounted rate – resulting in a net financial loss. Total energy exports in 2016 were 21.9 TWh compared to 22.6 TWh in 2015.

“OSPE continues to assert that the government must restore the oversight of professional engineers in the detailed planning and design of Ontario’s power grid to prevent missteps like this from happening,” said Acchione.

 Engineers Have Solutions

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In the summer of 2016, OSPE submitted an advisory document to the Minister of Energy and all three major political parties detailing 21 actionable recommendations to deliver efficiencies and savings. This included reducing residential and commercial rates by approximately 25% without the creation of the subsidy and deferral account under the Ontario Fair Hydro Act.

OSPE also recommended establishing a voluntary interruptible retail electricity market to productively use Ontario’s excess clean electricity. This market would allow businesses and residents to access surplus clean power at the wholesale market price –  less than $0.02 per kilowatt-hour (KWh). Clean electricity is best used to displace fossil fuels for thermal storage such as water and space heating, industrial steam, and the production of clean hydrogen fuel through electrolysis. Each of these recommended initiatives would help Ontario achieve its emission reduction targets.

“Engineers know how to fix these problems, but they need to be empowered. Engineers must be given independence in planning and designing integrated power and energy system plans,” said Jonathan Hack, P.Eng., President & Chair of OSPE.  “It is imperative that we depoliticize what should be technical judgments regarding energy mix, generation, distribution, pricing and future investments in Ontario. We are concerned that the government does not currently have enough engineers in key Ministry positions to properly assess the balance between environmental commitments and economic welfare when it comes to energy.”

About the Ontario Society of Professional Engineers (OSPE) & the Energy Task Force

 OSPE is the non-partisan voice of the engineering community in Ontario, with more than 80,000 professional engineers and 250,000 engineering graduates, interns and students. As part of OSPE’s energy advocacy initiative, its experts share findings to bring attention to the importance of engineering involvement in the planning and design of Ontario’s power system.

OSPE’s 2012 report Wind and the Electrical Grid: Mitigating the Rise in Electricity Rates and Greenhouse Gas Emissions detailed the mounting risk of hydraulic spill, nuclear shutdowns, and periods of negative wholesale electricity prices during severe surplus base load generation.

OSPE’s Energy Task Force has provided strategic engineering input to Ontario’s Ministry of Energy for over ten years. The majority of OSPE’s recommendations have been implemented, saving Ontarians hundreds of millions of dollars. But more can be done by engaging with Ontario’s engineers to optimize Ontario’s clean electrical power system.

Read OSPE’s full analysis of Ontario’s clean electricity exports: “Empower Ontario’s Engineers to Obtain Opportunity.”

OSPE

This Post Has 14 Comments

  1. Robert Muir

    And sadly, Green Infrastructure is on the SAME path to ruin in Ontario as Green Energy is. Why? Instead of engaging engineers and planning and managing systems as a whole, Ontario proposes a patchwork of ideology-driven feel-good initiatives with no interest in cost, or cost effectiveness, or how systems perform. For example, city by city, this is what Green Infrastructure could costs us with proposed generic, one-size-fits-all draft Green Infrastructure targets in Ontario … over $300B:

    http://www.cityfloodmap.com/2017/03/expensive-green-infrastructure.html

    But Ontario government (MOECC) says ‘excessive costs’ shall not be a concern for implementation. Troubling times in Ontario. 5 years from now when we realize the enormous cost of ‘smart swales’ and see the parallels to ‘smart meters’ I’ll suggest ‘I told you so …’.

    1. Paul Acchione

      Hi Robert. In the case of electricity its not the smart meters that are a problem, its the retail price plans. They are not designed properly for a clean low fuel cost power system like we have in Ontario. See my response to Peter Rapin’s comments below. You are correct that the appropriate engineering experts need to be more involved in developing public policy and implementation plans for complex technical systems especially for the electrical system – the largest most complex engineered system in society.

  2. Peter Rapin

    How is it we, Ontario, can dump excess energy to the States when every other export is subject to anti-dumping regulations resulting in duties and penalties? I understand that selling at a discount is less costly than just wasting the excess however there must a a way that Ontario can “dump” to local users without undermining the entire system.
    Also, can’t we, as Canadians, figure out how to get the excess “clean” energy to the central and western provinces so they can accelerate their mothballing of coal generation plants? Recognizing we can’t just run a cable or two but we could leap-frog from grid to grid. Maybe not efficient but as it is the excess is being severely discounted or wasted.
    I’m sure the experts will have all sorts of reasons why it can’t or shouldn’t be done but maybe we need to take a high-level look at this. How can we as Ontarian’s turn the problem of excess energy to a benefit? Sometimes you have to look through the binoculars from the other end!

    1. Paul Acchione

      Hi Peter. We are not actually dumping power into the USA. We export electricity at the wholesale market price which by international agreement is priced at its marginal cost of production. Capacity is paid for by the exporting jurisdiction. That means it is not economic to build clean generating capacity exclusively to export electricity to the USA. Energy prices happen to be very low in Ontario because clean electricity has a very low marginal cost of production mainly because it has very low fuel costs. You are correct that we should be using it here before we export it. But we don’t need to move that power across Canada. We can use it right here in Ontario to displace fossil fuels in other sectors of our economy. All we need to do is change the way we price electricity at the retail level. Ontario has a clean power system where installed capacity represents over 90% of the total cost. Energy is less than 10% of the cost. We need to have our retail price plans reflect that new reality so consumers can use surplus clean electricity when it is available for hot water and space heating among many other uses including industrial steam, hydrogen production and charging our electric vehicles.

  3. Al Taylor

    The Ont gov’t does not take advice from professionals only lobbyists & pols. Maybe the next government will listen. There is no $$ to be made from saving Ontarioans from dumping expensive power to our neighbours thats why you have an uphill battle, hope your members will vote en mass in 2018.

    1. Paul Acchione

      Hi Al. You just explained why it is important for engineers to form an advocacy organization and for all engineering graduates to support OSPE by becoming members. There are over 250,000 engineering graduates in Ontario. Only a small fraction are OSPE members. Our advocacy efforts would be far more effective if all those engineering graduates were part of OSPE so we could better influence policy makers. Size matters in politics because size reflects voting power. Politics is not only about doing something good for the public it is also about getting re-elected so the party’s policies can be continued. There are many opposing advocacy voices. OSPE tries very hard to make its pitch based on engineering and economic facts – hard data not opinion. We hope all political parties find that they can trust OSPE to provide them with sound advice that is good not only for engineers but for society as a whole. Over the past 5 or 6 years most of OSPE’s recommendations have eventually been acted upon by the government. We are still working with them to implement some of the more difficult recommendations like our call to introduce an interruptible electricity market at the retail level and to redesign our retail electricity rates to align better with our very low emission power system. And yes let’s all vote at the next election for the party that reflects our personal priorities. Regardless of which party wins, I hope OSPE will be there with sound engineering and economic advice. After all OSPE is a non-partisan organization. We want good policies from whatever party is in power.

  4. Robert Muir

    Just returned from meeting at MOECC where staff touted the accelerated approvals of MORE green energy projects. Nice administrative ‘WIN’ I suppose if that is the short-sighted and narrow KPI for the ministry …. but obviously a colossal “FAIL” for managing our energy system holistically … let’s get more green energy capacity online so we can dump even more in 2018 and beyond? It really is that BAD when we have ideologically driven programs and no engineers at the ‘front of the bus’.

    Time for #radicaltransparency in Ontario and reality checks on what is driving energy policy. Certainly it should not be extreme weather that drives clean energy GHG mitigation programs, since in Southern Ontario the Engineering Climate Datasets (version 2.3) show decreasing trends, no ‘new normal’ to throw good money after bad at:

    http://www.cityfloodmap.com/2017/11/radical-transparency-uncovering-big.html

    1. Paul Acchione

      Hi Robert. I won’t engage in a debate about what causes climate change but I don’t think we should be using our atmosphere and waterways as a sewer. My grandson has asthma so I admit I am biased. We have lots of low cost options available for low emission energy and more efficient energy use. If we are smart as a society we will get inputs from various experts including engineers and assess each new idea on a cost per tonne reduction in emissions. Then we can direct those cap-and-trade dollars to where they will do the most good at the lowest price. Funding every bright idea without the analysis to show that the idea is worthy of development is a recipe for turning Ontario into another Greece.

  5. Mbotezan

    The real problem is that “green” is an incredibly stupid endeavour in Ontario. Virtually 100% of base load in Ontario is C02 free energy (Nuke and hydro electric). The gas peaking plants can operate during high peak usage. The dam at the falls has good flexibility in terms of turn down.
    The real issue here is that some of the wind turbines operate at night when the nuke plants can pretty much pick up most of the load. The nuke plants generally are not turned down, ( not sure about the reasons) so the IESO’s short term solution is to sell power at a loss to the neighbouring provinces and states.

    Whenever you make a decision about installing “green” energy you must do a cost-benefit analysis. If you increase the cost of power significantly it is very likely industry will leave Ontario. Let’s say it goes to Ohio, Mexico or China, now does installing green energy result in a net C02 reduction? It is likely an increase. So your green energy projects have literally made more C02 emissions.

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