Ontario’s NDP are now trying to position themselves as defenders of the province’s battered electricity consumers. The NDP’s concerns are getting lots of news headlines like this and this and this, but the solutions the Dippers propose deserve more scrutiny.
Ontario’s NDP latest energy pronouncements remain mired in the confusion they have added to Ontario’s energy file. The NDP have been stalwart supporters of the Liberal’s Green Energy Act, so it is a bit rich for them to now complain about the rate increases that ugly legislation is causing.
Do the NDP propose to expand or not expand wind and solar power? If they want more wind power, who will they be pushing their turbines on? These questions remain unanswered.
To the extent that the NDP claim to address the root cause of Ontario’s rates increases, energy critic Peter Tabuns argues that “Ontario has signed costly deals with private power companies that have created a glut in supply that must be exported at a lower price than the generation cost.”
The theory that the evil Mike Harris and his privatization schemes have caused the rate increases does not explain the most recent big contributor to Ontario’s costly power glut — OPG’s Little Long hydro-electric station. That station is part of a $2.6 billion retrofit of four power stations on the Lower Mattagami ordered by McGuinty. The retrofit buys 450 MW of incremental capacity ($5.8 million/MW). The stinger is that this costly new capacity has very low productivity. The expected yield from the new capacity is a lowly increase in output of a mere 885 GWh/yr (22% capacity factor). To the credit of the project, the high cost for a small output gain is somewhat off-set by the benefit of increased generation flexibility. The Lower Mattagami project was proposed by the old Ontario Hydro in the late 1980s but rejected due to bad economics. The economic fundamentals today are as bad or worse than they were back then. Even if the incremental energy from the Mattagami project was affordable on average, most of the new production arrives during the spring freshet, when Ontario and neighbouring markets are typically already oversupplied. This spring, power consumers and utilities in Michigan, New York and Quebec will be harvesting subsidies from Ontario consumers stuck paying the bills for Lower Mattagami. While it is true that the added generation flexibility acquired from OPG’s Lower Mattagami projects will help backstop fickle wind and solar output, this benefit is acquired at a steep cost.
The NDP’s confusion isn’t limited to the causes of Ontario’s power glut. When pressed for explanations as to their proposed solutions for rising power rates, the NDP claim that conservation programs will lower rates. What the NDP never have shown is how their math is supposed to work to deliver lower rates. With Ontario’s overall electricity sector revenue requirement fixed for many years out into the future, even if conservation programs could successfully drive down usage without relying on any subsidies, the lower units of sales would drive unit prices higher. Falling power demand since 2005 has been a key driver pushing power rates up in Ontario.
The NDP claim that Ontario consumers subsidized power exports to the tune of $1 billion last year. There are a variety of ways to calculate the losses sustained by Ontario’s power exports, as Scott Luft has ably discussed many times including here and here, but the NDP’s estimate is reasonable. Energy Minister Bob Chiarelli has claimed that the NDP’s “math is inaccurate“. Minister Chiarelli’s power export math skills were recently on display in this TVO exchange, where it became clear that the Minister can’t distinguish between revenues and profits.