August 6, 2012
Why are we paying N.Y. to take our electricity?
If you are an electric utility operating in New York, you may have actually been paid dozens of times over the past year to take power from Ontario.
If you are an Ontario resident, however, the prognosis is that your power bill will just keep going up and up. What’s going on here?
Simply put, Ontario has found itself for good reasons (increased efficiency) and bad (overinvestment in nuclear power) sitting on a large and inflexible power surplus.
Essentially, it can sometimes be cheaper to pay our neighbours to take our power than to ratchet down operations at slow-to-respond nuclear units.
According to the Independent Electricity System Operator (IESO), this surplus will grow to the point where our total electricity generation capacity will be 56 per cent greater than our peak demand a year from now.
As a result, the actual market price of electricity has now dropped to just over 2 cents per kilowatt hour.
But Ontario residents battling heat wave after heat wave with the A/C running day and night are not getting power for 2 cents a kilowatt hour.
That’s because the province uses a "global adjustment charge" to close the gap between the market price for power and the actual cost of producing it. The secret villain here is nuclear power, which eats up about 45 per cent of the dollars collected from ratepayers through this special charge.
Now it may seem like a good thing to have a large power surplus, but the nature of that surplus matters a lot.
With almost all the surplus power produced by nuclear plants and more on the way thanks to hugely expensive repairs finally being finished at the Bruce Nuclear Plant, Ontario is locked into a glut of very inflexible power.
According to the IESO, a reactor "must remain offline for between 48 and 96 hours following a shutdown, depending on the unit."
So reaching for the "off" button is something of an "avoid-at-all-costs" scenario for nuclear operators — and just powering down is not a lot easier.
By contrast, a wind turbine can be turned out of the wind in seconds and a gas plant can similarly respond on a dime to market signals.
Fortunately, this surplus does present a couple of opportunities for some price relief.
The first is to finish the shutdown of the province’s dirty coal plants. We certainly don’t need the power from these plants any longer and it makes little sense to pay Ontario Power Generation $367 million a year to keep them available on the "life discovered on Mars" chance that our power use suddenly doubles. That’s an easy 2 per cent bill savings.
The Pickering A Nuclear Station, meanwhile, recently won the dubious honour of being the highest-cost nuclear power plant in North America. This aging, breakdown-prone plant is both a safety and financial hazard and putting it out of its performance misery would be the kindest thing to do, especially for Ontario ratepayers. Shutting down Pickering would cut our electricity system costs by another 5 per cent-plus.
But what happens if the economy suddenly kicks into high gear? Won’t we need this power?
The experts all say no. Since 2005, Ontario’s electricity demand has fallen by 10 per cent. The reasons for this range from ongoing improvements in the efficiency of equipment and lighting to the probably permanent shift away from heavy industry in Ontario.
Everyone from the North American Electric Reliability Corporation, which is responsible for the continental electricity grid, to the Association of Major Power Consumers in Ontario, agree that demand will remain flat or falling for at least the next eight years.
And this points to the biggest opportunity of all to reduce costs.
Currently, the Ontario government is planning to spend tens of billions of dollars on new nuclear projects.
Simply shelving this backward-looking plan in favour of safer and more flexible options like increased use of highly efficient combined heat and power plants, hydro imports from Quebec and increased efficiency (where Ontario still has a long way to go to catch up with its competitors), could result in dramatically lower future costs.
Remember that every nuclear project in Ontario’s history has gone massively over budget and you’ll understand why doubling down on nuclear will send our electricity bills through the roof.
Jack Gibbons is chair of the Ontario Clean Air Alliance.