Wind cover: the difference between big and small numbers in Ontario electricity

Friday’s Toronto Star carries a piece on discussions between Bruce Power and the Ontario Power Authority over how much money the OPA will allow Bruce to get for the nuclear-generated power from Bruce’s 4-unit “A” station. Under the current contract, Bruce A gets 6.8 cents per kilowatt-hour. That is pre-conditioned on unit 2, which recently underwent refurbishment, having returned to service by July 1 2012. That didn’t happen, because of an “incident” on the non-nuclear side of the generator system. Bruce claims this incident was beyond its control, and that on that basis it should continue to receive 6.8 cents per kWh for the “A” station output.

The TorStar piece points out that the 6.8 cent contract price is “much higher than the spot market rate, which has averaged about 2 cents a kilowatt hour this year.” That is true, but to say that 6.8 cents is “much higher” than the spot market price gives a false impression. The article fails to also point out that nobody in the province actually pays only the spot market price. Electricity rate payers in Ontario pay the spot market price plus the Global Adjustment (GA). The GA is a “cost recovery mechanism” through which just about every generator in the province—there are more than 140 of them—receives a “top up” that represents the difference between the spot market price and the price the province promised them. The latter is classified as contracted or regulated, but it works out to the same thing—a fixed and pre-determined rate.

The government promises a different price to just about every generating company. So the amount of GA that ratepayers pay, in addition to the spot market price, for their electricity depends on the generator, and on the price the government promised to pay that generator.

And here’s the kicker: most of the contracted prices are far higher than the price promised to Bruce Power.

So Bruce A would get a top-up of 4.8 cents per kWh of output if the spot market price is 2¢, but a wind farm receiving the feed-in tariff (FIT) rate would get a top up of 11.5¢. As any kid with a smattering of grade-school arithmetic can tell you, 11.5¢ is more money than 4.8¢.

Here’s a sampling of some of these contracted and regulated prices, and the Global Adjustment they would imply, if the spot market price were 2¢ per kWh:

Gen. type Rate per kWh G.A. top-up
Regulated nuclear 5.6¢ 3.6¢
Bruce A nuclear 6.8¢ 4.8¢
Wind (Standard Offer) 11¢
Wind (FIT) 13.5¢ 11.5¢
Natural gas unknown (secret) ?

As you can see, the contracted rate for FIT wind is nearly double the rate for Bruce A output and almost two-and-a-half times that for the regulated nuclear units (Darlington and Pickering). So if Bruce A fetches a rate that is “much higher” than the spot market rate, then how should we describe, say, the FIT wind rate as compared with the spot market? “Much, much higher”? “Way higher”? “Astronomically higher”?

The truth is, the Bruce A contracted price (6.8¢) is far below the cheapest price we are paying for wind (11¢).

The only reason nobody notices wind’s steep costs is because most of the power in Ontario comes out of the 16 (soon to be 18) nuclear generators. As I write this (ten a.m. on Monday, July 20, 2012), nuclear generators are providing more than 60 percent of Ontario’s electricity, much more than all the other generator types combined. Nuclear power is what pushes TTC subway cars up and down Yonge Street and east and west along the Bloor line. If wind were powering the subways, TTC fares would be much higher than they are today. The subway would cease to be the reliable, clean ride home that it is today. Ridership would decline—who wants to pay more just to receive unreliable transport? Apartment rents and condo fees would skyrocket; high rises cannot function without electricity. Urban planners’ dreams of the clean, walkable city—featured in the very same Toronto Star as recently as July 6 of this year—would be dead.

And if wind were powering TorStar printing presses, internet servers, and administrative offices, then the TorStar’s electricity bill would be more than twice as much as it is now. What would the paper’s editorial position on electricity be then?

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11 years ago

All good points. With surplus baseload generation we now curtail nuclear to allow wind to run at double the price with no impact on carbon emissions.

To really illustrate how nuclear is the work horse of the Ontario system we only need to consider that while nuclear represents 33% of the installed capacity in Ontario, it regualarly provides well over half of the energy – as you said closing in on 60%.

Looking at the IESO web site we can see that in 2011, nuclear accounted for 33% of capacity and generated 56.9% of the electricity in the province. On the other hand, wind accounted for 4.4% of the capacity and yet only produced 2.6% of the electricity – and keep in mind that wind is always accepted into the system when the wind is blowing so this was wind at its best.

I am a supporter of renewable energy as I believe that we need a diverse source of generation to meet our needs. But one thing is for sure, nuclear power is the backbone of Ontario’s system and will continue to be the main source of clean economic electricity powering us into the future.