August 2016: the most expensive month in Ontario’s electrical history

August 2016 likely was a record hot month in Toronto, says Environment Canada. It was a record setter on another related front: electricity prices.

I predict that when the data is officially out, Ontarians will have paid over $1.27 billion for electricity generation in the month of August 2016. This will, by my estimation, make August 2016 the single most expensive month in our electrical history. The current year of 2016 will be by far the most expensive one in our history: I estimate that generation costs in 2016 will exceed $13 billion. They were over $12 billion in 2015. They were $11.7 billion in 2014.

Will we have generated more electricity this year than last? Yes. In 2015, Ontario generators made nearly 155 billion kilowatt-hours of electricity. In 2016 I estimate they will have made close to 160 billion, possibly more. This means the additional five billion kWh will have cost $1 billion, which puts the average cost of each of those kWh at 20 cents.

The provincial auditor general, in her 2015 annual report, looked extra close at electricity and concluded that Ontario ratepayers in 2014 paid enormous, and enormously unnecessary, rates for electricity. Here is a graphical summary of her findings regarding what we paid.

The cost rate was calculated by just dividing the cost by the generation for each fuel type.

Applying the 2014 cost rate to August 2016 output data, here is what last month looked like:

Several things jump out.

  1. Nuclear produced 57.6 percent — well over half — of the electricity but represented 39.2 percent of the total cost.
  2. Solar produced 3.5 percent — less than one twenty-fifth — of the electricity but represented 18.6 percent of the cost.
  3. Gas produced 15.5 percent of the electricity but represented over one-quarter of the cost.

When you consider that all of the solar and most of the gas happened in the hours from 7 a.m. to 7 p.m., you realize that our peak hours coincided with generation that cost between 15 cents and 49 cents per kilowatt-hour.

Why are we paying such prices for solar energy? Because it is considered clean and green.

Why do we ramp up gas in tandem with solar during the peak hours of our days? To state a tautology, because that is how electrical demand looks, not just in Ontario but in every other modern jurisdiction on earth.

We have chosen to meet that very predictable demand with a combination of fossil fuel and an allegedly green source. The green source is there because it allegedly emits no greenhouse gas. The fossil fuel is there because… well, we need the electricity at that time of the day.

In the case of solar, we pay nearly 50 cents per kilowatt-hour to NOT emit greenhouse gases. At the very same time, we pay 15 cents for electricity from a fuel that DOES emit greenhouse gases into our air.

The peak electricity times of the day are easily predictable; they coincide with the other totally predictable energy peaks, the ones you see when you look out the window at a busy city street.

Knowing that electricity demand will ramp up and then ramp down at similar and predictable times every day of the year, and that the ramp up or down will be more pronounced when it is warmer or colder than usual, we have chosen to meet that demand with electricity from two of the most expensive and least efficient sources available.

The dramatic difference between the cost of nuclear versus that of gas and especially versus solar raises an instant question: why are we paying so much money to allegedly avoid dumping carbon dioxide into our air?

Click again on cost rate. Note the cost of nuclear, which emits no greenhouse gas at all. The dramatic difference between the cost of nuclear versus that of gas and especially versus solar raises an instant question: why are we paying so much money to allegedly avoid dumping carbon dioxide into our air? Could we not achieve total reductions in CO2 emissions at a far lower cost?

Indeed we could. Imagine we had an additional, say, 6,000 megawatts of nuclear capacity. That could easily provide for the daily ramp up-and-down on hot summer days like we just experienced in August.

For something like seven or eight cents per kWh, which is the price new nuclear would cost, we could be providing carbon-free electricity during those times of the day when we currently use gas (15 cents plus carbon) and solar (49 cents and no carbon).

“But hold on” I hear you cry. “Isn’t nuclear notoriously inflexible? Isn’t it incapable of daily ramp-up/ramp-down?”

No, nuclear is quite assuredly not incapable of adjusting output to meet daily demand cycles. If it were, tourists in Paris, France would have to climb the stairs to their hotel rooms, and forego afternoon coffee and rides on the metro and the mighty TGV and everything else in that country that requires electricity. Most of France’s electricity comes from nuclear plants.

In Ontario the reactor type most likely to provide future electricity is the Enhanced CANDU 6, a machine capable of running at full reactor power while completely disconnected from the grid. This gives it, says Don Jones, a retired AECL design engineer and expert in Ontario electricity, “zero to 100 percent full power manoeuvrability.”

So yes—Ontario could easily use nuclear to deal with the daily 5,000 to 6,000 megawatt ramp-up/ramp-down to meet the daily demand increase-then-decrease that so predictably occurs in hot months.

Moreover, this extra 6,000 megawatts of nuclear capacity would be able to run flat out from October to May (the heating season), providing zero-carbon heat.

To repeat: we have chosen to pay 15 to 49 cents to get carbon-heavy electricity, when we could be paying around 8 cents and getting carbon-free electricity.

This is why August 2016 was a record setting month for electricity costs.

19 comments for “August 2016: the most expensive month in Ontario’s electrical history

  1. seth
    September 4, 2016 at 13:46

    Hard to say what the real cost of nukes is in Ontario – so many lies from politicians and the engineers are cut off from speaking out in fear of dismissal according to the Ontario AG’s report.

    AECL built the last two Candu 6’s in China in 2007 for $2B/GW in just under 4 years. Inflation since then would add 20% making it $2.4B.

    AECL’s bid at Darlington was $2.6B/GW for it’s FOAK ACR-1000.

    The current rate for Ontario 30 year bonds is around 3% giving a capital cost of about a penny a kwh. Add that to the 2 cent a kwh operating cost of nukes that works out to 3 cents a kwh, not the 8 cents politicians are using to justify buying graft generating wind at 8 cents a kwh in auction backed up with inefficient gas guzzling peakers under contract at 15 cents a kwh.

    The actual cost of wind power in Ontario is 15 cents a kwh at the rate of return required by IPP’s, with the losses made up by substituting gas for wind as much as possible. The latest big wind project at the Sault – 60 MW, $240M Bow Lake Wind Project and here’s the Oakville IPP at 14% per annum

    Google “meet-the-brothers-behind-ontarios-controversial-gas-plant”

    That doesn’t include the AG’s estimate of 35 cents a kwh, for transmission grids sized up to 1o times normal to carry wind/solar peaks, that gas backup, and massive dumping of never around when needed wind/solar often paying customers to take the costly spew.

    The wind/solar/gas peaker backup scam actually uses more gas and spews more GHG’s than a 8 cent a KWh plan using OPG built combined cycle gas plant skipping the wind/solar.

    The corrupt McWynnie regime just loves those Big Oil campaign donations and lucrative post political favours for retiring politicians. Dolt McGuinty is collecting over 7 figures already.

    Unfortunately Trudeau has shown no inclination to adopt the policy of the old Liberal Party where Leader Micheal Ignatieff actually forced a election over the Conservatives plan to give away AECL. Seems Trudeau, under the influence of the his chief advisor Gerald Butts, one of the architects of Ontario’s Green Energy and former head of the WWF , is pushing Ontario’s Green Energy mess onto the rest of Canada.

    A great shame since Alberta’s plan to replace its coal plants with the wind/solar/gas peaker scam, would could be done at a fraction of the cost, with new Candu 6E’s. In fact the LCOE of nukes if build by a public power operator like EPCOR, should be less than just the operating cost of old fossil plant, if rational forces in the Trudeau government where able to renationalize Candu Energy, with the aim to replacing Canada’s fossil fuel generation and restarting international sales.

    After SNC Lavalin and Harper sold off the rights, China has sold 3 Candu’s – no Canadian content despite focusing its sales on its own Hualong One design.

  2. Dolf Johnson
    September 5, 2016 at 22:00

    Why not replace all that wind, solar, and petro-gas with nuclear power set up for 2 x 12/7 generation?

    • September 9, 2016 at 00:18

      Because it violates Green ideology.  And reasons.

  3. Kyle
    September 9, 2016 at 17:26

    I always wish I could just build one of these things https://en.wikipedia.org/wiki/Aqueous_homogeneous_reactor. Maybe I can convince Ontario Hydro that I have a 200KW solar array with a 90% capacity factor and make 50 cents on the KWh.

    • Kyle
      September 9, 2016 at 17:30

      + 8,760.00 hours in a year
      * 200.00 KW
      * 0.90 cf %
      * 0.50 $ per KWh
      —————
      + 788,400.00 MONIES IN A YEAR!

      I better invest in a few kilos of uranium and a hundred liters of heavy water.

      • September 9, 2016 at 19:43

        Good luck working on it yourself.  The whole primary loop is going to be hotter than hell with all the FPs, and the radiolytic hydrogen and oxygen will be a real headache.

        • Kyle
          September 10, 2016 at 09:14

          I’d need some hydrogen recombiner like this https://www.google.com/patents/US2943921

        • Kyle
          September 10, 2016 at 09:38

          On that note how do normal reactors handle radiolysis, or is that an issue in a PWR or PHWR?

          • September 10, 2016 at 09:53

            There’s a lot less radiolysis in conventional LWRs because the FPs are confined to the fuel pins, not barrelling through water expending a couple hundred MeV tearing molecules apart.

            This is why the dissolved-fuel reactor proposals use molten ionic salts, not molecular solvents:  no covalent bonds to break.

  4. David Walters
    September 12, 2016 at 09:52

    i am not sure the Enhanced CANDU 6 can handle the load changing. If you read the article links by Steve in the article, it is not the same as the French system which uses neutral ‘gray rods’ in their fueling scheme to control neutron poison build up and can actually load follow up and down without condenser bypass.

    The E-CANDU is far more limited. I’m not sure that the “3 hour” minimum power reduction is flexible enough to handle the ups an downs of daily load following *and* peak time. I haven’t examined the load various in the Province but it does seem problematical.

    I would suggest 2 possible alternative scenarios:

    1. Maintain a variation of the scheme Steve suggest: build out the nuclear with condenser bypass (I’m not sure why that can’t be used but by maintaining full load on the units?) and use gas turbines. This is automatically better than the W&S nonsense as the GTs will ONLY be used for peak power. In 10 years shortly after the CANDUs are build, SMRs will be coming on line that CAN replace the GTs. The advantage of this is that the GTs will not, ever, have to run before peak, which isn’t the case now in the short, cold winter days.

    2. Get better load changing reactors! Almost all new Gen III nukes can do very nice and very flexable load changing. it’s only a question of *financing* and not engineering. Insure a revenue flow to the accounting for the reactors as a needed service for load changing and viola! QED.

    • September 14, 2016 at 07:30

      The EC6 could certainly handle the predictable part of the rampup/rampdown, for peaking yes it would have to be something capable of that.

      On fast throttling SMRs — our wind has already laid the groundwork for them. It’s already connected. Our successors will come to their senses, see the poor return on the dedicated lines that connect wind to the grid as unacceptable, and pull down the oversized and inherently poor performing wind turbines and replace them with generators that are actually reliable, truly zero carbon, and that have a physical footprint so minuscule that nobody but their operators would even notice them.

      • September 15, 2016 at 19:14

        I’m not so sure, Steve. Marginal cost of nuclear generation – lcoe – is heavily dependent on capex and capacity factor. What is your anticipated Cf for a load-following nuke? Just how many of these will you need to meet maximum load? At what capital cost? Could you perhaps be more efficient buying fewer new reactors, run them at high Cf, and meet peak from storage? How are you fixed for hydro?

        • September 16, 2016 at 10:04

          Ed, good questions. Our current daily rampup in summer is provided by 49 cent solar and 15 cent CCGT. I back-of-the-enveloped that into 20 cents per kWh but it’s more like ~34 cents. Moreover, that combination comes with a CIPK that often exceeds 100 grams.

          My point is that we could provide that electricity with nukes for far far less than 34 cents, and of course with zero CO2.

          And with some basic outside-the-box thinking on the part of our government, we could improve the economics of meeting the summertime heat load (currently provided with carbon-heavy gas) with nuclear. We are too narrowly focused on electricity, while leaving a huge part of our energy load unexamined.

          The only way to reduce carbon from those unexamined areas is electrification, and the only way to electrify is with nuclear.

          Storage — we have some hydro that can instantly provide peaking

  5. Bud Bundy
    September 28, 2016 at 03:39

    Just to step back for a moment, hands up those who think that the hottest month in Ontario’s history would not have the highest energy generation in history? And keep them up if you think that the highest generation month in history would not be the most expensive month in history?

    Increasing generation capacity costs money folks, nothing surprising about that. A good case to be made here for increased consumer efficiency, reducing the need for increased capacity.

    • September 28, 2016 at 07:24

      There was more electricity generation in January 2016, January 2015, and January 2014 than in August 2016. Much less cost in each of those months than in August 2016.

      And the kicker is, thanks to high electricity prices more AC has shifted over to gas-fired. So we’re now dumping more carbon into the air in the hot months. That’s not energy conservation, it’s fuel shifting.

  6. Maury Markowitz
    October 18, 2016 at 14:23

    “For something like seven or eight cents per kWh, which is the price new nuclear would cost”

    New nuclear would cost around 12.5 cents:

    https://www.lazard.com/media/2390/lazards-levelized-cost-of-energy-analysis-90.pdf

    That number is assuming $7.60/W CAPEX, although Darlington B’s paper price was 8.25 and its whisper price was over $10/W.

    “we could be providing carbon-free electricity during those times of the day when we currently use gas (15 cents plus carbon) and solar (49 cents and no carbon).”

    Current LCOE on new solar in the US is around 5 to 6 cents (see same reference, above). It would be about 2 cents higher here due to CF considerations.

  7. Shehezaada
    October 19, 2016 at 19:28

    Mr. Alpin, I’ve followed your articles and understand your reasons for advocating nuclear power. However, what will we do when uranium runs out? I don’t mind paying extra money for a solution that is renewable…

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