Thursday, December 15, 2011

Ontario's Green Plan: Cut, Measure, Repeat

The recent Auditor General's Report on Ontario's Electricity Sector - Renewable Energy Initiatives highlights trends where the McGuinty government failed to adequately assess, plan or analyze their renewable energy plans. Perhaps it should have been taken as a bad omen when, in explaining the objective and scope of the audit, the report states:
We did not rely on the Ministry’s internal audit service team to reduce the extent of our audit work because it had not recently conducted any audit work on renewable energy initiatives.
In their summary, the auditor-general stated that
...no comprehensive business-case evaluation was done to objectively evaluate the impacts of the billion-dollar commitment. Such an evaluation would typically include assessing the prospective economic and environmental effects of such a massive investment in renewable energy on future electricity prices, direct and indirect job creation or losses, greenhouse gas emissions, and other variables.
The Auditor General did not mention the natural gas fired power plant in Mississauga that was supposedly cancelled (construction appeared to be ongoing last I checked) part way through construction. But this plays to the theme of the government making commitments for political purposes.

Concerning the Samsung deal, the auditor-general found that
...no economic analysis or business case was done to determine whether the agreement with the consortium was economically prudent and cost-effective, and neither the OEB nor the OPA was consulted about the agreement. 
I find it hard to believe that neither the OEB nor the OPA were even consulted about the agreement. If this is true, then have we truly reached a point where politicians don't even bother asking the experts for their opinions before going ahead with a plan?

Concerning the FIT prices, the report states that
There was minimal documentation to support how FIT prices were calculated to achieve the targeted return on equity
Which explains why they accidentally started giving out 20%+ rates of return for some solar projects.

To justify themselves, the government repeats ad nauseum about a study back in 2005 that claimed there were $4.4 billion in savings to be had by closing the coal fired power plants.  The study I believe they are quoting did not show that there were $4.4 billion in savings to be had by closing coal fired power plants and replacing them with natural gas (which is what the government is actually doing), it actually showed that there was less than $2 billion in savings.  That report also did not analyze the impact of trying to replace coal and nuclear with a mixture of natural gas and solar/wind backed by natural gas fired power plants running on standby.  Ironically, that very same report recommended instead that additional nuclear power would provide the greatest health benefits and lowest costs. The study also examined the effect of applying more stringent controls and the best available technology at the time to coal fired power plants and found that the net cost would be similar to that of natural gas. Moreover, the study performed in 2005 used the best knowledge at the time of the projected energy demand, which has substantially changed since the recession.

The Auditor General highlights this tangentially when he reports that
Although gas-fired plants emit fewer greenhouse gases than coal-fired plants, they still contribute to greenhouse gas emissions. Our review of experiences in other jurisdictions showed that the original estimated reduction in greenhouse gases had not been reduced to take into account the continuing need to run fossil-fuel backup power generating facilities.

Which also highlights that the government is not being fully upfront about how much greenhouse gas emissions will be reduced because of the practical limitations of solar and wind.  Without any practical way to handle the variability of wind/solar, natural gas fired power plants will be required to run in 'standby' just in case they are needed.  According to the Auditor General
The only analysis on backup power that the Ministry cited was a study done by a third party engaged by the OPA as part of its 2007 IPSP development. The study noted that 10,000 MW of wind would require an extra 47% of non-wind sources to handle extreme drops in wind. We noted that the third party who carried out this study also operated an Ontario wind farm, raising questions about the study’s objectivity.
The Auditor General, in examining other jurisdictions warned that
A 2008 study in the United Kingdom found that power swings from intermittent wind generation need to be compensated for by natural-gas generation, which has meant less of a reduction in greenhouse gases than originally expected.
and
A 2009 study in Denmark noted that although the country is the world’s biggest user of wind
energy, it has had to keep its coal-fired plants running to maintain system stability
and also that
The German government also had to build new coal-fired plants and refurbish old ones to cover electricity requirements that could not be met through intermittent wind generation.
I am willing to accept that the government may act on priorities that I do not believe are important (ie increasing mandatory minimum sentences) or in choosing policies may decide to focus on one kind of benefit (ie health, environment) over another (ie cost). But when it does so, it needs to be upfront and honest with the people it was elected to govern about the cost, and should at least be able to show that their plans will lead to the benefits they promise.  The Ontario government, in developing and implementing their Green Energy Plan has repeatedly failed to do so. But that's just my opinion.

References:

"Cost Benefit Analysis: Replacing Ontario's Coal Fired Generation", Ministry of Energy, April 2005 [link]

"Electricity Sector - Renewable Energy Intiatives", Ontario Auditor General's Report, 2011 [link]


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