Something Strange in Ontario Electricity Markets

The last few days have seen very unusual things happen in electricity markets. Prices have soared, we have been importing large amounts of electricity, and we have left our natural gas plants idle. Prices today have been as high as 24 cents/kWh – more than enough to power up a natural gas plant, by a factor of probably 3. What is going on?

Four of the 18 nuclear plants remain off line. The ice breakers at Niagara falls have been working overtime so far keeping the sluice gates open to the Beck generating station. Demand is fairly high because of cold weather, but it is Sunday, so factories and commercial establishments are idle. Demand will be higher tomorrow.

There are only two logical explanations I can come up with. Perhaps we have an Enron style gaming of the market, where generators find it more profitable to remain off line, and receive a higher price for what they do produce. This would require collusion among a large number of players, and so would seem unlikely.

Or perhaps we are facing an imminent shortage of natural gas. After all, we have had the coldest winter in years. Natural gas in storage has plummeted. According to the US Energy Information Administration, gas in storage is 40% below a year ago, and 35% below the 5 year average. With last week’s and this week’s cold weather, no doubt gas in storage will decline again – it dropped by 7% in the last reported week, which ended Feb 21. Some analysts have speculated that we will have difficulty rebuilding storage levels this year, despite increased gas production from fracking.

Part of the solution to a shortage of natural gas is to generate power from other ways. It would help if the nukes were working. But they are old and unreliable plants. This is an unlikely solution. The other solution is to build a lot more wind, solar, and water power. Fortunately, a lot of this is underway. Ontario is on track to double its wind in the next two years, with much of that build occurring this year. Wind generated 4.3% of electricity consumed in Ontario last year, compared to gas at 11.1%, so doubling wind makes a significant difference in taking pressure off gas demand. Solar additions don’t take much pressure off winter gas use for making electricity, but they will cut summer use, helping us to fill the storage facilities.

The US also has record amounts of new wind under construction, with over 12,000 MW started. This would increase America’s wind capacity by 20%.

It looks like we need more wind. And indeed, it may be urgent.

Leave a Reply