The world’s worst electricity market

Forbes opens an article titled Ontario’s High Electricity Prices Are Bad For Business with this quote from Pierre-Olivier Pineau, Chair of Energy Sector Management at the University of Montreal:

“Ontario is probably the worst electricity market in the world”

Friday, April 8th, Ontario’s market provided more evidence supporting that premise.

This tale doesn’t involve surplus “baseload” or huge wind output or even particularly low demand. This tale involves the price of natural gas and the Ontario market’s inability to recover even that small fuel cost.

 

April8

The closing price of natural gas on the Dawn hub (in Ontario) on April 8 was $2.68/mcf. My quick estimation just multiplies that by 7.5 to calculate fuel cost of producing one megawatt-hour of electricity: about $20/MWh.

April 8th, like all days, saw most natural gas fueled electricity produced by non-utility generators, with 3 exceptions: Halton Hills, St. Clair and Thorld generating stations also operated, and until hour 19 (7-8 pm), they all generated electricity well below the fuel cost of generating electricity.

Why is that?

I’m sure it’s complicated, and perhaps it has to do with location. Ontario’s “system operator”, formerly the “market operator”, has been studying a lot of things while doing a lot of other things. An outlook to 2035 indicated they plan on doing a lot of learning in the future based on all  the data they’ll have from stuff they did in the past.

One thing they’ve hired consultants to suggest, and now ruminate upon, is called locational Marginal Pricing (LMP), which is used in better functioning markets.

The locational aspect may explain why natural gas generators are generating below fuel cost judging the the Hourly Ontario Energy Price.

Maybe we should outsource market operations and find out.

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