Hurting Michigan

Parker Gallant has called for the Ontario government to “shutdown the intertie line with Michigan” – in an article that notes some of my work. I feel I should offer some support as Michigan is being a lousy neighbour and it would feel therapeutic, if nothing else, to respond.

I’ll try to stick to data.

The system operator in Ontario (IESO) data indicates the Michigan intertie is the most lucrative for exports – but that’s not saying much: exports at that intertie were bought in Ontario for an average of just 1.2 cents/kWh ($12/MWh) in 2020 – but were in such high demand another 0.9 cents/kWh of congestion rent was paid. Over the past 5 years congestion rents comprise 46% of the revenue on the Michigan intertie. The IESO’s insiders’ committees are considering sharing this revenue with exporters, whereas in the past its only benefitted internal Ontario consumers.

Action #1: hell no. Issue a ministerial directive that congestion rents will only benefit consumers in Ontario.

Ontario does not export to Michigan: traders purchase electricity in Ontario and sell it to purchasers in the United States – needing to arrange that it gets there. According to the Canadian Energy Regulator (formerly the NEB) the top 4 exporters of Ontario electricity into the United States in 2020 were MAG Energy Solutions (Quebec), TEC Energy Inc. (Quebec), Mercuria Commodities Canada (Alberta) and Plant-E Corp. (Quebec). These 4 traders handled 60% of all US bound electrons purchased in Ontario. It is likely these exports include wheel through transactions where Quebec power is sold to customers on the other side of Ontario. I have been told within U.S. regional electricity markets such transactions could pay multiple congestion charges as those much more sophisticated markets feature locational marginal pricing.

Action #2: the IESO should move as soon as possible to locational marginal pricing for the purpose of ensuring wheel through transactions pay appropriately for congestion they may cause within Ontario’s borders.

Canada has a price on emissions – for some things: for Ontario electricity generation it essentially does not. The logic goes something like it would be an onerous cost on Ontarians which would be unfair as most competitors of Ontario’s businesses don’t have a meaningful price on their greenhouse gas emissions. Any generator under a certain emissions intensity (my recollection is 385 kg CO2e/MWh) avoids the carbon price entirely – and most Ontario natural gas-fired generators are at above this level of emissions. It’s a noble sounding excuse but it is entirely bullshit: in 2020 the IESO’s so-called market recovered less than $2 billion to cover the cost of supply, which their global adjustment adder recovered almost $14 billion more. As I wrote in 2014’s “A Carbon Tax for Ontario, today” the entire receipts of carbon pricing in Ontario’s comparatively trivial emission electricity sector should be used to reduce the global adjustment. Germany has just altered its system to do exactly this: use revenues from pricing emissions to control its renewables surcharge. That it did so 6 years after my article could indicate they’re a little slow – yet they’re probably light years ahead of our government. The market rate is murdered here on purpose, to rip off the consumers least likely to notice for the benefit of the larges insiders. The Industrial Conservation Initiative (ICI) is the weapon designed to transfer global adjustment costs from big entities to little ones. Problems with the punching down ICI policy includes subsidizing exports fueled by natural gas -as those too escape paying for emissions. The $30/t CO2e in 2020 would have meant another 1.2 cents/kWh on gas bidding into the IESO market, and by 2022 that would climb to 2 cents/kWh – essentially the average price paid by exporters to Michigan this year.

Here’s the hourly export to Michigan along with hourly gas generation for the highest demand workweek of 2020 – note at no point do Michigan exports exceed gas’ output, so at all times during Ontario’s highest demand week gas-fueled generation could be considered what was exported.

Action #3: Apply Canada’s greenhouse gas price to all emissions from generators to reflect these deemed environmental costs in the HOEP, and use revenues from the pricing to reduce the global adjustment.

There are other actions the government could direct the IESO to take to avoid sending Michigan subsidized electricity, but it would be self-harming to cut our grid connection altogether as we do get some benefit from dumping supply when we have excess and a broader grid has benefitted us when extraordinary circumstances have occurred. The point I have tried to make in this post is there is one thing above all others this government, and its system operator, could do to control unnecessary feeding of cheap electricity across the border to our ill-behaved neighbours: their job


3 thoughts on “Hurting Michigan

  1. VEZINA: There’s no real price on most pollution — all we have is a feckless carbon tax | Toronto Sun

    Fossil fuel and green energy supporters are crying the blues over Prime Minister Justin Trudeau’s energy and environmental policies.
    VEZINA: There’s no real price on most pollution — all we have is a feckless carbon tax

    Trudeau crows about winning a narrow three-to-two split decision of the Saskatchewan government’s appeal of his Greenhouse Gas Pollution Pricing Act (GGPPA) that concluded putting a price on pollution is constitutional, but he neglects to mention not just any climate change plan works.

    Trudeau’s carbon tax faces more legal challenges by Ontario, Manitoba, Alberta and perhaps other provinces, and final review by the Supreme Court of Canada.

    Meanwhile Trudeau’s failure to advance the effort to get Canada’s fossil fuel resources to tidewater for sale to global markets, and his proposed legislation on the environmental review of energy projects, have fossil energy supporters upset.

    By contrast, the federal Trans Mountain pipeline purchase, LNG subsidies, carbon dioxide emission exemptions for large emitters, the use of natural gas and so-called green energy food-based ethanol as “bridges” away from hydrocarbons has upset the greens.

    The real problem is these incentives are costly, inefficient and focused in the wrong places, thereby precluding better industrial technologies and best environmental practices.

    An April, 2019 University of Chicago study found 30 U.S. state-level programs upped electricity prices as much as 17%, concluding: “The global experiences from carbon markets and taxes make clear that much less expensive ways to reduce CO2 are available right now.”

    For example, using a June, 2017 joint Concordia University and Montreal Economic Institute study, “Subsidizing electric vehicles inefficient way to reduce CO2 emissions,” as a benchmark, the new $5,000 federal battery vehicle subsidy will cost $200 per ton of emissions — 10 times the current federal carbon tax.

    By contrast, producing ammonia (NH3) from natural gas causes 2% of global GHG emissions, and the 90% carbon tax exemption, along with additional exemptions from life cycle emissions, is much less expensive.

    It puts the actual “price on pollution” at $4 per ton of emissions, compared to the current federal carbon tax of $20 per ton, rising to $10 per ton in 2022, when Trudeau’s carbon tax will be $50 per ton.

    The incremental cost of sequestering carbon in hydrocarbons when making ammonia is 15%, or about $30 per ton, declining in the next five years from nine to five times the cost of polluting under the carbon tax exemption.

    In November, 2015 “Energy Report” cited a Carnegie Mellon University study on the “Use of NH3 fuel to achieve deep greenhouse gas reductions from U.S. transportation.”

    It concluded aggressive implementation of NH3-fueled vehicles to replace gasoline vehicles, would eliminate 96% of the annual light duty vehicle CO2 emissions projected for 2040, a 718 million metric ton CO2 reduction.

    The same backwards situation in Canada exists with respect to the use of better waste remediation technologies for municipal liquid, solid and plastic waste we bury, burn or ship elsewhere.

    The Japan Times reported in a June, 2017 article that over 1,000 workers process 195 tons of waste plastic a day, making 175 tons of ammonia sold for industrial and medical uses.

    In 2014, Washington, D.C. opened North America’s first large-scale high-tech system to turn 1,500 tons of sewage a day into a safe, rich soil amendment and in 2024, Maryland’s Washington Suburban Sanitary Commission will start production.

    We need an honest and fair user pay “price on pollution” which includes all life cycle emissions with no exemptions, except for big improvements in state of the art technologies.

    — Greg Vezina is chairman of Hydrofuel Inc.


  2. Beware of False Green Prophet$ | Ottawa Life Magazine

    Canada needs honest viable energy and environmental policies based on science and economics, not on political rhetoric, nonscience or nonsense.

    Prime Minister Trudeau’s proposed carbon tax is a clear example of this because of the delay in keeping his December 9, 2016, promise to create a matching national clean fuel standard “based on life cycle analysis” billed as “the single biggest element of Canada’s national emissions reduction plan”.

    There are at least seven major types of pollution caused in the life cycle of the production and utilization of energy: abiotic depletion; acidification; eutrophication; global warming; human toxicity; ozone layer depletion; and terrestrial ecotoxicity.

    The Trudeau Liberal government’s proposed carbon tax applies to fossil fuels like coal, oil and bitumen, but exempts other forms of energy including natural gas used for power generation, which is worse over the 20 to 50 year time frame, and likely will so-called renewable fuels such as bio-fuels including those made from food crops, and biomass such as wood.

    The results of the recent Ontario Election reflect upon the failure of the Government of Canada to disclose the real cost of the carbon tax, how it will be used appropriately and in the public interest, the true life cycle production and utilization of all forms of energy, or the facts regarding the real economic benefits of their energy and environmental policies.

    The practice of letting politicians and civil servants make and implement policies that create winners false green prophet$ for their chosen technologies and multibillion-dollar losers out of the rest of us has been proven wrong in every instance, as was confirmed by Ontario’s last two Auditors General.

    The International Energy Agency (IEA) and the UN’s Intergovernmental Panel on Climate Change (IPCC) both now officially warn that growing crops to make “green” biofuel harms the environment and drives up food prices, and rather than combating the effects of global warming, they could make them worse.

    With one child under 10 dying from hunger and related diseases every five seconds now according to the UN, using food for fuel is actually a crime against humanity.

    This applies to other so-called renewable energy sources like wood biomass, shown as not being “carbon neutral” at all, because the immediate harm from releasing the carbon in it and the fifty years or more needed to grow the trees to replace it actually makes it worse.

    Taxpayer subsidies, mandatory use laws and exemptions from carbon and life cycle taxes further increase the negative impacts of these pseudoscience based policies.

    That’s why the user-pay life cycle clean fuel policy should have been fully formulated and implemented before any other steps were taken.

    We need to find ways as a country to economically and sustainably develop and utilize our vast fossil fuel and renewable energy resources to our advantage, instead of exporting them for the benefit of others at huge discounts while unnecessarily increasing life cycle environmental impacts.

    According to Bill Gates, whose multibillion-dollar Breakthrough Energy Coalition now targets carbon-free ammonia energy, we should end all energy subsidies and spend our resources developing new and better technologies for all fossil and renewable energy production and use.

    Gates’ most read and recommended author, University of Winnipeg’s Dr. Vaclav Smil’s June 3, 2018, IEEE Spectrum article, “A Critical Look at Claims for Green Technologies”, is subtitled “Green technologies are not yet proved, affordable, or deployable—but even if they were, it would still take them generations to solve our environmental problems.”

    Alberta Premier Rachel Notley should join Saskatchewan Premier Scott Moe and Ontario Premier Doug Ford in their proposed legal challenge to Trudeau’s unjustified carbon tax grab scheme using plans to implement realistic life cycle energy and environmental tax policies.

    We need a level playing field for energy, and everything else for that matter, so consumers and industry can vote with their wallets in a true user-pay economy that doesn’t pass off the real costs to anyone else.
    By: Greg Vezina, Chairman, Hydrofuel Inc. and leader of Ontario’s None Of The Above Direct Democracy Party.


  3. Scott,

    It would probably help if Michigan had some price on carbon. The actors involved in the Ontario-Michigan trade are financial traders and the merchant power to sell on the market can’t go to Quebec or New York state, since both tax carbon emission through cap-and-trade (WCI for Quebec, RGGI for New York), so it makes this CCGT power more expensive there.

    By getting rid of it in Michigan where it displaces coal, Ontario reduces U.S. emissions while increases Canadian ones. Being nice to the neighbor is a good thing but it sucks if you have to pay the bill to help them out.

    Liked by 1 person

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