Surplus Baseload Electricity Generation in Ontario

{Note: The Environmental Commissioner of Ontario (ECO) was asked the following question from a member of the Ontario Legislature. The information the ECO provided in response has not been published in the ECO’s public reports. In the interest of transparency and impartiality, the ECO’s response is provided to the public and to representatives of all parties represented in the Ontario Legislature.}

Q: What is the current situation with surplus baseload electricity generation in Ontario?


Response from the office of the Environmental Commissioner of Ontario:

Definition of Surplus Baseload Generation
The Independent Electricity System Operator (IESO) defines periods of surplus baseload generation as when baseload generation (which includes nuclear generation, baseload hydroelectric generation, and intermittent generation such as wind and solar) is higher than Ontario electricity demand (exports are excluded from this calculation).

How is Surplus Baseload Generation Managed?
Most surplus baseload generation is managed naturally through the electricity market by net exports to other jurisdictions. Other options of dealing with surplus baseload generation include IESO curtailment of wind and nuclear generation, and hydro spill. In these cases, potential electricity production with zero marginal fuel cost goes unused.

Curtailment of Wind and Nuclear Generation
The IESO has options to reduce generation by curtailing wind generation, nuclear, or imports (the last option is rarely used). In 2015, the IESO reports that the total amount of wind energy that was curtailed was 733.5 gigawatt-hours (GWh), representing 7.5 per cent of the total amount of wind energy produced in the province. For nuclear generation, 897 GWh of electricity production was lost through nuclear manoeuvres or shutdowns due to surplus generation, representing 1 per cent of the total amount of electricity produced from nuclear. In total, 1.6 terawatt-hours (TWh) (897 GWh nuclear + 733 GWh wind) of potential nuclear and wind electricity production went unused due to surplus conditions. In the first 8 months of 2016 (the most recent data that the IESO has published), the amount of electricity curtailed increased slightly, to about 2.5  TWh from all sources (IESO 18-month outlook, figure 6.1). The increase in wind curtailment (instead of nuclear) is due to an IESO rule change that effectively curtails wind before “flexible nuclear” during periods of surplus electricity. This change was made because nuclear production can only be turned off in 300 megawatt-size blocks, and this means that additional (usually non-renewable) energy may be needed to make up the shortfall. The IESO estimated that this change will lead to about 800 GWh more curtailment of wind in 2016, and 1,000 GWh less curtailment of nuclear (200 GWh less waste of electricity overall).

Hydro Spill
The IESO statistics above do not include hydro spill, because the IESO does not directly constrain electricity generation from hydropower in times of surplus. However, Ontario Power Generation (OPG) typically operates its regulated hydro plants to spill some water instead of generating electricity, if possible, when the market electricity price (Hourly Ontario Energy Price or HOEP) is less than the Gross Revenue Charge (tax) it would need to pay the government. The fee structure for the Gross Revenue Charge is sliding, but the rate is in the neighbourhood of 1 cent/kWh. So if the HOEP is below this, OPG might be spilling some water instead of generating electricity. This means that hydro spill will typically occur before wind or nuclear curtailment.

The table below (assembled from various Ontario Energy Board decisions) estimates hydro spill from OPG facilities in recent years:

Table estimating hydro spill from OPG facilities in recent years

There is an incentive mechanism in OPG’s regulated rates that encourages OPG to make use of Niagara Pumped Storage and its dam storage capacity, where possible, in order to generate electricity when the HOEP is high, and save electricity when HOEP is low, reducing the amount of hydro spill. This filing with the Ontario Energy Board provides more information on OPG’s approach to surplus conditions.

All of these points apply only to OPG hydro assets regulated by the Ontario Energy Board. The ECO has no information on the operating strategies used by hydroelectric generators under contract with the IESO, and whether they are at times spilling water due to surplus generation.

Amount of Surplus in the Future
The most recent estimate of future surplus electricity generation was prepared by the IESO as part of its technical report (slides 33 and 34) prepared for the 2016 Long-Term Energy Plan consultation. The IESO estimates that surplus generation (labelled SBG in the image below) will be as large as 9 per cent of Ontario electricity generation in 2016 (this would be about 13 TWh), before dropping. The estimate of future surplus is obviously dependent upon Ontario’s electricity supply and demand choices in the future – this estimate uses the assumptions in “Outlook B” of the IESO’s technical report.

Surplus Baseload Generation (SBG) as Percent of Ontario Net Demand (Outlook B)

The IESO estimates above do not identify how the surplus would be managed (e.g., exports, hydro spill, nuclear or wind curtailment). The Ontario Auditor General’s 2015 report on Power System Planning uses slightly older information from the IESO as to how this surplus could be managed:

IESO's Surplus Baseload Management Plan, 2015-2032. This graph shows Ontario's estimated surplus baseload from 2015 to 2032.


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