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    Record cheap electricity is transforming world energy markets as Canada struggles to

    Record cheap electricity is transforming world energy markets as Canada struggles to keep up: Don Pittis
    Radically new Alberta auction system will play a part in disrupting the global energy market

    By Don Pittis, CBC News Posted: Nov 27, 2017 5:00 AM ET Last Updated: Nov 27, 2017 5:00 AM ET

    The Italian company ENEL has signed a bid to make solar power at 1.7 cents per kilowatt hour, a new record low that experts say will allow it to easily compete with fossil fuel plants even with the added cost of battery storage.

    A new world record price for electricity set earlier this month signals a radical disruption in global energy markets — and Canada, whose economy was once powered by some of the world's cheapest electricity, will not escape the effects.

    The new price, described by the news site Electrek as the cheapest electricity on the planet, was less than 2 cents per kilowatt hour, "part of a pattern marching to 1 cent per kWh bids that are coming in 2019 (or sooner)," the site declared.

    The record was not set in a place where energy is traditionally cheap. Nor is it from a traditional electricity source.

    The new low price of 1.7 cents per kilowatt was part of a contract between the Italian multinational ENEL Green Power and the Mexican government agency that administers the country's electricity wholesale market.

    It was just one of a series of low bids, including from Canadian Solar — the company founded by former Ontario Hydro engineer Shawn Qu — to make electricity from sunlight.
    CANADA/

    For the first time in Canada, Alberta will shortly announce the results of competitive bidding system expected to push electricity prices much lower. (Todd Korol/Reuters)

    But the fact the power will come from solar is only one part of a series of profound changes, including mass battery storage, that is in the process of shaking up the world energy market.

    As as has so often been the case in the past, Alberta is on the leading edge of an energy experiment that is turning global — and Canadian — markets upside down.

    Within weeks, the Alberta Electric System Operator (AESO), which manages and operates the province's power grid, is expected to announce the results of a bidding process to create "5,000 MW of renewable electricity generation capacity connected to the Alberta grid between now and 2030."
    Pushing prices down

    The power will come from wind, not solar, and the prices will be more than double the record prices set in Mexico. But for the first time in Canada, the Alberta agency will use the same market auction system for creating green power that has helped push electricity prices down in Mexico and other places around the world.

    Some experts say the prices set in the Alberta bidding process could be as low as 5 cents per kilowatt hour. That's in the same range as the gold standard combined cycle natural gas power plan and just the beginning of a process that will use market forces to stimulate new efficiencies in Canada's electricity market as technology improves.

    Cost overruns at two Canadian hydroelectric stations now under construction, B.C's controversial Site C and Newfoundland's expensive Muskrat Falls, have drawn attention to an electricity system in transition.
    Muskrat Falls Fears 20170716

    Costly construction costs at power plants like Muskrat Falls in Labrador may lead to a disruption in the industry in the face of lower-cost wind or solar power. (Andrew Vaughan/The Canadian Press)

    Electricity pricing in most of the world remains complicated, but (allowing for my inevitable mistakes of over-simplification) the principles are not.

    No end user, even in Mexico or Chile where prices have hit record lows, gets to buy electricity for less than 2 cents per kilowatt hour. Nor will Albertans pay the lowest prices resulting from the new bidding process.

    Instead, each new tranche of low-cost power is mixed into the basket of previously contracted electricity to make a composite price. Then, you at home pay that price, plus transmission fees and various other things tacked on to your bill.
    Disruptive pricing

    As market bidding structures expand beyond Alberta, the low bid prices will be crucial — and disruptive — for companies making the electricity.

    "What you're starting to see is a willingness or at least desire in Ontario to switch to a more market-based system," says Sarah Petrevan, Ontario electricity specialist with Vancouver based Clean Energy Canada.

    Under the provincially owned and operated Ontario Hydro, low cost was often set aside in favour of other goals. For example, Petrevan says, when one includes start-up and decommissioning costs, nuclear power would be impossible to justify on a market-competitive basis.

    A recent report declared that B.C.'s Site C would not be cheaper than greener alternatives except for the $2 billion kill fee required to stop the project.

    The high cost of safe construction and decomissioning could make nuclear power uncompetetive as the price for electricity goes to competitive bidding. (John Flesher/The Associated Press)

    Even Ontario's recent push toward green energy was not based on the lowest cost. Rather, it was an attempt to create a wind and solar industry during an industrial recession by offering high-priced long-term contracts.

    In its first contracts, Ontario was offering 80 cents per kWh, a price high enough to make the University of Calgary's Blake Shaffer briefly consider coming to the province to get a piece of the action.

    Shaffer cut his teeth in electricity trading when BC Hydro started doing it in 1999, just before the California energy crisis. After seven years in B.C., Shaffer left to set up the electricity trading desk at Lehman Brothers, and then Barclays in New York.

    Now finishing a doctorate, he has a ringside seat to Alberta's new green power bidding system.

    "I'm very curious to see what the price is in that auction," he says.
    Out-competing coal and gas

    Shaffer says that in order to be effective in an integrated power network with backup systems like gas and hydro, intermittent power sources like wind only have to fall below the price of the of the cheapest alternative. Carbon pricing gives wind an even greater advantage over gas.

    But with Mexico's under-two-cent power, even without the effects of carbon pricing, the argument from the fossil fuel industry that green power cannot stand alone no longer holds water.

    "It seems like at these prices, and that's what's really amazing about how low we're getting in solar, is that, yeah, it can compete, even though battery technology is expensive these days," says Shaffer. "You can out-compete coal and natural gas at these levels."

    Follow Don on Twitter @don_pittis

    More analysis from Don Pittis

    #2
    Yup another company monopolising the power grid through corruption all the while with again government subsidies.

    Comment


      #3
      Even as cost to produce electricity continues to fall sadly the consumer will keep paying more.

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        #4
        Chuck2 read this article this morning. Couple of quick thoughts. Don implies that this 1.7 cents a kilowatt is with battery back up, at 1.7 cents I can assure you it is not. In Ontario as he points out the cost of electricity will continue to rise putting more jobs at risk. In Alberta the government is asking for bids on wind power, if solar is so great why are they using wind? Also much cheaper wages in Mexico to install the solar than in Canada. Also with present technology batteries are 35 to 50 percent of the cost of the system and have to be replaced every 5-10 years.

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          #5
          The takeaway from chucks article is enel has to be getting their panels for less than 75$ us. We are still around250$US. Most in industries say they won't drop below price we are at now, they will just get more productive. 10 cents a kw hour takes 15 years to pay off right now.

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            #6
            I'd like the author to pay my power bills for the next 20 years.
            The add ons after power is where the knife is. We are paying power companies to phase out of coal. Shut down mines. Convert to gas.
            Thats the only reason my bill has doubled since this started and its set to double again. The big high line recently pushed south? Put on our tab. Last penny profit ultimately Buffets.
            Will we really be competitive in 20 years? Or will we have no new tech. Some wore out infrastructure. Wealthy lawyers and ex politicians.
            And nothing to generate wealth with.

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              #7
              Originally posted by blackpowder View Post
              ....................
              And nothing to generate wealth with.
              Well, it all depends on where you live!

              Because just this morning I read in a local farm paper that a large greenhouse company is building an additional 12 acres of greenhouse here in Ontario because Ontario Hydro cut them a special deal on electricity cost.

              It all sounds wonderful until I read further down where it says that the same company is adding another 60 acres of greenhouses to its already huge greenhouse base in Ohio because electricity is so much cheaper down there.

              So yes, our electricity scheme is most certainly generating wealth, just not at home where the subsidy dollars - TAKEN FROM MY TAX DOLLARS - went to set up this "GREEN ENERGY".

              Between our brain-dead, libtard leadership and a U.S. president who has determined to move his country's interests forward, it's a good time to be an American.

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                #8
                Further to the energy balance here in Ontario, I was recently told - by someone directly involved in the process - of a company which is setting up a significant grains processing plant that Ontario Hydro (or whatever it's now called) is PAYING them 6 cents/kwh for any electricity that they use on weekends.

                Comment


                  #9
                  Originally posted by burnt View Post
                  Further to the energy balance here in Ontario, I was recently told - by someone directly involved in the process - of a company which is setting up a significant grains processing plant that Ontario Hydro (or whatever it's now called) is PAYING them 6 cents/kwh for any electricity that they use on weekends.
                  looks like that will be the start of the 2 day work week

                  Comment


                    #10
                    chuckChuck
                    That was an interesting piece, but in my mind it raises a large number of questions. One is how on earth can the 1.7 cent bid be so much cheaper than anyone else....new technology?? Secondly there is still the huge problem of the practical percentage of power on any grid that can be solar and wind. In most areas there is not perpetual sunlight and or wind. I remember reading a northern European country's grid allowing only a very low percentage, something like 15% wind power because you need an alternate for backup. And as far as battery backup is concerned, even though technology has made great advances in batteries, they are expensive, require a great deal of energy and some exotic materials to build, and don't last terrifically long. Really I wonder when you add up all the costs and materials in wind turbines and solar panels and batteries and all the energy and pollution in their construction and disposal how you could possibly be ahead of a hydro electric plant. The hydro electric dam has a life span at least 4 times as long as turbines and solar panels. Is it possible that this is a subsidy driven frenzy that like many other well intentioned actions does not consider the entire equation.
                    I would be really interested in what the practical percentage of renewable power would be on a western Canadian grid and at what percent failure rate. I realize that the grids are all interconnected but there is a practical limit to transfer distances too.

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                      #11
                      The takeaway from the article is the price of renewables are dropping fast and they are winning competitive auctions in the open market place over many other forms of generation. Battery storage will add additional costs but that will likely drop as well.

                      Ontario paid a lot for renewables in the beginning to build an industry. But I don't think Ontario is a model for the current world. Canada has import tariffs to support solar and wind manufacturing jobs. Maybe we don't need the tarrifs now. But Trump is fully prepared to use protectionist measures for American jobs. Why not Canada?

                      New coal is dead in Canada. Natural gas retrofits as an interim measure are cheaper and cleaner. I doubt Trump can overcome the economic disadvantage new coal has.

                      Consumer electrical rates are still going to move higher with or without renewables as distribution costs are still large.

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                        #12
                        I guess the money will be made in battery components and minerals. Storing energy is the 64 million dollar question. I suspect man needs a problem if he hasn't already got enough of them.

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                          #13
                          Meanwhile here in South Aust were the best at something.....we have a 50% renewable energy target.
                          South Australia will bring temporary back-up power generators online to prevent blackouts this summer but irony is at peak usage and if needed 80,000l diesel a hour.

                          Click image for larger version

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                            #14
                            If you were a bussiness man and could produce electricity at say 2cents per kw/h when the going price is say 30 cents why would you, wouldnt you think they would make more profit and perhaps charge say 15 cents or more, just asking

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                              #15
                              Originally posted by malleefarmer View Post
                              If you were a bussiness man and could produce electricity at say 2cents per kw/h when the going price is say 30 cents why would you, wouldnt you think they would make more profit and perhaps charge say 15 cents or more, just asking

                              Exactly, maybe I would do it to get all the free government money up-front, then come the hic-cups.

                              Comment

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