Sunday, June 26, 2022

Questions and learnings from reading SaskPower's annual report (2020-21)

Over the last few years I have become more fascinated by energy and energy issues. I've read a bunch of books (here's my list and queue on the topic of energy), tuned into some great podcasts like Decouple, and even made a career change to be closer to the energy sector. 

I have not seen a terrific amount of dialogue about energy in Saskatchewan. That may due to channels I'm plugging into (or not). To learn more, I read SaskPower's 2020-21 Annual Report. These are some of the things I learned and some questions I think are worth asking. Any page numbers I mention refer to the 2020-21 report PDF.

(update 2022-07-13: See my updated post on the 2021-22 report)


0. Background terms

Two related but critically different units in energy are the watt and the watt-hour. Watts (W, kW, GW) represent a rate, whereas watt-hours (more commonly kilowatt-hours; Wh, kWh, GWh) represent a quantity

Little example: if you have a 60 watt light bulb turned on for one hour, the light consumes at a constant rate of 60 watts, for a total energy consumption of 0.06 kWh. 

Big example: SaskPower's peak load was 3,722 MW (instantaneous production/consumption), their total generating capacity is 4,987 MW, and they supplied 24,634 GWh of energy in 2020-21. 


1. Did you know we're not a coal province, we're a gas province? (but we still burn coal) 

There's a trope in Saskatchewan when talking about electrification (of cars, appliances, heating, etc.) that when you electrify something, it's "coal-powered." Nice EV you've got there, did you know it runs on coal? 

I was surprised to learn that 43% of the province's generating capacity is natural gas, compared to 31% coal (page 6). By 2025, this is forecasted to be 40% gas, 21% coal, with wind making up much of the difference. 


2. Given SaskPower is going big on wind power, why aren't they clear about wind utilization?

On page 2, two new wind projects (Golden South Wind Energy Facility and Blue Hill Wind Energy Facility) are discussed, adding a combined 375 MW of generating capacity to the province's grid this year. This will more than double previous wind generation in the province. By 2025, they estimate 15% of the province's generating capacity will be wind (approx. 900 MW). 

(Just for a sense of scale, the Queen Elizabeth (gas) Power Station in Saskatoon is listed at 623 MW)

The utility is not clear about the utilization or capacity factor of wind assets. On p117 there are tables that let us calculate a rough estimate of utilization. See this spreadsheet for my futzing around. 

In the first two columns are data from p117. Columns F and G calculate the theoretical energy (GWh) that each source could generate if it were running at 100% utilization, 24/7/365, which are scaled by multiplying by peak load (3,722 MW) over total generating capacity (4,987 MW). This scaling is done because we can't run at 100% utilization all the time; electricity supply must always equal demand. 

Let's visualize the top four power sources in chart form: 

Conclusions and speculations from this chart (recall, this is 2020-21 data): 

  • Coal is the province's stable base load, running at the highest overall utilization (even though more generation capacity and electricity supplied is from gas)
  • Wind is the least utilized source relative to its generating capacity (perhaps predictable, due to its intermittency) 
  • Hydro is lower than I expected but perhaps like gas, it is more easily dialed up and down to handle variability in demand (customers) and supply (intermittent renewables). There are also seasonal considerations in managing water levels of dams

Why does utilization matter, both for the climate and our energy bills? 

One of SaskPower's corporate metrics (M17, see p30) is Renewable Generation Portfolio (%), or how much power generation capacity comes from wind (and solar, hydro, biomass, waste heat, flare gas, landfill gas). However, what's more important than capacity is utilization! The numerator (actual electricity supplied) is more important than the denominator (theoretical capacity if the wind never stops blowing) for keeping our fridges running.

My peak-adjusted utilization numbers aren't perfect but are useful for asking questions like this. SaskPower should publish utilization data, and even better, supply live demand and capacity data like the province of Alberta

Clarity around capacity factors and utilization for renewable sources are important. If 15% of our generation capacity by 2025 comes from wind, what does that translate to in electricity supplied? Weighing costs, intermittency, and climate goals, is it worth it? 


3. The province is phasing out coal by 2030. Is natural gas enough to carry this province? 

"Renewable power holds a central place on the roadmap to our province’s cleaner energy future. In the years ahead, wind and solar generation will play increasingly larger roles as generating options. As we phase out conventional coal-fired facilities in Saskatchewan by 2030, SaskPower will rely on natural gas generation to back up intermittent renewable generation until other emissions-free baseload power options are proven reliable, cost effective and available for our geographic region." (p11, emphasis mine) 

I didn't realize coal was being phased out. This is exciting from an environment standpoint. 

It is maybe slightly concerning from an energy security standpoint. Natural gas is dispatchable in the sense that power generation can be ramped up and down quickly to meet supply, but it's dependent on gas being in the pipe and flowing to the plant. Three of coal's redeeming factors: One, a great big pile of it can be stored on-site to buffer supply and demand, two, it's low-cost (in dollars, not climate impacts), and three, we have a lot of it in the ground in Saskatchewan. 

I did a bit more reading and learned that SK is Canada's third-largest natural gas supplier (source) and there are underground caverns all over SK and AB where gas is stored to buffer supply/demand (source). So maybe shutting down coal is not a big deal in the grand scheme of things. 

Once coal ramps down, we're dependent on the flow (and cost) of gas for energy security, plus the 20% of generating capacity that comes from hydro.

The longer-term nuclear and geothermal options for the province are very appealing from an energy security standpoint, where fuel is either stockpile-able for years or functionally infinite. 


4. Is it widely understood that renewables need to be backed up with gas? The utility is quite blunt about this.

Increasing use of intermittent renewables (like wind and solar) must be combined with increasing use of more dispatchable energy sources like gas or coal. Hydro is dispatchable - until the dam is empty. But it makes sense: when the sun stops shining and the wind stops blowing, we still want our phones charging. 

SaskPower states this in an unmissable spot on page 3: 

"As we continue to integrate increasing levels of renewable energy, natural-gas fired generation will play a foundational role in following intermittent supplies of wind and solar energy." 

It is discussed much more throughout the report.

SaskPower discusses another option to back up renewables: the utility is building their first "grid-scale" battery. It will be 20 MW (about 0.4% of grid generating capacity) and be able to "power up to 20,000 homes for one hour." This is framed as a learning project for larger future options. I am skeptical but curious to see if battery storage technology can achieve "true" grid scale at a reasonable cost. It's good we're starting small. 


5. What does it cost to generate electricity in SK (operating costs and capital)?

I would love to see data or tables that make the following types of questions super easy to answer: 

  • What is the operating cost per kWh to supply energy, broken out by generation type and individual plant? 
  • What is the capital cost per MW of new capacity, also broken out by generation type and individual plant/project? 

I couldn't find this anywhere in the report. 

Without cost data it is difficult to ask questions and have discussions about the value of current and future projects. It is easy to compare wind to natural gas on an emissions basis, but what about capital cost, or operating cost?  Are the people in the province getting the most bang (literally, electricity) for their buck? Emissions is part of that conversation, but costs need to be understood. 


6. SaskPower is not the sole electricity generator in the province. How does public/private grid management impact ratepayers?

This is obvious to people who know about SaskPower's Net Metering program, where individual customers can sell their own power back to the grid (I did learn this applies to any power type like biomass or wind, too). 

I was surprised to learn (see page 4 of the report) is that 18% of SaskPower's generating capacity comes from Power Purchase Agreements (PPAs) with independent power producers (IPPs). Here, SaskPower is buying power from in-province private entities, or cross-border public entities like Manitoba Hydro. 

The majority of that 18% PPA-supplied capacity is natural gas, and there is over $10B committed to long-term (greater than 5 year) PPA contracts. 

I can think of lots of interesting questions around PPAs:

  • Is SaskPower required to act as a monopsony, obligated to buy any power hitting the SK grid? Or can they say "no" to proposed projects and/or disable IPPs from feeding electricity into the grid, when needed?
  • When both public-owned (SaskPower) and private (IPP) electricity is available, which source gets priority in hitting the grid? How is that balanced? 
  • How are private- and publicly-owned sources balanced to ensure high standby costs are not passed on to ratepayers? The negative image that jumps into my mind is an IPP plant running at 100% with the SaskPower plant next door idling, with all the workers sitting around having coffee. 
  • Are PPAs an emerging or growing trend, or part of a stable and healthy energy infrastructure? I can imagine some people being quite shocked at nearly 20% non-publicly owned capacity, and others pushing for more private energy generation opportunities. 
  • If the bulk of IPPs are wind and solar (see p119 map), are purchase agreements structured to account for the fact that SaskPower is always the reactive party? (essentially, SaskPower needs to dial gas/coal/hydro up or down to react to renewables) Do SaskPower's costs increase as more private intermittent power is added to the grid, and is this accounted for in PPAs? How is the utility planning for more IPPs/PPAs in the future from more variable sources? Is grid management... easy right now, or hard?
The over-arching question is what is the impact IPPs have on grid management, grid planning, and energy cost to ratepayers? 

7. What are SaskPower's top corporate risks? Most interesting risks? 

From p53 in the report, there's a detailed discussion of some of the top 10 risks facing the utility. Here are some of the more interesting ones and a few thoughts. 

#1: Environmental regulation. Changing regulations have forced the shutdown of coal by 2030. We know that Saskatchewan pays for the carbon in our natural gas, and that cost of carbon is ramping up from ~$40/tonne (today) to ~$170/tonne (in 2030, and what impact will that have on our electricity rates?). What's hinted at in this risk management section is that if environmental regulations and the cost of carbon are a constantly-shifting target, that impacts the utility's ability to plan for costs in the future, which will certainly impact ratepayers.

#2: Financial sustainability "is challenged by current economic conditions, growing capital requirements, increasing debt, and pressures to maintain competitive rates." Isn't it just a bit concerning when your provincial utility worries about their long-term financial health? What's the impact on the people in the province? 

#8: Industry disruption. Essentially, SaskPower's infrastructure is mostly in its twilight years, environmental regulations constrain how and when new supply is brought on, new types of loads like EVs are expected to change grid demand, and customer self-generation is growing. I highly recommend The Grid by Gretchen Bakke to learn more about challenges facing grid operators.

#10: Security and optimization of energy supply. p56: "Increasing the percentage of renewables in the supply mix - along with changing regulations resulting in the phase-out of conventional coal-fired generation - impacts system operability and has the potential to increase costs to integrate and maintain a secure system. The natural gas market continues to evolve [...] impacting supply and demand." Here again, SaskPower is hinting at a renewables-and-gas-rich, but more expensive and harder-to-operate grid of the future. 


8. Is nuclear renewable? Is anything? 

The nuclear part of this question was not answered in the 2020-21 report, and would make for an interesting debate. As I mentioned above, SaskPower has a corporate metric (#M17) for the percentage of generating capacity that comes from renewable sources. The metric explicitly includes wind, solar, and hydro, excludes fossil sources, and doesn't mention nuclear. 

The first flaw in this metric (discussed briefly in Section 2) is that it's not clear how or if capacity factor and utilization play into that metric. An absurd exploit would be building 100 MW of solar panels... deep underground where they get no sunlight. Does the fact they're grid-connected mean they count towards capacity? 

The second flaw is that "renewable" is not well-defined, in this M17 metric or in society in general. When you look at the mass of raw, scarce materials required to generate 1 MWh of electricity, wind and solar don't look so hot - see p66 of this monster PDF report from the UN (note the page is numbered 56, but is 66 of the PDF). It takes 300-600 grams of scarce minerals to generate 1 MWh of solar PV electricity, but just 59 grams of minerals per 1 MWh of natural gas. Nuclear: 84 grams per 1 MWh. 

I am not against wind or solar energy but I think the renewables discussion should go deeper than the  emissions and ecological impacts in one's own community. It takes concrete, glass, polymers, and a ton of mining and processing to build all of that "clean" energy infrastructure. 

The point is that if we care about decarbonization, a "renewable" metric that excludes nuclear may work against us in how we allocate capital and plan for major future energy sources. 


Fin

As I was reading, I was signing up to various SaskPower newsletters to get updates about changes in the future. My sense is the provincial energy mix is not a widely discussed or debated topic and I was hoping to start some of that - then again, maybe I'm plugged into the wrong channels and these questions are all asked and answered. Please let me know of any errors or inaccuracies above. 

What I've love to see in the future is more transparency from the provincial utility on current supply and demand (ideally, some live value that can be scraped or trended), broken down by energy type and source facility, like Alberta has. I would also like to see more discussion around costs by facility or aggregated by generation type.

I expect SaskPower to release their 2021-22 report shortly. I will make a follow-up post to see if anything has substantially changed. Thanks for reading. 

2022-07-08: Revised content for clarity. 

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