Tuesday, July 12, 2022

SaskPower's 2021-22 Annual Report: More Wind, More Coal, Higher Costs, Less Income... Rate Increases

SaskPower released their 2021-22 Annual Report last week. A lot can change in a year! 

Let's explore the data and the new information. All numbers in this post are from the five-year operating and finance statistics (last few pages of the report), and all page numbers reference the 2021-22 report unless otherwise noted. 

Electricity costs to consumers are increasing by 8% over the next year. 

On p9 of the 2021-22 report we learn we're in for two rate increases in the next ~10 months. A 4% increase this September and a 4% increase in April, pending approval by the Saskatchewan Rate Review Panel (SRRP). The decision should be confirmed (or not) this July. 

This is SaskPower's first rate increase since March 2018, so there's a fair argument to be made that we're overdue to pay more. 

But what are the costs driving this rate increase? Read on...

Provincial generating capacity has increased, mostly in wind. 

Golden South, Blue Hill, and Riverhurst Wind Energy Facilities have come online, delivering a combined 385 MW of generation capacity - when the wind is blowing, of course. 

Generating capacity includes SaskPower assets plus Independent Power Producers (IPPs) SaskPower buys power from. 

Due to the ramp-down of Unit #4 at Boundary Dam Power Station this year, 141 MW of dispatchable base-load electricity has been taken offline (p30). 

The result, which you can infer from the chart above, is we have less dispatchable, reliable base-load generating capacity than in the last two years. 

Generating capacity is somewhat misleading when it includes non-dispatchable sources that cannot be called online when needed. 

Generating capacity is growing faster than electricity supplied.

Intuitively, and as SaskPower makes clear in the report, this is due to intermittent renewables. Intalling intermittent sources means we build more dispatchable assets to ensure there is always capacity to meet peak demand (plus an operating reserve).

When the sun shines and the wind blows, we draw on renewable sources and ramp down dispatchable sources. When it's dark and still, we burn gas and coal. 

Question: In a province facing so many parallel challenges (healthcare and education to pick two), is the best use of scarce resources to build out intermittent generation capacity? Or would it be better to install dispatchable, on-demand base load? 

Hydro power was down significantly in 2021-22 due to drought conditions. 

The result was that SaskPower burned more gas, more coal, and imported more power from other jurisdictions to make up the gap. 

One takeaway from this graph is how one bad year can completely reverse a 3-year trend of declining fossil fuel use. Things can change in a positive direction, but quickly reverse when times are dire. 

Look at Germany, bringing coal generation back online in their current energy crisis. Will Saskatchewan even flinch thinking about keeping coal burning past 2030 if we don't have reliable replacement generation in place? 

In 2021-22, SaskPower ran their remaining coal assets harder than they've been run in years. 

When hydro availability dropped this past year, SaskPower ramped up their coal assets and ran them harder than they've been run in years. Peak-adjusted utilization (based on GWh delivered, MW capacity, and annual peak load) was over 100%, which means:

  • Assets were run above capacity, and/or 
  • Decommissioned coal assets were temporarily brought back online, and/or
  • My utilization metric (methodology on my previous post) isn't perfect, because of limited data supplied by the provincial utility

Some call-outs when reading this graph: 

  1. We might be able to ignore solar's abysmal 3.4% utilization in 2021-22, on the basis of it being the first year with any data. In my last post, the City of Saskatoon hinted at utilization of solar PV at ~26% (in reality, would be lower - search "solar capacity factor"). Utilization at one tenth of that is awful. 

  2. Does adding new wind capacity in 2021-22 also skew the reporting? Despite increasing wind generation capacity by 260% year-over-year, SaskPower reports electricity supplied by wind increased by just 180%. The 40% utilization this past year is within historical error bars, and could be due to curtailment, production being out of phase with demand, or just a calmer year.

  3. We have to demand better, more granular data from SaskPower so we don't have to have all these call-outs. (write your MLA, let's get more transparent data!)

SaskPower's Net Income fell through the floor. 

SaskPower's Net Income this past reporting year was just $11 million dollars, down from $160M last year. 

These "modest earnings" were "anticipated" (p9) due to "defer[ring] increasing customer electricity rates in the face of rising cost pressure due to capital spending and higher fuel and purchased power expense." 


  • Is the "rising cost pressure due to capital spending" due to the "major built-out of intermittent renewable energy," (p15) which are material-dense and energy-dilute? In other words, is the graph above a spurious correlation, or an indication we're accelerating spending capital on projects with poor economic value? 

  • Does "higher fuel purchased power expense" include the costs of renewables? Or, are private Independent Power Providers?

    SaskPower deleted a table that was on p4 of the 2020-21 report that broke out PPA (Power Purchase Agreement) capacity vs. SaskPower-owned capacity. The impact is we cannot calculate IPP-delivered energy vs. SaskPower-delivered energy (although, here is a fun fact: over 98% of wind assets in SK are IPP-owned) and related costs. 

    However, we can look at costs aggregated by fuel source: read on. 

We have decent data on fuel and purchased power costs by source. We're missing capital and operating costs.

Using data on p80 of the 2021-22 report (and a similar table from the previous years' report), we can visualize the cost category "Fuel and Purchased Power". SaskPower says these costs include:

the fuel charges associated with the electricity generated from SaskPower-owned facilities, costs associated with power purchase agreements (PPAs), as well as electricity imported from markets outside Saskatchewan. This electricity is used to serve our company’s Saskatchewan customers, with surplus electricity being sold to markets outside the province when favourable conditions exist (p34)

Looking at the last two years, we can visualize the significant increase we spend in this category, and it's not all carbon tax: 

Gas is up, coal is up, wind is up (although its footprint doubled year-over-year), and imports are up. 

The above chart shows total fuel and purchased costs per year in millions of dollars. 

When the costs are normalized to the total amount of electricity generated by each source, a different story is told: 

(image updated 2022-08-12 - I noticed an embarrassing error in units conversion. Original image showed all costs 1000x too high)

Just for fun, here's the same dataset inverted to visualize how the amount of electricity we can generate for every million dollars of fuel and purchased power spend. 

The takeaway is it's terrifically expensive per unit of energy to purchase imported energy, buy from small IPPs, and buy from solar providers. 

(not that we shouldn't do any of these things. An example: the City of Saskatoon's landfill gas plant is a small IPP that valuably combusts waste gasses that are worse for the atmosphere than CO2, and is trending towards breaking even on its electricity sold back to the City) 

Caveats to this analysis:

  1. Fuel and Purchased Power does not factor in Operating, Maintenance, and Administration costs (which are another $700M, and are not broken out by generating source or plant). Where can we get this data? 

  2. Fuel and Purchased Power does not include any capital expended by SaskPower to build generating assets. Where can we get this data? 

  3. Numbers may be misleading for just 12 MW of solar capacity in the province in 2021-22. We will have to monitor this closely. 
I would love better data on capital and operating costs to understand what it costs to build, operate, and generate reliable electricity in this province. 

The question for the future is: What will Saskatchewan replace our cheap, dispatchable, stable, dirty, bad, base-load coal with? What happens to total fuel costs (and costs per kWh) when coal is off the table? If the solution is "more wind," what dispatchable source do we build up in parallel? How much more cheap hydro do we have access to? Do wind and gas costs rise or fall when they're more coupled  and interdependent in the future? 

What does the future hold for Saskatchewan and what does it mean for our utility bills - and the climate? 

Here are some more tidbits from the 2021-22 report and questions I'd like to learn more about: 

  • More gas incoming: Great Plains (Gas) Power Station will deliver 377 MW of generation capacity in 2024 (p45)

  • A 100 MW solar facility is planned for the Estevan area (p14 - no date given), built for SaskPower by a private sector partner. Three more 10 MW installations are planned (by IPPs) between 2022 and 2024 (p45)

  • Another 200 MW of wind is coming online in 2024: Bekevar Wind Energy Facility. 

  • 190 MW of additional hydro capacity from Manitoba should be online by 2024 (p45)

  • The Audit & Finance Committee notes mention SaskPower's "10-year generation supply plan" (p106). Where is this plan? Should it be publicly available? I've emailed SaskPower to ask for a copy. 

  • What are the dependencies and relationships between SaskEnergy and SaskPower? Topical this week was a proposed 17% customer rate hike over the next year and a bit. I have started reading and hope to have a post up in the next month. 

  • SaskPower is assessing the feasibility of a 300 MW Small Modular Reactor (SMR) for commissioning "as early as" 2034. 
    • Why not earlier? 
    • Why only 300 MW when there's 1200 MW of coal to be retired by 2030? 

I have another post in the works where I will start exploring possible answers to the question of what happens when coal goes away in this province. 

I'll give you a hint: think of an energy source that generates a zero-carbon, stable base load with a fuel can be stockpiled on a small generation site for years in advance. 

As always: open to constructive feedback and corrections! 
Data and calculations.

2022-08-12: Updated the 7th image in this post correcting a units conversion error. 

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