Wind and solar driving up Ont. electricity bills
Fraser Institute recommends reconsidering commitments to renewable energy companies.
The public policy think-tank with offices across Canada says annual power cost has risen more than 50% since 2004, despite declining competitive wholesale market prices and blames the global adjustment, a non-market mechanism that dominates power pricing.
Ontario closed all of its coal-fired power plants and entered into contracts with other generators including renewable energy companies (hydro, wind, solar and biomass) that charge the Ontario Power Authority (OPA) higher-than-market-value prices for energy. To make up the difference, the OPA adds the global adjustment charge to the electricity bills of Ontarians.
“In the US, power rates have been falling but Ontarians are paying more than ever because of the global adjustment,” said Tom Adams, independent energy analyst and study co-author.
Since 2007, the charge has risen six cents per kilowatt hour and is the main reason electricity bills have increased dramatically.
Looking at the factors driving the global adjustment, the Fraser Institute model estimates solar and wind systems provided just under 4% of Ontario’s power but accounted for about 20% of the average commodity cost in 2013.
Each additional megawatt of new wind capacity adds about $0.02/MWh to the charge after netting the offsetting benefit of revenues from wind production. Over the past decade each additional megawatt of new hydro-electric capacity has added about $0.015/MWh.
The study notes solar power generation has a large marginal impact on the global adjustment that will be more accurately estimated when the amount generated becomes material; that reductions in coal-fired power generation in Ontario were associated with statistically significant increases in the charge; and that imports can potentially reduce it, but exports occur under circumstances that increase it.
According to the study, to prevent further electricity rate increases, the province could halt all new hydroelectric, wind and solar projects. And to reduce rates, the province could terminate (where possible) existing contracts between renewable energy companies and the OPA.
Moreover, notes the study, Ontario could import electricity from Quebec (particularly while Ontario refurbishes its nuclear power plants) and reopen four of 12 coal-fired power units at Lambton and Nanticoke that had been outfitted with advanced air pollution control equipment prior to their closure, making them as clean to operate as natural gas plants.
Click here to access “What goes up: Ontario’s Soaring Electricity Prices and How to Get Them Down.”