Billion-dollar burden: how Ontario bungled green energy
Worthy of a repost, from the National Post, this opinion from a renewable energy insider.
September 2, 2016
Ontario set an all-time peak electricity demand of 27,005 megawatts (MW) 10 years ago this summer. At the time, rising demand and plans to retire its coal-fired power plants dominated provincial energy policy. What followed was optimism for a new energy policy, focused on the ambitious procurement of large wind and solar installations. I felt great pride in helping to lead an industry that would make Ontario’s power system clean, responsive and cutting edge.
What a difference a decade makes. Intrusive policy and poor implementation are largely responsible for the energy market debacle Ontarians face today. But there is no excuse now for buying more mega-projects when our power supply is saturated and hydro bills are skyrocketing.
Coal-fired power generation effectively disappeared after 2010, by which time Ontario’s electricity demand had already started to plummet. Demand has fallen 13 per cent in the past 10 years, including consecutive reductions in each of the past five years. In 2016, Ontario will consume less electricity than in 1997.
Peak demand exceeded 23,000 MW only one day this summer, despite parts of the province seeing 35 days with temperatures above 30 C. Yet our installed capacity approaches 40,000 MW. The system will have reserves above extreme summer peaks well into the 2020s. The Independent Electricity System Operator (IESO) reinforced this point recently when it confirmed “Ontario will have sufficient supply for the next several years.”
Against this troubling background, the Ontario government is procuring an additional 1,300 MW of large wind and solar generation under the Large Renewable Procurement (LRP) program. This decision is indefensible. It makes the frequency of negative pricing (paying our U.S. neighbours to take Ontario energy during periods of low demand) and curtailment (paying wind developers for energy production even when the grid can’t use the power) even worse. These problems have become billion-dollar burdens for Ontario electricity customers.
Sweet contracts, painful electricity bills
Offering sweet contracts to large renewable energy developers while demand stagnates has helped push hydro bills higher. Electricity prices have increased by seven per cent a year since 2009. Costs have risen faster than Ontario’s inflation rate in each of the past several years. The province’s electricity rates are increasing faster than any other jurisdiction in North America.
It’s clear that change must begin with the renewable industry, since our industry alone benefits from the continued overprocurement of electricity. The fact is large wind and solar developers have been pampered by Queen’s Park for far too long. Although solar installation costs dropped 70 per cent in the past decade, the government froze prices for years at a time. When permitting delays enabled projects to be built as much as five years after contracts were awarded, multi-millionaires were created overnight.
Today, with no logical reason to build more wind and solar mega-projects in Ontario, renewable developers must confront the economic damage they are doing to their families, friends and neighbours, and to the next generation of citizens who will bear the brunt of this green corporate welfare.
Renewable energy companies must confront the economic damage they are doing.
We need to make four changes. First, Ontarians must demand a return to basic electricity policy principles: safety, reliability and cost effectiveness. Second, the government should revisit the IESO’s legal obligations associated with the current LRP process and exit this procurement process without paying the ransoms that characterized Ontario’s gas plant debacles. Third, the IESO should restrict renewable procurement to the smaller rooftop and distributed energy projects that actually benefit customers. Fourth, Ontario renewable energy firms must learn to export their pioneering expertise and target new domestic and international markets.
The global renewable energy revolution has just started. Solar energy is increasingly the cleanest, cheapest and most environmentally sustainable option. The advent of battery storage, smart grids and the Internet of Things will catalyze innovative economies that embrace change. Renewables have a bright future in this world, but we need to regain control of Ontario’s failing electricity policies — and do it soon — to ensure we seize the energy opportunities of the 21st century.
Jon Kieran is a Toronto-based renewable energy consultant. He is a member of the Canadian Solar Industries Association’s board of directors. He declines LRP work from clients.