Here from Ottawa-based energy economist Robert Lyman, a summary of the “hidden” costs of generating electric power from renewable sources…what the government has done over the past five years.
THE HIDDEN COSTS OF ONTARIO RENEWABLE ELECTRICITY GENERATION
Ontario residents can be forgiven if they fail to understand the public debate during the current (2014) provincial election about the costs of different types of electricity generation and why these have caused electricity rates for consumers to rise so much over the past ten years. The complexity of the system makes it difficult to explain the costs associated with one source of supply, namely the renewable energy generation (industrial wind turbines and solar power generators). In this note, I will nonetheless try to explain in layperson’s terms why these costs are significant.
Electricity supply in Ontario takes place within the framework of the policy and legislative framework established by the Ontario government, an important part of which is the Green Energy and Economy Act of 2009 (GEA). Historically, the goal of Ontario electricity policy was to keep electricity rates for consumers as low as possible consistent with the goal of maintaining adequate and reliable supply. Within the current framework, however, that is no longer the goal. The GEA seeks to stimulate investment in renewable energy projects (such as wind, solar, hydro, biomass and biogas) and to increase energy conservation. To do this, it:
- Changed the review process for renewable energy projects to reduce environmental assessment and hasten approvals
- Created a Feed-in-Tariff that the Independent Electricity Systems Operator (IESO) must pay, guaranteeing the specific rates for energy generated from renewable sources (typically, the rates are fixed for the full term of the twenty year contracts, with inflation escalators)
- Established the right to connect to the electricity grid for renewable energy projects and gave renewable energy source preferential access over other sources of generation
- Implemented a “smart” grid to support the development of renewable energy projects
- Eliminated local approval requirements that local governments previously could impose on renewable energy projects
The guaranteed rates paid under the FIT system are not negotiated based upon the actual costs of production. In fact, the actual costs of production are largely unknown…
Read more of Robert Lyman’s summary here: THE HIDDEN COSTS OF ONTARIO RENEWABLE ELECTRICITY GENERATION