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Green Energy Act contracts costing $4B a year: Scott Luft
May 4, 2020
Energy analyst and Ontario government historian Scott Luft has just published an important analysis of energy contracts post the Green Energy and Green Economy Act passed in 2009, and has made some starting calculations: those above-market contracts cost us plenty, and still are.
The good news is that the increase in the costs incurred by the GEA contracting slowed significantly after 2016. Additional costs are still to come as the largest, most expensive, single feed-in tariff contract only entered service for the last third of 2019: a full year of operation will add another $75 million. Hydro output from sites contracted under the HCI and HESA initiatives have been producing less in the past couple of years, while global adjustment cost components reported by the system operation (IESO) for this group have been fare higher than my estimates – so I suspect the system operator is hiding payments for curtailment. I have not accounted for biomass contracts, although some exist: over 80% of contracted generation from biofuels is either on FIT contracts or is the converted-from-coal Atikokan Generating Station. Reporting on the global adjustment shows biomass responsible for $230 – $287 million annually over the past 5 years.
Precision is elusive, but I am confident the current annual cost from procurement programs initiated in 2009 is over $4 billion a year.
Wind and solar contracts are for 20 years. A handful of smaller hydro facilities have contracts for less than 20 years, but most are 40 and the largest, most expensive contracts are for 50 years (for facilities on the Lower Mattagami river). By multiplying $4 billion (per year) by 20 years it’s clear the entire cost will be more than the $80 billion.
This is bad news for the current Ontario government that promised lower electricity bills—hard to do when you’re locked into lucrative contracts for years to come yet. But this is interesting for people who complained about cancellation of the 758 new energy contracts last year—we didn’t need that power, and we certainly don’t need the cost of intermittent, weather-dependent power, produced out of phase with demand.