Ontario’s electricity policy disaster: power cost down, consumer rates up says economist

Massive revenue guarantees for a handful of lucky wind power generators, but no appreciable environmental benefit from Ontario’s energy policies says economics professor Ross McKitrick

More turbines means more losses and higher bills, with no environmental benefits [Photo: Gord Benner]
More turbines means more losses and higher bills, with no environmental benefits [Photo Algoma construction site by Gord Benner]
Financial Post, August 10, 2016

You may be surprised to learn that electricity is now cheaper to generate in Ontario than it has been for decades. The wholesale price, called the Hourly Ontario Electricity Price or HOEP, used to bounce around between five and eight cents per kilowatt hour (kWh), but over the last decade, thanks in large part to the shale gas revolution, it has trended down to below three cents, and on a typical day is now as low as two cents per kWh. Good news, right?

It would be, except that this is Ontario. A hidden tax on Ontario’s electricity has pushed the actual purchase price in the opposite direction, to the highest it’s ever been. The tax, called the Global Adjustment (GA), is levied on electricity purchases to cover a massive provincial slush fund for green energy, conservation programs, nuclear plant repairs and other central planning boondoggles. As these spending commitments soar, so does the GA.

In the latter part of the last decade when the HOEP was around five cents per kWh and the government had not yet begun tinkering, the GA was negligible, so it hardly affected the price. In 2009, when the Green Energy Act kicked in with massive revenue guarantees for wind and solar generators, the GA jumped to about 3.5 cents per kWh, and has been trending up since — now it is regularly above 9.5 cents. In April it even topped 11 cents, triple the average HOEP.

So while the marginal production cost for generation is the lowest in decades, electricity bills have never been higher. And the way the system is structured, costs will keep rising.

More wind turbines, bigger losses, higher bills

The province signed long-term contracts with a handful of lucky firms, guaranteeing them 13.5 cents per kWh for electricity produced from wind, and even more from solar. Obviously, if the wholesale price is around 2.5 cents, and the wind turbines are guaranteed 13.5 cents, someone has to kick in 11 cents to make up the difference. That’s where the GA comes in. The more the wind blows, and the more turbines get built, the bigger the losses and the higher the GA.

Just to make the story more exquisitely painful, if the HOEP goes down further, for instance through technological innovation, power rates won’t go down. A drop in the HOEP widens the gap between the market price and the wind farm’s guaranteed price, which means the GA has to go up to cover the losses.

Ontario’s policy disaster goes many layers further. If people conserve power and demand drops, the GA per kWh goes up, so if everyone tries to save money by cutting usage, the price will just increase, defeating the effort. Nor do Ontarians benefit through exports. Because the renewables sector is guaranteed the sale, Ontario often ends up exporting surplus power at a loss.

The story only gets worse if you try to find any benefits from all this spending. Ontario doesn’t get more electricity than before, it gets less.

Despite the hype, all this tinkering produced no special environmental benefits. The province said it needed to close its coal-fired power plants to reduce air pollution. But prior to 2005, these plants were responsible for less than two per cent of annual fine particulate emissions in Ontario, about the same as meat packing plants, and far less than construction or agriculture. Moreover, engineering studies showed that improvements in air quality equivalent to shutting the plants down could be obtained by simply completing the pollution control retrofit then underway, and at a fraction of the cost. Greenhouse gas emissions could have been netted to zero by purchasing carbon credits on the open market, again at a fraction of the cost. The environmental benefits exist only in provincial propaganda.

An ordeal for people forced to live with wind power projects

And on the subject of environmental protection, mention must be made of the ruin of so many scenic vistas in the province, especially long stretches of the Great Lakes shores, the once-pristine recreational areas of the central highlands, and the formerly pastoral landscapes of the southwestern farmlands; and we have not even mentioned yet the well-documented ordeal for people living with the noise and disturbance of wind turbines in their backyards. We will look in vain for benefits in Ontario even remotely commensurate to the damage that has been done. …

Read the full story here.

Comments

Segue C
Reply

Great photo to illustrate the devastation…GreedEnergy has razed the Ontario economy as it demolishes our cherished landscapes and communities.

alide forstmanis
Reply

Excellent article! Should be mandatory read for all – including climate alarmist activists and politicians.

Pat Cusack
Reply

I agree with those comments!

Sommer
Reply

I’m so grateful to Professor Ross McKitrick for his ability to analyze and communicate this information and to the Financial Post for printing it!

We need to elect a government that will promise to create a body of experts pertaining to the many facets of the energy portfolio, to get Ontario out of this mess. This needs to be an election issue.
Can we afford to wait for an election though?

Ron Hartlen
Reply

If you’d like to see how useless the Wind Power is, take a look at this, for the past 48 hours from 2016 Aug 10 4:40 pm
Nothing there when we could use it (high demand for air conditioning) but some appears overnight when we don’t need it (nuclear and hydro could meet all demand). Very typical.

https://www.cns-snc.ca/media/ontarioelectricity/ontarioelectricity.html

Vince
Reply

If Ontarians have any brains whatsoever, they’ll vote that idiot Wynn and her stupid party out during the next election. Then, maybe, I’ll return to the province where I grew up. Until then, forget it.

notinduttondunwich
Reply

Vince that’s the problem…. WE didn’t vote her in!
?

notinduttondunwich
Reply

Little something something going on with the voting system there… maybe should talk to your PC MPP bout fixing that…. I’m going to!

notinduttondunwich
Reply

Aha haha!!!!! Lmao!!! ! Grid watch says we’re importing hydro from Michigan and NY !!!! Do we like get that back at like 1.1 cents per kilowatt hour? ???? I’m going to turn on all my lights in the house!!!! That’ll cause a blackout!!! Night folks!!!!!

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