The sting of high electricity costs – and the potential for more pain in the near term – has decisively punctured Ontario’s infatuation with high-cost renewable energy sources, such as wind and solar. “Achieving Balance” – the latest version of the province’s Long-Term Energy Plan – is a courageous attempt to right the wrongs and administer the right dose of medicine to the patient at about the right time.
The Green Energy Act’s policy directives remained doggedly indifferent to the key question of cost: Clean tech jobs were suggested as the pathway to prosperity. Reality has turned out to be a cruel test of that thinking.
To its credit, the new plan has introduced a high degree of flexibility, responded to the diversity of views across Ontario and charted a course that allows a glimmer of light. The tool kit for ongoing course correction is there, and there is solid evidence of a determined effort to limit cost impacts.
The open question is whether it will be sufficient to placate a consumer backlash, given that the plan cannot completely make up for past mistakes.
It would be unfortunate if the plan’s positive features were to unravel under the withering glare of an electorate that can no longer abide more short-term pain. Cost increases in the order of $1-billion to $1.5-billion a year will arise from 3,800 MW of new wind and solar generation (the same order of magnitude as the onetime cost of gas plant cancellations) to be absorbed in the system over the next 18 months.
The Ontario experience mirrors developments in several other jurisdictions around the world, in particular Spain, Germany and the United Kingdom, where there are cautionary tales of hubris and how good intentions muddled with poor policy prescriptions can lead to unpalatable consequences.
Energy poverty is generally defined as the threshold when energy costs – electricity and heating – either approach or exceed 10 per cent of household income. European energy price increases, driven primarily by green obligations and subsidies, have translated into an increasing number of households facing energy poverty.
Germany’s electricity costs are among the highest in Europe, approximately 40 cents per kWh compared to 10 cents in Ontario. The installed capacity for wind and solar combined (65,000 MW) is almost twice the size of Ontario’s total system. Subsidies for green energy equal 10 cents per kWh, with a total cost of $25-billion in 2013. For a country that has built such a large capacity in solar and wind, it is disconcerting to observe that 17,000 MW of new coal capacity by 2022 is in planning or under construction to provide base-load power that would act as backup to fickle wind and solar resources. If renewable generation simply turns into a strong embrace of fossil fuels, then this clean energy pathway is fraught with danger.
The challenge for Ontario’s new plan is clear: Are the long-term targets for renewables credible?
An even more compelling question for the global context, in light of the German and Spanish experience, is this: Can carbon emissions truly be reduced effectively by building renewables on a very large scale? Ineffective environmental performance by renewables may turn out to be more damaging than ineffective cost performance.
Jatin Nathwani is professor and Ontario Research Chair in Public Policy for Sustainable Energy at the University of Waterloo.