Critics of the Ontario government’s green energy policies have argued that paying high prices for renewable power will push up consumers’ electricity costs sharply. Subsidies to wind, solar and biomass plants will ratchet up prices, making electricity less affordable, they say.
The issue has become a key election issue, as Opposition Leader Tim Hudak vows to kill off portions of the province’s Green Energy and Economy Act if he comes to power in the fall.
But a new report from the Calgary-based think tank Pembina Institute says the contribution to higher power prices from renewables will be minimal over the next 15 years, and that over the long term adding more green power to the mix could actually trim electricity costs.
The report, to be released Wednesday, compares the province’s current plan where wind and solar power ratchet up to 22 per cent of power capacity by 2030, with another scenario where little is added after 2011 and additional power comes mainly from natural gas. In both cases nuclear power would continue to supply close to 50 per cent of Ontario’s power.
In either scenario electricity prices will grow sharply in the coming years, reaching a peak around 2022 when the rebuilding of nuclear plants is at its peak, the report says. But there would be virtually no difference in the price trajectory in the immediate future even if contracts for renewable power are ended, the study showed. Electricity costs would rise somewhat more quickly because of renewables from 2015 to 2025, but after that green technology could actually dampen price growth - particularly if gas prices rise and a price is put on carbon emissions.
Tim Weis, Pembina’s director of renewable energy policy and an author of the report, said one reason for the small price impact from renewables is that these technologies are becoming much more cost competitive, especially relative to building other new power plants. Constructing a new nuclear plant, gas plant, or even a coal-fired power station is far more expensive than in the past.
That’s a lesson that will apply in every province, he said. “All across the country we need to be rebuilding infrastructure, and anything new is going to be a lot more expensive than what was built in the 1960s or 1970s.”
In addition, there are massive investments needed in transmission lines, and that will boost the cost of power no matter what means is used to generate the electricity, he said. “There’s a whole lot else in the system, so it is not a huge surprise that building up renewables isn’t the dominant force that is driving prices,” Mr. Weis said.
The report makes it clear that there are many uncertainties that could also alter the scenarios, including changes in the price of natural gas, the potential impact of carbon pricing, and the expense of dealing with climate change.
One of the advantages of Ontario’s current green energy policies, Mr. Weis said, is that they add some stability and predictability to the system because the prices to be paid for renewable power are set far in advance, and there are no fuel costs.
The provincial policy that has come under the strongest fire from Mr. Hudak – the feed-in tariff that pays high prices for renewable power generated from equipment built in the province – is also crucial in setting a stable environment that will attract manufacturers, Mr. Weis said.
“The whole point of a feed-in tariff is to create stability, then that stability creates the market, and the market creates manufacturing,” he said. Cancelling the program would mean uncertainty for both power developers and manufactures, and undermine the expansion of a new industry in Ontario, he added.
Much of the natural gas needed to fuel power plants in a non-renewable scenario would likely come from shale gas deposits outside Ontario, the Pembina report suggests, and that would also channel funds away from the province. Most renewable spending, on the other hand, would stay within its borders.