What the death of Ontario’s green energy dream can teach other provinces about the challenges ahead

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About 20 workers descended upon a new wind farm in Ontario’s Prince Edward County last fall. Their orders: Wrestle its turbines to the ground by year end.

It took them just two months to remove the most visible portion of the White Pines Wind Farm, and the province put the turbines up for sale. But the process of erasing the facility from the landscape had only begun. Crane pads, substations, transformers, electrical transmission lines, foundations and access roads would have to follow.

The demise of White Pines is a vivid symbol of Ontario’s emerging energy policy, which turned hostile to renewable sources of power after Premier Doug Ford’s Progressive Conservatives were elected in 2018. Mr. Ford has blamed “these terrible, terrible wind turbines” for soaring electricity prices, and said he’d rid the province of every single one if he could. This was more than political bluster: The construction of White Pines was nearly complete when the government killed it – a move that risked discouraging investors across the electricity sector and beyond.

The government’s abandonment of renewables stems partly from the high costs Ontario paid to become an early adopter under the Liberals, who passed the Green Energy Act in 2009. The irony is that renewable sources are now among the most cost-effective options available. BloombergNEF, an energy-focused research service, recently said solar and wind energy are now the cheapest sources of new generation for two-thirds of Earth’s population.

And as governments look to foster a “green recovery” from COVID-19, proponents of renewable energy argue that new projects are an ideal component of stimulus packages. According to a recent report by the International Energy Agency, COVID-19 has dramatically slowed installations of new energy sources worldwide, but renewables will be the only segment to grow this year over 2019. It adds that “growth is expected to resume next year” amid supportive government policies.

But Ontario has plotted a different course. The province continues to refurbish the old nuclear reactors that provide about 60 per cent of its electricity. In late April, Ontario Power Generation (OPG) completed its purchase of three natural-gas-fired plants from TC Energy Corp. for $2.8-billion, which the utility said “are strategically important to the current and future electricity system.” (The Ford government views natural gas as a flexible way to meet power demand during peak hours.)

Environmental activists are appalled. The Ontario Clean Air Alliance, which wants the province to phase out gas plants, said “this move demonstrates not just lack of insight into our climate crisis, it also is a risky financial bet as the world transitions away from fossil fuels.” Yet other large jurisdictions abroad have also come to regret their early adoption of renewables. Germany, for one, has stalled in its transition.

Ontario’s energy policy shift might have greater implications if the province urgently needed new generation facilities. However, many experts say the existing fleet can fulfill demand for the medium-term.

Canada’s most carbon-intensive provinces, by contrast, very much need to sort out what role renewables will play in their future generation mix. Alberta, Saskatchewan and Nova Scotia all rely heavily on coal-fired plants. As Ottawa mulls how to meet its emissions reduction commitments under the 2015 Paris Agreement, these provinces are under considerable pressure to shift to cleaner sources of power over the next decade.

What can they learn from Ontario’s mistakes?

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How Ontario’s renewables revolution shorted out

White Pines was conceived during Ontario’s honeymoon with renewable energy. The Green Energy Act, a signature Liberal initiative, guaranteed above-market rates to generators of renewable energy for periods as long as two decades. In 2010, the developer of White Pines, wpd Canada, won a 20-year contract to supply electricity to the province.

Yet White Pines never powered a single lightbulb. And Ontario’s rush to renewables was in jeopardy long before the Ford government killed it.

In 2018, former premier Kathleen Wynne appeared before a provincial committee to explain what went wrong. She said that for decades the government had invested as little as possible in Ontario’s electricity sector. Its components became obsolete and unreliable, prompting the Liberals, who assumed power in 2003, to spend $50-billion to build new dams, refurbish nuclear facilities and string out more transmission lines.

The result was a pretty spectacular transition. Ontario became the first jurisdiction in North America to shutter its coal-fired power plants, which once provided a quarter of its electricity, en masse. To replace them, the Green Energy Act offered generous, guaranteed prices to encourage new wind and solar plants. It worked. The province burned its last coal for power generation in 2014. The following year, a report by Auditor-General Bonnie Lysyk found that natural gas, wind, solar and bioenergy generated 16 per cent of Ontario’s electricity.

But the government paid a great deal to achieve this first-mover status.

The Auditor-General found that those same four power sources accounted for a disproportionate 36 per cent of the province’s total generation costs. Ontarians paid $9.2-billion more for renewables under those guaranteed-price contracts than they would have under previous procurement programs. The government also built far more generation capacity than it needed, pushing costs higher still.

Ontario has a mechanism to bridge the gap between the low prices for electricity in wholesale markets (known as the Hourly Ontario Energy Price, or HOEP) and the high guaranteed rates it pays for renewable power under those long-term contracts. It’s called the “Global Adjustment,” and Ontarians have to pay for it, either through rates or taxes. Demand for electricity has been low in recent years, as have natural gas prices, so wholesale rates have declined substantially. But as Ontario bought increasing volumes of power under long-term contracts, the Global Adjustment soared.

Ontarians, accustomed to paying some of the lowest electricity rates in Canada, suddenly found themselves paying among the highest. And they weren’t happy.

In 2016, with an election looming in a couple of years, the Wynne government began a desperate search for easy, quick ways to lower rates. It didn’t find any.

“All of the low-hanging fruit in relation to trying to find ways to reduce costs had already been done,” Glenn Thibeault, Ms. Wynne’s energy minister, told the 2018 inquiry.

So the government selected an extreme option: borrowing billions of dollars to subsidize consumers’ electricity rates. The Fair Hydro Plan involved a complex financing and accounting structure that concealed the borrowing, thus allowing the government to claim its budget remained balanced.

It backfired spectacularly. The Auditor-General opposed the government’s aggressive accounting methods. On the campaign trail in 2018, Mr. Ford howled about the injustice of forcing future Ontarians to pay for today’s lower rates. The Conservatives won a majority government; Ms. Wynne’s party recorded the worst election result in its 161-year history.

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‘Fixing The Hydro Mess’

Fast forward a couple of years and Ontario’s drive to renewable energy sources has stalled.

Immediately after the election, the Ford government terminated 758 renewable energy contracts, a move Energy Minister Greg Rickford said would save $790-million. It repealed the Green Energy Act soon afterward. Most of the cancelled renewable energy projects hadn’t been built yet, many were small and the government said the province didn’t need the power.

White Pines, with a nameplate capacity of 18.5 megawatts, stood out in that it was just months away from generating electricity. The way the project was terminated also provoked criticism. The government introduced legislation, the White Pines Wind Project Termination Act, to revoke the project’s permits, dictate how its owners would be compensated and prohibit any proceedings “for a remedy in contract, restitution, tort, misfeasance, bad faith, trust or fiduciary obligation, or any remedy under any statute.” This approach risked spooking major infrastructure investors well outside the electricity sector, but the message was clear: Ontario’s retreat was non-negotiable.

Another, larger wind project nearly suffered a similar fate. Last December, Environment Minister Jeff Yurek revoked the approval of the nearly completed 100-megawatt Nation Rise Wind Farm 40 kilometres southeast of Ottawa. His justification: It would harm local bat species.

That facility’s developer, EDP Renewables Canada Ltd., halted construction and asked the Ontario Superior Court to quash the minister’s decision. In May, the court granted that application, stating that Mr. Yurek failed to adequately explain his decision, and that it “is not reasonable and does not deserve deference.” The court said Mr. Yurek drew several conclusions not supported by evidence and breached his duty of procedural fairness.

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The government’s approach is partly fuelled by rural resentment of wind turbines, which Mr. Ford has said “were rammed down the throats of communities that didn’t even want them.”

In this respect, Ontario’s experience has been similar to Germany’s. After the tsunami-induced nuclear disaster at Fukushima, Japan, in 2011, German Chancellor Angela Merkel vowed to phase out nuclear generation and replace it with wind and solar. Hundreds of billions of euros were invested.

In 2019 Germany generated approximately 28 per cent of its electricity by burning coal, and politicians fear rural opposition to turbines and the transmission lines required to service them. Last year, the newsmagazine Spiegel reported that “the greatest political project undertaken here since Germany’s reunification, is facing failure.”

In Ontario, however, casting off renewables probably won’t help address the government’s primary political problem on the energy file: lowering electricity rates.

The Wynne government left its successors in a bind. The Fair Hydro Plan did nothing to address the underlying causes of soaring rates, and its temporary relief costs billions of dollars annually. The Liberals planned to pay for these short-term subsidies by ratcheting up consumers’ bills by as much as 10 per cent every year, beginning in 2022.

The Ford government has shown no inclination to cease the subsidies – indeed, it has repeatedly vowed to reduce rates further, by 12 per cent. But it has yet to reveal credible plans to do so. It continued this approach during the COVID-19 pandemic by suspending time-of-use pricing until May 31. Ontario utilities usually charge higher rates on weekdays during periods of peak demand, but in March the government fixed the price of electricity for residences and some businesses at the “off-peak” rate of 10.1 cents a kilowatt hour. That relief measure will likely cost hundreds of millions of dollars, according to estimates from the province’s Financial Accountability Office.

The Fraser Institute analyzed the Progressive Conservatives’ energy policy late last year. “Instead of enjoying reduced electricity costs, our analysis showed that almost all types of consumers in Ontario have experienced increased electricity costs over the past year,” said Elmira Aliakbari, an economist with the institute.

“Based on the measures the government has implemented, achieving that [12-per-cent] target is not really likely.”

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Nuclear Options

If the Ford government really hopes to lower rates, killing its predecessor’s sacred cows may not be enough. It may have to slaughter some of its own.

The province has bucked international trends by doubling down on nuclear power. OPG continues to refurbish four reactors at its Darlington nuclear station, which will take until 2026 at an estimated cost of nearly $13-billion. Bruce Power, the private company that operates the provincially owned Bruce station, is in the early stages of a $13-billion life extension program that will refurbish six reactors. (Ontario now generates about a quarter of its power from hydro.)

Mr. Rickford and his associate minister, Bill Walker, are both nuclear enthusiasts. Mr. Walker celebrated Ontario’s decision to spend “$26-billion to refurbish the province’s nuclear reactors to support reliable, emissions-free energy.” Before Mr. Walker entered provincial politics, he was operations manager at Bruce Power and, as a member of provincial parliament, has touted it as a recipe for lowering prices.

“We’re definitely a pro-nuclear government,” Mr. Walker told a local newspaper after joining the Energy Ministry last year.

Nuclear reactors have long played a central role in Ontario. According to OPG, they meet demand for “baseload" – the minimum amount of power needed by the electrical grid at a given moment. One problem with wind and solar is that output varies widely under different weather conditions.

Yet reactors hardly offer a sure-fire formula for lowering rates. Over decades, they’ve frequently overshot budgets and deadlines. Many have also required expensive refurbishments long before reaching the end of their expected lifespans.

So far, the Darlington refurbishment, which began in 2016, has stayed on target. In late 2018, the Auditor-General concluded that the project was reasonably on-budget. However, she warned of “significant risk factors” that could result in it becoming “late and over budget.” The government has claimed it has “off-ramps” for discontinuing refurbishments in case approved costs and schedules aren’t met.

Energy lawyer Mike Richmond, a former counsel to the Ontario Progressive Conservative party who was an adviser in Mike Harris’s government, says nuclear refurbishments might be attractive targets for cost-cutting. What if just five of Bruce Power’s reactors were refurbished instead of six, for potential savings of a billion dollars or two?

“Anything in the millions is not going to make a dent on 12 per cent," said Mr. Richmond, who now works at the law firm McMillan. "It’s got to start with a ‘B.’”

“The only contracts that start with a ‘B’ in this province right now," he observed, “are the nuclear refurbishment contracts.”

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While Ontario licks its wounds, other provinces are at much earlier stages of their own difficult energy transitions. Alberta, Saskatchewan and Nova Scotia each generate much of their electricity from burning coal. All are under considerable pressure to abandon it and migrate to lower-emissions sources.

In Alberta in 2016, then-premier Rachel Notley’s NDP government committed to phase out coal-fired generation by 2030 by making “transition payments” to utilities that were originally scheduled to close their plants after the cutoff date. “We’re bringing offline about 6,400 megawatts of coal," said Binnu Jeyakumar, director of clean energy at the Pembina Institute. But what to replace it with, she says, remains the most important question facing Alberta’s electricity sector.

Saskatchewan generates most of its electricity by burning fossil fuels. Yet according to the Canada Energy Regulator, the southern areas of the province (including Regina and Saskatoon) enjoy some of the highest potential for wind and solar generation in the country. Several large wind projects – as much as 200 megawatts – have been approved in recent years. SaskPower, the utility that generates most of the province’s electricity, has committed to double its percentage of renewable generation capacity by 2030.

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Nova Scotia switched to burning coal in the 1970s after the OPEC oil crisis, in an effort to reduce reliance on foreign energy suppliers. But with Cape Breton’s coal mines long closed, the province resolved to turn to renewables a decade ago.

Despite adding plenty of wind generation since then, coal-fired generation still provides more than half of Nova Scotia’s electricity, versus about 12 per cent for wind. “We’re simultaneously the most coal-intensive grid [in Canada] while also the most wind-intensive grid,” said Stephen Thomas, energy campaign co-ordinator at the Ecology Action Centre in Halifax. The organization wants Nova Scotia to generate 90 per cent of its electricity through renewables and completely phase out coal by 2030.

What can these provinces learn from Ontario’s aborted drive to renewables? First, energy transitions don’t happen on their own. They require careful planning.

Of Canada’s coal-burning provinces, Alberta appears to have the clearest path to closing its plants. However, Ms. Jeyakumar said it’s far from certain that renewables will fill the resulting void. “There’s a good chance that a lot of it is going to be replaced by [natural] gas, and that is definitely not consistent with Paris Agreement targets." (Alberta currently generates only about 5 per cent of its electricity from wind.)

Nova Scotia, meanwhile, reached an agreement with the federal government in 2016 that will enable it to run its coal-fired plants well beyond the federal 2030 deadline for phasing out coal.

Saskatchewan has no clear answers, either. Steve McLellan, chief executive of the Saskatchewan Chamber of Commerce, said energy policy is largely directionless amid Saskatchewan’s constitutional challenge of the carbon tax imposed on it by the federal government. (The case is currently before the Supreme Court of Canada.) Mr. McLellan said the province’s residents haven’t embraced renewables. Equipping coal plants with carbon capture and storage is another option. “So we’re still evolving,” he says.

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The second lesson from Ontario: Don’t overpay for your energy transition.

Ontario’s many expensive long-term contracts with wind, solar and biomass generators have contributed to its current dilemma. But other provinces need not make the same mistake. According to the Pembina Institute, costs of renewable generation have fallen as more wind and solar farms have been built around the world. All that accumulated experience has driven increased labour efficiency, technological improvements and economies of scale.

Alberta has conducted four rounds of renewable procurements since 2017. “We had wind contracts coming in at between 3.7 and 4 cents per kilowatt hour, and solar at 4.8 cents per kilowatt hour,” Ms. Jeyakumar said.

A report published last year by Ontario’s government confirms the competitive price of wind energy.

“Wind energy is the cheapest thing that you can put on the grid pretty much anywhere in North America,” Mr. Thomas said. “It’s a better financial choice than it’s ever been.”

Perhaps the most important lesson Ontario can offer is this: Don’t take shortcuts to sidestep opposition from local communities.

Ontario’s Green Energy Act centralized decision-making in the hands of provincial officials while disempowering municipalities – a strategy to counter NIMBY-fuelled resistance. That helped Ontario build wind farms in a hurry, but it fostered rural resentment that probably contributed to the still-adverse climate for renewables.

Mr. McLellan said there’s been “very little” opposition to wind farms in Saskatchewan. “It’s more about our geography than anything,” he added. “We’ve got a lot of open land. We’ve got a lot of wind. And we’ve got a lot of people who have used windmills to some extent in their farming activities for a century and a half.”

Similarly, Mr. Thomas said wind farms are popular in Nova Scotia because many of them are part-owned by local communities, and they’re smaller than Ontario’s. “That’s very different than than a corporate-owned, much larger wind energy project where it almost feels like they don’t have a choice about whether the project goes forward, and they’re not seeing the direct benefit," he said.

With a report from Kathryn Blaze Baum

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Editor’s note: In 2019 Germany generated approximately 28% of its electricity by burning coal. Incorrect information appeared in an earlier version of this story.

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