Is renewable energy responsible for driving up Ontario’s electricity costs? Not so much.
Many people have suggested that renewable energy is to blame for Ontario’s rising electricity rates. But that’s just not true.
Based on analysis commissioned by Environmental Defence, the average Ontario household pays about $11 per month for wind power, and $9 for solar power. Taken together, wind and solar are only responsible for about 12 per cent of an average Ontario residential electricity bill.
Yes, wind and solar power are new additions to Ontario’s electricity system. Yes, they are paid a premium compared to some other forms of power generation. And yes, they play a role in the province’s rising electricity rates. But it’s a small role.
Even though Ontario is now a North American green energy leader, renewable energy still represents a small share of total power generation in the province and, consequently, a small share of the average person’s bill. Wind and solar power, collectively, are responsible for about $20 of an average $170 monthly residential electricity bill.
The delivery charge is actually the largest component of bills. And when it comes to the electricity itself, nuclear is the largest cost. Natural gas is the second largest.
The same goes for the Global Adjustment, which has received attention of late. Many media reports suggest that the Global Adjustment is due entirely to renewable energy. However, nuclear is the largest component of the Global Adjustment and natural gas is the second largest. Hydro power is also a larger component of the Global Adjustment than wind or solar power.
So what’s behind rising electricity costs? It’s complex, but we can point to these contributing factors:
– Investments to increase the reliability of the electricity grid. (Remember brown-outs? Or the massive 2003 blackout?)
– The rising costs of nuclear power. The rates we pay to Ontario Power Generation and Bruce Power, the two companies that generate nuclear power, have increased by 60 per cent and 54 per cent respectively since 2002. That’s added billions to electricity costs.
– Gas power plants are actually very expensive. On average, gas plants are paid more on a per kilowatt hour basis than wind power.
– Ontario has a power surplus. Due to the recession, changes to the economy, and conservation measures, Ontario has too much power and exports some at a loss.
– In 2016, Ontario ended a 10 per cent subsidy on electricity bills. Now Ontario is taking the provincial HST – eight per cent – off bills. But that just masks the real price of electricity.
– It cost something to get rid of coal. But the coal phase-out is also estimated to have saved Ontario $4.4 billion each year in health and environmental costs. Getting rid of coal has made our air much cleaner, and it’s one of the main reasons that smog days have become a thing of the past.
It’s this combination of factors that led to Ontario’s high electricity costs – not just renewable energy as many claim.
And it’s important to put this all in context. Electricity rates in Ontario are not the highest in North America, and rates are very low by European standards.
And electricity rates aren’t likely to send businesses packing. For example, when compared to Michigan, electricity adds about $6 to the cost a car made in Ontario that sells for $30,000. Hardly a deal breaker.
THE OPPOSING VIEW: "Ontario's renewable energy 'disaster' is what drives up the cost of your hydro"
Meanwhile, renewable energy has done lots of good for Ontario. Tens of thousands of homeowners now generate income and clean power thanks to rooftop solar projects; thousands of farmers have a new revenue stream; tens of thousands of Ontarians have jobs in clean energy; and, Ontario is Canada’s clean technology leader, attracting about half of all clean tech spending in Canada.
None of this is to take away from the real fact that for some Ontarians, the high price of electricity is an issue. And the government has now moved on that, promising to cut rates by 25 per cent.
Refinancing the Global Adjustment is obviously the centrepiece of the government's package of reforms. But the plan also contains important new conservation initiatives. The $200 million Affordability Fund, which will help people renovate their homes to make them more energy efficient, is on the money. Going forward, we need to see more energy conservation, because the best way to help people pay less for electricity is to help them use less electricity.
The government’s reforms made no changes to the supply mix – the amount of power we get from nuclear, versus gas, versus wind. But to keep costs low, we need to see more renewables in Ontario’s future. Wind and solar power costs are plummeting, while costs for nuclear power are rising. Renewable energy has created a solid foundation for a clean economy – one that Ontario now needs to build upon.
Keith Brooks is Programs Director at Environmental Defence, Canada’s most effective environmental action organization, where he directs the Climate & Clean Economy, Water and Blue Flag programs. He holds a Masters of Environmental Studies from York University.