Ontario’s Green Energy Act is attracting considerable attention in the run-up to the October provincial election. At issue is the Act’s contribution to increasing electricity prices in the province, with critics saying renewable electricity is responsible for about half of the recent and projected cost increases. Supporters say there’s no way that renewable energy is having that big an impact since the total amount of “green” generating capacity coming on stream is only a couple of percentage points which couldn’t possible play that big a role in electricity prices expected to rise by about 10 per cent a year in the next half decade.
In the midst of an election campaign — which is already under way — the truth may be hard to find. The sticker price of 80 cents a kilowatt hour for small solar PV generators is a shocker for many of us, but keep in mind that price only applies to a small percentage of the renewable energy projects moving through Ontario’s Feed-In-Tariff program. Most projects receive considerably less: 44.3 cents for solar PV between 10 kw and 10 MW, 13.5 cents for on-shore wind, and 10.3 cents for landfill gas. And keep in mind that of the 17,291 MW of electricity which could come on stream under the FIT program, 10,450 MW (60 per cent) is expected to come from wind and 4,989 from solar PV. Those residential roof-top installations that dot the countryside and bring the 80 cents/kWh total 265 MW — less than two per cent of the total renewable energy likely to come on-stream in the next few years. If we still believe in basic math, it’s hard to see how these little projects could make much of a contribution to the electricity price hikes we are seeing.
A few folks watching this market development closely will realize that a significant chunk of the upward pressure on electricity prices comes from introduction of time of use (TOU) pricing that assigns a higher price to electricity used during core daytime hours. I’ve blogged on that before….. the cost per kilowatt hour ranges from 5.1 to 9.9 cents a kwh, with the latter being peak hours. Businesses typically can’t do much in the off-peak hours so we’re caught in the crosshairs of those higher prices. Based on my most recent electricity bill, I am paying (all charges included) 20.9 cents a kwh for my electricity. That’s because my delivery charge is twice the charge for the electricity itself. By the way, that 20.9 cents is AFTER my Clean Energy Benefit is applied; otherwise, I’d be paying 23.3 cents a kwh.
Those same market observers will also realize that upward price pressure is also coming from the desperate need for grid infrastructure improvements. Because of Ontario’s long-term reliance on just a few (centralized) generators, the inadequacy of the grid to receive and distribute power from thousands of smaller generators is now emerging as the Achilles Heel of the distributed (green) energy system.
When it comes to the implementation of the distributed renewable energy system Ontario envisages, it seems as if one hand (the policy-pricing hand) doesn’t know what the other (the grid infrastructure hand) is doing. At a minimum, the two don’t appear to be moving in lockstep. And that is going to hurt come October. One way or another, we can expect to see changes to the FIT program after the election. Whether those changes address the real issues behind the rapid run-up in electricity prices remains to be seen. But you can bet all parties will be responding to an increasingly agitated public.
