Hydro Bill Blues; is Ontario’s Feed-in-tariff system to blame?

May.07.2012

Are feed-in-tariffs causing higher utility pricesUtility bills in the province of Ontario have been steadily creeping upwards, placing a strain on households and increasing the production costs of industry. It’s bad for local residents and very bad for business. Worse still, many are predicting that bills could double in the next 15 to 20 years. Exactly who or what is to blame for this hydro mayhem remains a topic of hot debate. Several critics have leveled an accusing finger at the McGuinty government’s Feed-in-tariff programs, but are they really to blame?

The current state of affairs

As we move away from coal (the last plant will be closing in 2014), the province is relying heavily on nuclear power and, once extensive refurbishments have been completed, 80% of the province’s power will be provided by nuclear plants by 2030. Renewable energy constitutes a very small percentage of the energy pie (shared between wind, bio-energy and solar).

Currently underway is the refurbishment of two reactors at the Bruce A nuclear power plant. In addition, two new reactors are in the planning stages. The total investment into nuclear will be more than $33 billion which is said to fulfill the province’s energy needs until 2035. The project is already 2 years behind schedule. A 15% increase in consumption by 2030, as well as an aging nuclear fleet, has required the government to spend an enormous amount of money on refurbishments. It’s the cost of these refurbishments that must be borne by the long-suffering consumer.

Natural gas and nuclear facilities get large subsidies when market price falls below guaranteed price. This happens “almost all the time” according to the Environmental Commissioner of Ontario who goes on to say; “The latter subsidies involve 70% of the global adjustment monies paid out, simply because they pay for the delivery of much more power. In fact, the Ontario Power Authority paid out $1.35 billion in 2010 to meet gas and nuclear power purchase agreements.”

The cost of renewable energy

The Environmental Commissioner of Ontario released figures for what renewable energy costs the average household. “In 2010, the Ontario Power Authority paid electricity resource costs of $317 million for conservation programs, and $269 million for renewables. That is a lot of money – but you must realize that it is recovered over a total Ontario consumption in 2010 of 142 terawatt hours (that’s 142,000,000,000 kWh), which amounts to 0.4 cents per kWh (split roughly equally between conservation and renewable subsidies). So the cost of conservation and all the renewable subsidies in 2010 amounted to 0.4 cents of the 13 cents we paid for a kWh in our homes.”

Are feed-in-tariffs causing higher utility pricesIn addition to the environmental benefits of renewable energy, the growth that these industries have created in Ontario has been invaluable. Private Sector Investment in Ontario will total over $21 Billion by 2018. There are over 60 manufacturers and over 1000 aboriginal community-based FIT projects are bringing much-needed revenues to Ontario communities. A recent study showed that the solar industry had been responsible for over $2 billion in investments in 2011 alone, creating an estimated 8,200 jobs. A number which will increase to 11,400 in 2012 with 25 jobs created for every megawatt of energy installed by 2018.

As the cost of resources increases, nuclear energy becomes more and more expensive as does natural gas. A recent review of the Feed-in-tariff program saw a 30% reduction of rates paid by the government. Most of this reduction was absorbed by the drop in prices for solar panels and other components. As renewable energy technology improves, solar power collection becomes increasingly efficient and cheaper. To blame our high hydro prices on renewable energy and specifically the feed-in-tariff programs is a fatuous representation of the true costs of electricity.

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