Don’t blame renewables for hydro prices, study says
Ontario electricity prices are heading higher with or without controversial renewable energy contracts, says a study by the green-leaning
Pembina Institute.
The study, released Wednesday, says that the relatively high prices paid to wind, solar and biogas power producers under Ontario’s feed-in tariff program, or
FIT, are being blamed unfairly for rising power prices.
Even if no more FIT contracts are signed, the study says, the outlook for rising prices doesn’t change much — because the alternatives are no cheaper.
“Prices are going up, and in some ways people need to know that’s inevitable, whichever path one chooses,” says Tim Weis of the
Pembina Institute. “There’s no silver bullet to bringing prices down.”
The difference in prices, with or without the FIT program, is never more than 1.5 per cent, or about $2 a month on a typical consumer hydro bill, the study contends.
Curbing renewables produces lower bills until about 2025, the study says; after that, prices are likely to be cheaper with more renewable power in the system.
The issue is likely to be a hot one in this October’s provincial election. The
Conservatives have vowed to end the FIT program, calling it “unsustainable.” The
Liberals are firmly committed to pushing for more green power.
FIT contracts pay 13.5 cents a kilowatt hour for onshore wind power; an average 52.5 cents a kilowatt hour for solar power, and 13 cents for hydro.
The key questions if the FIT program is halted in its tracks, says Weis, are: What will replace it? And at what cost?
The Pembina study maintains that natural gas generation will pick up the slack if renewables are curbed.
That seems like a good idea, since gas prices have tumbled since 2009 with the discovery of massive shale gas deposits in North America.
But the study warns that won’t last. Resistance to the environmental damage wreaked by shale gas extraction may limit production.
Meanwhile, demand for gas could spiral as the United States shuts down more coal-burning plants and replaces them with gas-fired units. Electric cars will also spur demand for gas-fuelled generation.
The study also assumes that some form of carbon tax or carbon pricing regime will come into play in the medium term.
It notes that emissions regulations are already being introduced on U.S. gas generators, and Canada will probably follow suit. .
While natural gas prices rise, the study says the price of renewables will fall. The price of solar panels, for example, is declining steadily as more manufacturers flock to the sector.
Ontario also plans to review the price of new FIT contracts, with an eye to reducing them, later this year (assuming the Liberals are still in power.)
Meanwhile, whether or not the FIT program is shut down, other factors are at play in driving prices higher.
Nuclear reactors at the
Darlington and
Bruce B generating stations will have to undergo expensive mid-life overhauls in the coming decade, while the Pickering B station will need work to prolong its life for an extra 10 years.
The province also figures it will need two or more new reactors at Darlington, at a cost still to be determined.
As well, the wires that carry the power to customers are aging.
Hydro One says it will need to spend billions to modernize its transmission grid. Local utilities such as
Toronto Hydro have also said they face expensive upgrades.
Those costs are coming, no matter what kind of power is being produced.
“If it’s going to cost us roughly the same price, it seems to make a lot more sense to be investing money in cleaner renewable energy going forward than placing our bets on a volatile price of gas,” says Weis.
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