Saturday, June 12, 2010

The Real Costs of Electricity Rates

If your electricity rates were to double, the effect it would have on your monthly bills wouldn't mean more than a few hundred dollars a year most likely. To be sure, that might crush those living beneath the poverty line and those living paycheque to paycheque, but for the middle and upper class, just a mild inconvenience.

But rising electricity rates don't just affect your monthly electricity bills, they can have serious repercussions on businesses and industries. Reading the news today I came across a significant example of how cheap electricity can fuel an entire industry and undermine the industries of other jurisdictions.

The electricity costs per day for that NPI are huge, and yet, the overall costs for electricity from a coal fired power plant only 3-4cents / kWh. Suppose that over the long term, the primary expense for NPI is not the raw material costs, which they get cheap, or the manpower costs, which are practically nothing in China, but the electricity costs. If you were to only double the costs of electricity in that context, NPI would stop being a viable alternative to Sudbury's nickel.

If electricity costs were only half the total costs for each kg of NPI then quadrupling the electricity costs to 12-16 cents / kWh would have the same effect.

So cheap electricity has a huge impact on the effectiveness of an industry to compete on the international marketplace and overcome challenges from new industries.

Something to think about the next time you hear talk about how great it is that wind mills (12 cents / kWh) or solar panels (44 cents / kWh) are being built by McGuinty's government.


Charles said...

2 80+ year olds living in a 1535 sq.ft. home. Off to bed by 8 - scrimp & save where ever possible. Current Hydro monthly bill $333. without HST & escalating rates.A solution to a doubling of this cost doesn't come redly to mind.

Eric said...

Hi Charles,

I'm more familiar with apartment costs which are far lower than your costs. Mine are approximately $50/month.

The only solution I can think of to the rising electricity rates is a change in government. We need a government that is willing to stop soaking the ratepayers with added fees and billion dollar boondoggles investing in technologies that will not provide electricity in a reliable manner. A government that isn't willing to hide increased expenditures in our monthly electricity bills.

Natural gas costs 10 cents/kWh, coal costs 3-4 cents/kWh, nuclear costs ~6 cents/kWh (even with the massive cost overruns), wind costs 12 cents/kWh and solar costs 44 cents/kWh. Of those, the government is focusing on natural gas, wind and solar when our focus used to be coal and nuclear. No wonder then that our rates are going up.

Hoarfrost said...

What the hell is NPI.

Hoarfrost said...

The following explains what it is. Good thing I guess that Vale from Europee now owns Inco.

NPI, a material produced in low-tech Chinese factories, already accounts for as much as 10 per cent of the world’s $21-billion-a-year nickel market, more than all the nickel that can be produced annually in Sudbury. Some analysts expect China’s NPI producers to double their output this year.

bullpup said...

Eric's rate is $50 a month, which is $600 dollars a year. $600 multiplied by 2 equals $1200 per year. Those ain't small apples.

Eric said...


You're right, its not. But I figure that if my rates were to double I could survive. It might mean some lifestyle changes and reducing other expenditures but its doable. Just like most people above the poverty line or people not on fixed incomes.

Remember its $600/year. I spend about $300 on coffee in a year.

Hoarfrost: Sorry, NPI is explained in the link that I gave.

The problem is actually beyond Inco's control since it relies on the electricity prices both in Ontario and in China. Things Inco can't deal with.

rlkris said...

He who would climb the ladder must begin at the bottom...................................................

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