Wednesday, December 7, 2011

Ontario's Green Energy Bill

To fully cover what's in the Auditor General's report, I'm going to try to explain the main points in a few postings. So please bear with me as I try to explain how the Auditor General came up with some startling facts on how much McGuinty's Green Energy plans will cost you.

According to the Auditor General's report on Ontario's renewable energy plans, only 14% of Ontarians know that renewable energy like wind and solar costs more than conventional sources like gas, coal and nuclear. I can hardly blame them, with the McGuinty government introducing things like the "Clean Energy Benefit" to reduce the electricity bills of Ontarians, it makes it seem as if renewable energies are cheap. Unfortunately, McGuinty's government has a reality problem, solar and wind are tremendously more expensive than the alternatives.

Per the Auditor General's report, the Feed-In Tariff (FIT) program and microFIT program provide a guaranteed rate to solar power of between 44.30 and 80.20 cents per kWh. Wind power has a guaranteed rate of between 13.50 and 19.00 cents per kWh. By comparison, the average price of electricity in Ontario in 2006 was slightly more than 5 cents per kWh. By the way, that is the price that was being paid on average to the generators, not necessarily the price you see.

The price of Ontario's electricity is divided into two relevant parts, the Hourly Ontario Electricity Price (HOEP) which is determined through free market bidding by generators and the Global Adjustment (GA) which is determined through the cost of government mandated programs and special deals to certain generators to guarantee backup generation is available in an emergency or for baseload electricity. In 2006, the GA cost the Ontario ratepayers about $700 million per year (a lot of that likely went to nuclear power plants but the Auditor General doesn't provide a breakdown) making up less than 10% of the combined HOEP and GA cost. By 2014, the GA will surge to over $8 billion per year and make up 66% of the combined HOEP and GA cost. The HOEP will actually fall from almost 5 cents per kWh to about 3.5 cents per kWh, but the GA will increase from almost nothing to over 6 cents per kWh.

In simple terms, the cost of electricity in Ontario is going to go up by over $700 per person, the average price nearly doubling.

The Auditor General asked the government to provide a breakdown of how much their renewable energy plans would cost the average Ontarian and received an answer that by 2018 it would cost approximately $400 per year per household. But the costs to businesses (which will inevitably be passed down) will be much more; $6000 per year per small business, $60000 per year for a medium business and $28.8 million per year per factory. Not mentioned is the effect that this increase in electricity costs will have on employment.

But it didn't have to be this bad.

In 2009, the Ontario Power Authority warned the Ontario government that it was overpaying for solar power installed on the ground since the installation costs for ground based solar is far less than roof based solar. They told the Ontario government that reducing the guaranteed rate to something more comparable to other jurisdictions would save the ratepayers an additional $2.6 billion; the Ontario government ignored the advice.

In 2010, the Ontario Power Authority again warned the Ontario government that it was overpaying for solar power installed on the ground, telling them that they were giving investors a 24% rate of return. The Ontario government waited five months and accepted 11000 more applications from investors before closing the loophole, costing the ratepayers over $1 billion. Raise your hand if you're getting a 20% rate of return on your savings or retirement fund...

Also in 2010, the Ontario Power Authority informed the government that the estimated costs for a proposed hydro project had increased from $1.5 billion to $2.6 billion. The Ontario Power Authority questioned whether the project was in the financial best interests of the Ontario ratepayers and requested that the government provide a direction instructing it to continue. The government did so saying that the project was in line with the government priorities despite the cost overrun. Does that sound like the OPA requested the direction as a precaution or that the OPA insisted they wouldn't continue unless the government ordered it to - the Auditor General's report didn't clarify which it was.

But its a worthwhile investment, right? We're creating lots of jobs, saving the environment and will save on health costs from closing all those coal fired power plants, right?

According to the Auditor General, the answer is not necessarily, but that's a subject for another day.

NOTE: All facts are from the Auditor General's report on Renewable Energy. Everything else is just my opinion.


Unknown said...

Thank you for taking the time to explain this in layman's terms. So to summarize, the criticisms by the AG are really pointed at mistakes made up to July 1, 2010 (too high a rate for ground mounted units)- NOT necesarily due to the current FIT rules and rates?

I think this is an important distinction, since there are people who are permanently anti-green energy saying "I told you so". I think solar rooftops and the FIT program that supports it is awesome, and hate to see it being slagged by the misinformed.

Eric said...

I apologize for not responding sooner.

The AG doesn't necessarily 'criticize', he is highlighting the flaws or potential flaws in the governments plans including (what I perceive) as the following:

1. The government misrepresented the overall cost of their plans to the public, possibly because they didn't know how much it would really cost. The actual cost still isn't being made clear to the Ontario ratepayers.

2. The government has missed opportunities to save the Ontario ratepayers money, was slow to respond to opportunities and did not prepare any cost/benefit analysis of their plans. They are prioritizing their ideology over costs without any evidence of any benefits.

3. The government did not perform any studies on the health benefits of their energy plans (they are just removing coal from the energy, they are replacing it with natural gas, also natural gas fired power plants are running as backups to solar and wind).

4. The government has not performed any analysis to know if their plans will provide any net jobs to Ontario.

The problems do not start or end on any one particular date and are continuous and ongoing.

I do not support the FIT program because it provides no benefit to the Ontario ratepayer. I do not support solar power as it exists today because the cost is excessive and benefits slight if they even exist. If someday solar can provide reliable electricity in a relatively cheap manner I'll support it, but not a day before.

Christopher said...

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Martin Clooney said...

After WTO instructions, Ontario made a great progress in Solar energy..Its one of the fastest growing solar energy generating land.

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Nick Peterson said...

Green energy bill is a much good looking act for eco-system.

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