Here are links to a column Scott Luft and I co-authored in today’s National Post discussing new renewable energy contracts Ontario consumers are now on the hook for. I encourage anyone interested in Ontario’s electricity situation to follow Scott’s blog here, twitter account @scottluft, and FaceBook page here.
The article focuses on the immediate price and operability consequences of adding more wind and solar. The longer term impacts could be less negative, even positive, if the market value of power rises, or if drastic carbon taxes are imposed. The timing of this procurement comes amid surplus conditions which may not persist for the longer term, particularly with coming nuclear retirements and long term refurbishment outages. On the otherhand, Ontario demand peaked in 2005 and soar rates keep driving it down, down, down. Over the longer term, technologies that might deliver better options for on-site power, like package cogen, might make these new contracts even more burdensome than they are today.
The Ontario government is obviously blind to the negative externalities associated with wind power. For the purposes of a thought experiment, let’s assume that wind power is kind to bat, eagles, Blandings turtles, property values of neighbours, and neighbours with sleep disorders. Of all its important characteristics as a power system investment, about the only thing wind power has going for it is its short lead time. Solar has both short lead time and potential to be located at a load. Short lead times would allow just-in-time purchasing, which would drastically cut the effective costs. Buying these options in advance of need illustrates the state of integrity in Ontario’s power system decision-making processes.
Governments are sometimes criticized for tax and spend policies. Decision-making in Ontario’s power system is driven by a government that has found a way to use the power system to spend without the costs appearing on the provincial deficit or taxes. Ontario’s power system is now a playground for politicians. The path to stabilizing this situation will necessarily require more transparency. Consider for example, how difficult it is to track just the current and historical power rates paid by small to medium-sized enterprises in Ontario.
For folks interested in more discussion quantifying the overall ratepayer impacts of wind power, you might be interested in an econometric study that Professor Ross McKitrick and I did for the Fraser Institute, available here. The upshot of that analysis is that while most analysis claiming to report on the cost of wind power considers only payment to generators, those payments turn out to be only part of the story from a ratepayer perspective.
One of the indirect impacts of Ontario’s growing fleet of intermittent new generation capacity is to further undermine the value of OPG. As the future profitability of OPG deteriorates, one consequence is to hasten the coming insolvency of Ontario Electricity Financial Corporation. Ontario’s Auditor General and Financial Accountability Officer should both be investigating the alarming situation now developing at OEFC.
The new cost for competitively procured wind power closely matches some of the prices obtained when the McGuinty government used competitive procurement to start the province’s large-scale wind industry in 2004. So much for the advocates claims that plunging prices show that wind power has a great future.
For folks who want to follow some of the references, IESO announced the results of its latest Large Renewables Procurement (LRP) here and Ontario Energy Minister Bob Chiarelli touted the resulting “low prices” here.