The hard truths behind Ontario’s pricey electrical system
While the headline numbers in Bonnie Lysyk’s report are indeed shocking—between 2006 and 2014 Ontario consumers and small businesses made $37 billion in “excess payments” to electricity generators above the market price for electricity, the report said—experts say it’s misleading to imply consumers didn’t receive anything in return.
Jatin Nathwani, a professor at the University of Waterloo who has sat on several public energy boards, says the $37 billion figure reflects the cost of building new generation capacity in the province, as well as engaging in various conservation and pollution-reduction strategies—none of which is reflected in the “spot” or market price for electricity. “We all demand and want electricity services when we require it,” he says, adding that as much as $28 billion to $30 billion in extra fees charged to consumers over the past decade can probably be justified as necessary investments. “Let’s not say everything is evil and bad. We’ve spent an enormous amount of money to build up the system we have.”
It’s easy to forget, Nathwani adds, that Ontario was in crisis-mode back in the early 2000s as it grappled with aging infrastructure and a lack of sufficient generating capacity. The massive blackout that plunged the entire province into the dark, along with parts of the Northeastern U.S., on Aug. 14, 2003 only served to underline the precarious state of Ontario’s power supply in many people’s minds. At the same time, Ontario had made a commitment to phase-out its coal-fired generating plants, which in 2003 accounted for a quarter of generating capacity, because of pollution concerns. “You don’t shut down 800 or 900 megawatts of base-load capacity and not pay a price for it,” says Nathwani. “We were in a very tight situation.”
Of course, just because Ontario needed to build new generating capacity doesn’t mean it opted for the most reliable and cost-effective solutions. An oft-cited factor behind the rising costs is Ontario’s decision to make the province a renewable energy leader through the 2009 Green Energy Act. The auditor general estimates Ontario consumers paid an estimated $9.2 billion more than necessary because of 20-year contracts offered to producers of wind and solar power at prices as much as triple the market rate—despite the fact that these sources of power of not nearly as dependable as, say, gas-fired power plants. Energy Minister Bob Chiarelli, has responded by indicating the province will announce a new, more competitive process for renewable energy projects next year that will bring costs down.
Nathwani is particularly critical of the government’s handling of renewable energy contracts, which he dubs among “the richest deals you can find.”
Nevertheless, he says critics shouldn’t completely overlook what’s been accomplished over the past decade-and-a-half. The system is greener, more modern and has more capacity to accommodate future growth. And because Ontario closed its last coal-fired power plant last year, he argues it will be that much easier for the province to adapt to any new climate change regime that might come down the pipe. “We have already swallowed all of that,” he says.
http://www.macleans.ca/economy/the-hard-truths-behind-ontarios-pricey-electrical-system/
While the headline numbers in Bonnie Lysyk’s report are indeed shocking—between 2006 and 2014 Ontario consumers and small businesses made $37 billion in “excess payments” to electricity generators above the market price for electricity, the report said—experts say it’s misleading to imply consumers didn’t receive anything in return.
Jatin Nathwani, a professor at the University of Waterloo who has sat on several public energy boards, says the $37 billion figure reflects the cost of building new generation capacity in the province, as well as engaging in various conservation and pollution-reduction strategies—none of which is reflected in the “spot” or market price for electricity. “We all demand and want electricity services when we require it,” he says, adding that as much as $28 billion to $30 billion in extra fees charged to consumers over the past decade can probably be justified as necessary investments. “Let’s not say everything is evil and bad. We’ve spent an enormous amount of money to build up the system we have.”
It’s easy to forget, Nathwani adds, that Ontario was in crisis-mode back in the early 2000s as it grappled with aging infrastructure and a lack of sufficient generating capacity. The massive blackout that plunged the entire province into the dark, along with parts of the Northeastern U.S., on Aug. 14, 2003 only served to underline the precarious state of Ontario’s power supply in many people’s minds. At the same time, Ontario had made a commitment to phase-out its coal-fired generating plants, which in 2003 accounted for a quarter of generating capacity, because of pollution concerns. “You don’t shut down 800 or 900 megawatts of base-load capacity and not pay a price for it,” says Nathwani. “We were in a very tight situation.”
Of course, just because Ontario needed to build new generating capacity doesn’t mean it opted for the most reliable and cost-effective solutions. An oft-cited factor behind the rising costs is Ontario’s decision to make the province a renewable energy leader through the 2009 Green Energy Act. The auditor general estimates Ontario consumers paid an estimated $9.2 billion more than necessary because of 20-year contracts offered to producers of wind and solar power at prices as much as triple the market rate—despite the fact that these sources of power of not nearly as dependable as, say, gas-fired power plants. Energy Minister Bob Chiarelli, has responded by indicating the province will announce a new, more competitive process for renewable energy projects next year that will bring costs down.
Nathwani is particularly critical of the government’s handling of renewable energy contracts, which he dubs among “the richest deals you can find.”
Nevertheless, he says critics shouldn’t completely overlook what’s been accomplished over the past decade-and-a-half. The system is greener, more modern and has more capacity to accommodate future growth. And because Ontario closed its last coal-fired power plant last year, he argues it will be that much easier for the province to adapt to any new climate change regime that might come down the pipe. “We have already swallowed all of that,” he says.
http://www.macleans.ca/economy/the-hard-truths-behind-ontarios-pricey-electrical-system/
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