Ontarians will no doubt recall the 2008 Great Recession and how Canada emerged from it better off than most of the G7 and G20 countries. In Ontario we faired pretty well to the point where the McGuinty led Liberal government decided to usher in the Green Energy and Green Economy Act (GEA) in 2009 under the guidance of the then Minister of Energy, George Smitherman. Smitherman promised us electricity rates would only increase 1%! He suggested wind and solar contracts under the GEA were the way to reduce emissions while keeping electricity price increases low!
From the foregoing perspective it is interesting to look back at the electricity sector in the province to see what has emerged since enactment of the GEA to see how we ratepayers/taxpayers have been affected and how Smitherman’s forecast worked out. My friend, Scott Luft, makes the foregoing task relatively easy by downloading data from IESO on a regular basis. His update to the end of 2020 below can also be found on his twitter page!
What is initially evident (adjusted for exports/imports) is consumption was down 1.6 TW (terawatts) in 2020 compared to 2019. The Covid-19 pandemic presumably was the cause however, costs increased by $381 million meaning the average cost of generation per kWh went up from 10.6 cents/kWh to 11.7 cents/kWh. In Ontario using less electricity somehow always costs more!
Eleven years after the GEA clicked in
It has now been over eleven years since the GEA received third reading in Ontario’s legislature and most of the 20-year large wind and solar contracts to (mainly foreign) companies were signed shortly after it was passed. Scott Luft’s chart provides an opportunity to look at the figures at the end of 2009 and compare them to 2020 to see the effect on our electricity costs.
The chart indicates the cost of electricity delivered to both the TX (transmission grid) and the DX (distribution grid) in 2009 cost us $8.965 billion and in 2020 it was $15.459 billion, an increase of $6.494 billion or 72.4%. The increase in consumption (adjusted for imports/exports) was 3.2 TWh more as Ontario’s population increased 1.6 million from 2009. The result was, the average generation cost of a kWh went from 6.34 cents/kWh to 11.07 cents/kWh or 74.6%.
The burden of those increased costs played out differently depending on rate class, with those labelled Class A paying less and Class B ratepayers (residential and small/medium businesses) paying more. Needless to say; “energy poverty” has increased.
Cost increase drivers
So, after noting the huge increase in annual costs of $6.5 billion since 2009 it is worth examining why those costs jumped:
First wind and solar generation in 2020 was 17.5 TWh (2.9 TWh less than our gross exports) with an additional 2.4 TWh curtailed and together their combined costs were $215.9 million per grid accepted TWh (21.6 cents/kWh) adding about $3.8 billion in costs. In 2009 it was 2.5 TWh at a cost of $246 million.
Secondly hydro costs shot up by $800 million** and while accepted generation indicated a decrease of 0.62 TWh it doesn’t include the 4 TWh OPG was forced to spill in 2020. Hydro’s grid accepted cost came in at 5.38 cents/kWh in 2020 with inclusion of the spilled hydro and 3.7 cents/kWh in 2009.
Finally, nuclear generation costs were also up considerably by $2.9 billion*** as both generation and per kWh costs increased. In 2009 nuclear generation supplied 55.28% of all generation (including net exports) * and that increased to 56.71% in 2020. The per TWh cost in 2009 was $58.2 million (5.82 cents/kWh) and $87.5 million per TWh (8.75 cents/kWh) in 2020.
The above three costs total $7.5 billion. If one deducts the cost of coal generation in 2009 of $750 million the net increase becomes $6.75 billion which is close to the increase noted above of $6.5 billion.
Reviewing Scott Luft’s chart highlights the fact wind and solar were the principal culprits in driving up Ontario’s electricity costs. The McGunity/Wynne led governing Ontario Liberal Party handed out the contracts at above market rates with “first to the grid” rights despite the unreliable and intermittent nature of wind and solar generation. The combined per kilowatt cost (21.6 cents/kWh) of those two sources of generation is two to three times the cost of non-emitting clean energy such as nuclear or hydro which together have the ability to supply Ontario with well over 95% of its electricity needs.
The Green Energy Experiment has cost Ontarians dearly!
* Net exports is total exports minus total imports.
**OPG spent $1.5 billion on two large hydro projects which were Big Becky and another $2.6 billion on expansion of the hydro available from the Mattagami River which collectively added about 500 MW of additional capacity
***Nuclear cost increases were mainly related to refurbishments of Bruce (two units), Darlington (one unit) and extension costs associated with maintenance upgrades at Pickering.