Study
| EST. READ TIME 2 MIN.Contracts with wind, solar power companies driving up electricity bills in Ontario
Ontario’s total annual power cost has risen by over 50% since 2004, despite declining competitive wholesale market prices. This is due to increases in the so-called Global Adjustment, a non-market mechanism that now dominates power pricing in Ontario, and which is the focus of our study.
Using the results from a new econometric model of factors driving Global Adjustment (GA), we estimate that solar and wind systems provided just under 4 percent of Ontario’s power but accounted for about 20 percent of the average commodity cost in 2013—a consumer impact greater than the direct payments to wind and solar generators. In addition, the model indicates that each additional 1 MW of new wind capacity adds about $0.02/MWh to the Global Adjustment after netting the offsetting benefit of revenues from wind production; that each additional MW of new hydro-electric capacity over the past decade has added about $0.015/MWh net to the GA; that solar power generation has a large marginal impact on the GA that will be more accurately estimated when the amount generated becomes material; that reductions in coal-fired power generation in Ontario were associated with statistically significant increases in the GA; and that imports can potentially reduce the GA, but that exports occur under circumstances that increase it.
We observe that encouraging greater domestic consumption and suspending conservation programs would reduce power costs in Ontario, particularly if the demand shortage could be relieved during times of surplus generation. We also recommend a moratorium on new renewable power capacity; pursuit of regulatory and legislative options to reduce operating renewables capacity; keeping available for restart 4 of 12 coal-burning units at Lambton and Nanticoke; exploring the option of large-scale imports of power from Hydro Quebec to bridge the interval for nuclear power plant refurbishment; and, careful scrutiny of nuclear refurbishment investment value.
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Ross McKitrick
Professor of Economics, University of Guelph
Ross R. McKitrick is a Professor of Economics at the University of Guelph and a Senior Fellow of the Fraser Institute. Heis the author of Economic Analysis of Environmental Policy published by the University of Toronto Press in 2010. He has been actively studying climate change, climate policy and environmental economics since the mid-1990s. He built and published one of the first national-scale Computable General Equilibrium models for analysing the effect of carbon taxes on the Canadian economy in the 1990s. His academic publications have appeared in many top journals including the Journal of the Royal Statistical Society, Proceedings of the National Academy of Science, Journal of Geophysical Research, Climate Dynamics, Journal of Environmental Economics and Management, The Canadian Journal of Economics, Canadian Public Policy, Energy Economics, Journal of Forecasting, Climatic Change, Climate Change Economics and Environmental Economics and Policy Studies. He has also written policy analyses for numerous Canadian and international think tanks. Professor McKitrick appears frequently in Canadian and international media and is a regular contributor to the Financial Post Comment page. In addition to his economics research his background in applied statistics has led him to collaborative work across a wide range of topics in the physical sciences including paleoclimate reconstruction, malaria transmission, surface temperature measurement and climate model evaluation. Professor McKitrick has made many invited academic presentations around the world, and has testified before the US Congress and committees of the Canadian House of Commons and Senate. Professor McKitrick is widely-cited in Canada and around the world as an expert on global warming and environmental policy issues. He has been interviewed by Time, The New York Times, The Wall Street Journal, The National Post, The Globe and Mail, the CBC, BBC, ITV, Fox News, Bloomberg, Global TV, CTV, and others. His research has been discussed in such places as Nature, Science, The Economist, the MIT Technology Review, The National Post, The Globe and Mail and in a front page article in the The Wall Street Journal (Feb 14 2005).… Read more -
Tom Adams
Tom Adams is an independent energy and environmental advisor and researcher focused on energy consumer concerns. He has worked forseveral environmental organizations and served on the Ontario Independent Electricity Market Operator Board of Directors and the Ontario Centre for Excellence for Energy Board of Management. He is a media commentator and guest newspaper columnist. He has published peer-reviewed papers in a range of fields. He has presented expert testimony before many legislative committees and regulatory tribunals in Canada.… Read more