Ontario to scrap Green Energy Act, which increased electricity prices and killed jobs

This week the Fraser Institute released a series of short essays discussing ways for the Ontario government to restore the province’s competitiveness and attract business investment. Among other things, the report called for reforms to Ontario’s electricity system to counter skyrocketing electricity prices.

In particular, one essay discussed how Ontario’s approach to electricity policy underwent a fundamental shift in 2009 when the government launched its Green Energy Act (GEA). The centrepiece of the GEA was a feed-in-tariff program, which provided long-term guaranteed contracts to generators of renewable energy (wind, solar, etc.) at a fixed price above market rates.

In other words, generators with renewable sources received a fixed price without being subject to competition in the market. In fact, some of these generators were to be paid based simply on their capacity to generate power rather than actually providing electricity. To fund these commitments, and the cost of conservation programs, the Ontario government levied a surcharge on electricity prices called the Global Adjustment (GA).

Between 2008 and 2016, the GA grew more than 70 per cent, causing a drastic increase in electricity prices.

Moreover, as argued in the essay, the high cost associated with aggressively promoting renewable energy sources is particularly troubling given the relatively small amount of electricity generated by these sources. In 2016, for instance, renewable sources generated less than seven per cent of electricity in Ontario while accounting for almost 30 per cent of the GA.

The essay also examined the harmful role high electricity prices have had on the competiveness of Ontario’s manufacturing sector, noting a 2017 study that found Ontario’s high electricity prices are responsible for approximately 75,000 job losses in the province’s manufacturing sector from 2008 to 2015.

Finally, the essay explained that the Ford government could lower electricity prices by using legislation to cancel or prompt the renegotiation of existing contracts that require the province to purchase renewable electricity rates at above market prices.

Which brings us back to yesterday, when the Government of Ontario introduced legislation to repeal the Green Energy Act. Ontario Energy Minister Greg Rickford said the GEA had resulted in fewer manufacturing jobs in Ontario. In the its official news release, the government also acknowledged that the Act “led to the disastrous feed-in-tariff program and skyrocketing electricity rates for Ontario families” and that the legislation, if passed, will “fully strike the Green Energy Act from the province's books.”

After years of compelling research and numerous calls for the government to repeal feed-in-tariff contracts, Ontario’s new government finally took action to correct the policies that have driven Ontario electricity prices higher and higher, which is welcome news for Ontarians and their families.