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New Energy Costs Will Be Much Higher Than Anticipated – New Study Says

Posted October 18, 2011

Guelph – The cost of providing wind and solar energy in Ontario will be about 40 per cent higher than government estimates, according to a new study co-authored by a University of Guelph agricultural economist.

The study, which will appear in a forthcoming issue of Bulletin of Science and Society and is available online now, looks at the impacts of wind and solar directives in the provincial Green Energy and Economy Act. Adopted in May 2009, the act formed the framework for Ontario’s 2010 Long-Term Energy Plan.

“We found that there were omitted costs and inflated benefits,” said Glenn Fox, a professor in Guelph’s Department of Food, Agricultural and Resource Economics. He conducted the study with Parker Gallant, a retired banker.

“As a result, the rate increases that are predicted in the Long Term Energy Plan are substantially lower than those that Ontarians will in fact face,” Fox said.

Government estimates for the LTEP predict that electricity bills will rise by 46 per cent by 2015 and 100 per cent by 2030.

But the study found people can expect to see increases closer to 65 per cent and 141 per cent, respectively.

“This would have Ontarions paying some of the highest costs of electricity in the developed world,” Fox said. “These higher costs would erode the competitiveness of businesses in Ontario and pose particular challenges for low income households.”

Among costs omitted from government forecasts are costs of inflation, transmitting electricity to the grid from wind and solar facilities, additional costs of surplus electricity export subsidies, and backup generation against potential disruptions.

“Solar and wind power are unpredictable,” Fox said. “Solar power underperforms when there is cloud cover, and wind power underperforms when the wind isn’t blowing.”

The study says 9,600 megawatts of backup power will be required by 2030 to support 10,700 megawatts of renewable energy.

“Ironically, the backup will be fossil fuels and natural gas, negating the prime rationale,” Fox said.

The study also questions government calculations for wind and solar operating capacity, and highlights exclusions for export issues, revenue and conservation efforts. Total costs omitted in the province’s LTEP are $60.94 per megawatt-hour, which would raise power bills about 40 per cent above government forecasts.

As well, the report says creating 50,000 new wind and solar energy jobs as promised in the Green Energy Act will require ratepayer subsidies of about $200,000 a year for each position.

“The theory is that, if new industries that are not competitive are subsidized, they will eventually mature and be able to function on their own,” Fox said. “The problem with that theory is that some kids never grow up and leave home.”