Green Energy Act causing Ontario power prices to soar: Fraser Institute

Ontario’s Green Energy Act (GEA) is set to push the costs for large energy users to the top in North America, with serious consequences for the province’s economic growth and competitiveness, according to a new report from Canadian think-tank the Fraser Institute.

“Already, the GEA has caused major price increases for large energy consumers, and we’re anticipating additional hikes of 40% to 50% over the next few years,” said Ross McKitrick, a senior fellow at the Toronto-based Fraser Institute.

McKitrick, noting the Ontario government defends the GEA by referring to a confidential 2005 cost-benefit analysis on reducing air pollution from power plants, said it did not recommend pursuing wind or solar power. Instead it looked at conventional pollution control methods, which would have yielded the same environmental benefits as the GEA, but at a tenth of the current cost.

“If the province sticks to its targets for expanding renewables, the GEA will end up being 70 times costlier than the alternative, with no greater benefits,” McKitrick said.

The Fraser Institute report calculates that the manufacturing and mining sectors will be particularly hard hit by rising energy costs, with returns to investment in manufacturing likely to decline by 29%, mining by 13%, and forestry by less than one per cent.

“Provincial efforts to shield these industries through energy subsidy programs only transfer the costs onto Ontario taxpayers, who are already dealing with skyrocketing residential electricity prices,” McKitrick said.

The study shows that the GEA’s focus on wind generation is particularly wasteful, since 80% of Ontario’s wind-power generation occurs when electricity demand is so low that the entire output is surplus and must be dumped on the export market at a substantial loss.

The Auditor General of Ontario estimates that the province has already lost close to $2 billion on surplus wind exports, and figures from the electricity grid operator show the ongoing losses are $200 million annually.

The wind grid is also inherently inefficient due to the fluctuating nature of the power source. The report calculates that due to seasonal patterns, seven megawatts of wind energy are needed to provide a year-round replacement of one megawatt of conventional power. “Consequently, the cost of achieving renewable energy targets for the coming years will be much higher than the Ontario government’s current projections,” McKitrick said. “In fact, air emissions may start going up under the GEA if the growing surplus of wind and solar power necessitates taking one of Ontario’s nuclear power plants offline.”

The Ontario government has also backtracked on its original claim that the GEA would create 50,000 jobs, a projection that failed to account for permanent job losses due to electricity price increases under the GEA. The province has also admitted that the vast majority of GEA-related jobs will be temporary.

The full Fraser Institute report is available at this link.