Wind Energy and Ontario Electricity Bills – the Facts
October 14, 2016
Wind energy is not a major factor in Ontario’s electricity bill increases
Critics of wind energy say it is a major reason for increases in Ontario’s electricity bills over recent years. This criticism is not supported by the facts. Not only is wind energy a small factor in bill increases, more wind energy will be needed to keep Ontario electricity bills affordable into the future.
Research in 2014 by Power Advisory LLC for Environmental Defence showed that an Ontario residential electricity customer using 800 kilowatt hours a month paid a monthly bill of $137. Of that total, $78 was the cost of electricity generation. And of the $78, only $5 per month was needed to pay the costs of wind generation.
Most of Ontario’s electricity generation costs are captured in what is called the “global adjustment” – the costs paid to contracted and regulated electricity generators. Monthly data from Ontario’s Independent Electricity System Operator shows that sources such as the province’s nuclear and natural gas-fired generators contribute more to global adjustment costs than wind energy.
If wind energy is a relatively small contributor to Ontario electricity bill increases today, how would new wind energy procurement impact future costs?
This is where the story of wind energy gets even better.
According to a U.S. study, Lazard’s Levelized Cost of Energy Analysis – Version 9.0” (November 2015), the levelized cost of wind energy has declined by 61 per cent from 2009 to 2015. This study finds that wind energy is the lowest-cost way to generate electricity for the future, with a cost range of US$ 32-77 per megawatt hour (3.2-7.7 cents per kilowatt hour), less expensive than natural gas, nuclear, biomass, hydro microturbines, geothermal and various solar technologies.
In fact, wind energy is becoming the lowest-cost option for new electricity supply in most Canadian provinces. Ontario recently procured new wind supply as low as 6.5 cents per kilowatt-hour (or $65 per megawatt hour), which compares very favourably against an average electricity supply cost of 11.14 cents per kilowatt hour as of May 1, 2016. Hydro-Quebec’s last procurement set a new low average price for wind energy in Canada of 6.3 cents per kilowatt hour ($63 per megawatt hour).
In the coming years, additions of new low-cost wind energy in Ontario will be needed to help mitigate increasing cost pressures resulting from nuclear refurbishments, carbon pricing, potential natural gas commodity price increases, and transmission and distribution infrastructure renewal.
Wind energy is uniquely positioned to benefit Ontario’s electricity customers. Because it uses the wind, there is no fuel price risk. Because it is emission free, there is no carbon price risk. Wind generation costs have continually declined over the past several years. And costs are expected to keep decreasing as economies of scale and other efficiencies are realized by wind developers worldwide.
It is wrong to identify wind energy as the major contributor for increases in Ontario electricity bills. The fact is, more wind energy will be needed in the future to keep Ontario’s electricity supply affordable.
Definition of Global Adjustment: The Ontario Energy Board says the Global Adjustment reflects the differences between the market price of electricity and the regulated or contract prices that are paid to generators for the electricity they produce. These include nuclear, gas-fired and renewable generators (like wind farms) that have contracts with the Ontario Power Authority (OPA) and generators that have contracts with the Ontario Electricity Financial Corporation (OEFC). It also includes Ontario Power Generation’s (OPG) “base load” generating stations that need to run at or near capacity all the time to meet basic demand. Lastly, the Global Adjustment reflects the costs of conservation programs.
Average Regulated Price Plan (RPP) Price for Electricity Generation for Ontario as of May 1, 2016: The Ontario Energy Board website reports that the resulting average RPP supply cost (effective May 1, 2016) is $111.41/MWh. The average RPP price (RPA) is 11.14 cents per kWh.
Photo: Enbridge Inc.