As we come upon the darkest time of the year, the cost of keeping the lights on continues to be a hot topic. With two rate hikes in the last six months, many people in Ontario are feeling the burn of rising electricity prices. Why are prices rising so steeply, and are the Province’s renewable energy policies at the heart of this problem, as many people claim?
In an excellent TVO article, “What Ontarians don’t know about rising electricity prices,” Daniel Kitts helps de-code the multiple reasons for Ontario’s electricity price increases. We recommend reading the entire article, but we’ve identified five key points here:
1. Ontario’s prices are not higher than elsewhere
Although electricity prices in Quebec and Manitoba are cheaper due to their reliance on abundant hydro-electric resources, Ontario prices are quite competitive compared with jurisdictions that have electricity generation systems similar to ours like New York, California, and Michigan.
2. Inflation is driving up costs
Between 2000 and 2010, inflation accounted for almost half of the increase in cost for the average residential consumer. Since then, the inflation rate has slowed, but is still responsible for around 30% of recent electricity price increases.
3. We’re spending a lot on nuclear power-related expenses
Based on a standard electricity system cost measurement called the global adjustment, nuclear power has contributed to rising costs more than any other form of generation. A recent study shows the that nuclear costs contributed to 42 percent of GA costs, compared to 26% for gas-fired generation and 17% for renewables.
4. We’re catching up after a long period with no investment in infrastructure
For 20 years, provincial governments of all political parties have spent very little on maintaining the energy system or building new capacity. The current government has had to spend billions on energy infrastructure to make up for years of inaction.
5. Challenges in forecasting Ontario’s supply needs has left us with surplus power
Due to past errors in judging Ontario’s energy long-term power needs, we now have a surplus of electricity. While arguably this is better than having an energy shortage, it leaves Ontarians having to sell of surplus power at a loss.
Image credit: TVO.org