Category: Hydro

Massive revenue guarantees for a handful of lucky wind power generators, but no appreciable environmental benefit from Ontario’s energy policies says economics professor Ross McKitrick

You may be surprised to learn that electricity is now cheaper to generate in Ontario than it has been for decades. The wholesale price, called the Hourly Ontario Electricity Price or HOEP, used to bounce around between five and eight cents per kilowatt hour (kWh), but over the last decade, thanks in large part to the shale gas revolution, it has trended down to below three cents, and on a typical day is now as low as two cents per kWh. Good news, right?

It would be, except that this is Ontario. A hidden tax on Ontario’s electricity has pushed the actual purchase price in the opposite direction, to the highest it’s ever been. The tax, called the Global Adjustment (GA), is levied on electricity purchases to cover a massive provincial slush fund for green energy, conservation programs, nuclear plant repairs and other central planning boondoggles. As these spending commitments soar, so does the GA.

In the latter part of the last decade when the HOEP was around five cents per kWh and the government had not yet begun tinkering, the GA was negligible, so it hardly affected the price. In 2009, when the Green Energy Act kicked in with massive revenue guarantees for wind and solar generators, the GA jumped to about 3.5 cents per kWh, and has been trending up since — now it is regularly above 9.5 cents.

In April it even topped 11 cents, triple the average HOEP.

So while the marginal production cost for generation is the lowest in decades, electricity bills have never been higher. And the way the system is structured, costs will keep rising.

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