Power Price Punishment Forces Ontario to Hit Reverse on Wind Power Push

Terence Corcoran: Ontario Liberals’ huge green energy about-face shows renewables aren’t so doable after all
Financial Post
Terence Corcoran
28 September 2016

One should never underestimate the ability of politicians to convert massive policy failure into a dazzling display of green concern for the welfare of voters. That’s the trick now being attempted by the Liberal government of Ontario as it begins to unravel parts of its financially disastrous green energy program.

Glenn Thibeault, the province’s latest energy minister, on Tuesday read through the script provided by the spin-meisters within Premier Kathleen Wynne’s government. The province, he said in a speech to the Ontario Energy Association, had decided to “suspend procurement” of 1,000 additional megawatts of unneeded wind and solar power. The cancellation is “expected to save $3.8 billion in electricity system costs,” thereby saving a typical residential consumer “an average of approximately $2.45 per month.”

Only a government can get away with declaring a saving for consumers by not spending on projects that are not needed.

It’s the latest defensive electricity market move by the Wynne Liberals, who are down in the polls and facing a crisis over electricity prices. An eight per cent provincial sales tax recently imposed on power was suddenly eliminated and rural Ontarians will receive rebates on part of their soaring electricity costs.

But there’s more to the decision to suspended 1,000 MW of wind and solar projects than attempting to mollify unhappy consumers. The real objective is to keep consumers and the public in the dark over the electricity mess that exists after a decade of Liberal policy based on the slogan “Renewable is doable.”

In the rush to green, Ontario’s electricity sector has become an overbuilt collection of electricity-producing assets selling power at high prices into a declining market. Since 2006, annual electricity demand within Ontario has dropped 6.5 per cent, mostly a function of declining industrial sectors. Meanwhile, installed capacity soared by more than 25 per cent, mostly a function of the government’s expensive wind and solar schemes.

This is an abrupt about-face for a province that had made green energy a religious mission.

While masses of new generating and transmission capacity have been added, the latest report from the province’s Independent Electricity System Operator warns that electricity demand is unlikely to increase over the next 20 years.

The only way to boost demand, it projects, would be to adopt Plan C: mandate residential conversion to electric water and space heat, reduce commercial and industrial use of fossil fuels, and turn 2.4 million automobiles into electric vehicles.

The government now appears to realize none of the above is going to happen, leaving consumers to bear the cost of new capacity that’s not needed.

The excess capacity, supported by government-mandated feed-in tariffs and expensive transmission-grid modifications, has propelled Ontario electricity prices higher. Since 2006, the average price of electricity has risen 6.4 per cent per year in nominal terms. Residential consumers pay higher rates still.

The decision to stop buying more wind and solar is also an abrupt about-face for a government that had turned doable renewables into a religious mission. The planned new capacity — including 600 MW of wind and 250 MW of solar—had only been ordered by ministerial directive last April. Known as Large Renewable Procurement II, the new plan follows LRP I, which set out earlier to contract 300 MW of wind and 145 MW of solar. Those projects have not yet started.

The surplus electricity capacity means that nuclear, gas, hydro, wind and solar power producers are often paid not to produce electricity. At other times, surplus power is exported at cheap prices to neighbouring states. Ontario’s power regime pays 11 cents a kilowatt hour then exports the same power at two cents. Almost 15 per cent of Ontario’s annual power production is now dumped into the U.S. market. Ontario power consumers pay for these losses.

Experts and analysts have been warning of the excess wind and solar expansions for years. The Ontario Society of Professional Engineers’ Paul Acchione warned in 2012 that wind expansion is “costly” and “technically difficult to integrate” into the Ontario system.

More recently, Ontario solar consultant Jon Kieran, in a National Post commentary, called on the government to cancel LRP II and revisit LRP I. He said there is “no logical reason to build more wind and solar megaprojects in Ontario.” He called the projects a form of “green corporate welfare.”

While the government has as of Tuesday only cancelled the LRP II procurements, Kieran said in an interview that LRP I could also be cancelled. None of the LRP I wind and solar deals are underway and they are not scheduled to receive firm notices to proceed until 2017. Kieran believes these deals could also be cancelled with minimum cost to the government. The major contractors are mostly U.S.-based firms.

All of this merely highlights the electricity system absurdity that’s been created over the last decade by the Liberal government. Producers are paid to produce power that’s not needed. On the demand side, consumers are paid not to consume the same power produced under government mandate. A paper last April by energy consultant Tom Adams and Guelph University economist Ross McKitrick concluded that Ontario’s demand-side program cost billions despite no evidence of real savings.

Maybe the Wynne government’s sudden withdrawal from large wind and solar projects is a sign of more pre-election reforms to come. If it is, let’s be grateful that voters are finally starting to realize the results of 10 terrible years of Liberal electricity policy.
Financial Post