Pembina Institute

New study finds cancelling the Green Energy Act would have little effect on electricity prices in Ontario

Modelling shows current renewable energy plans likely to have less impact on consumer electricity bills than uncertainty around future nuclear and natural gas prices

Released: July 6, 2011

Media contact: Tim Weis, Julia Kilpatrick

TORONTO — Ontario consumers would see virtually no relief from high electricity prices if the province cancelled its support for renewable energy under the Green Energy Act, according to new research released today by the Pembina Institute.

In fact, the study indicates that investing in renewable energy today is likely to save Ontario ratepayers money within the next 15 years, as natural gas becomes more expensive and as the cost of renewable energy technology continues to decrease.

"Ontario's electricity system is in critical condition," said Tim Weis, director of renewable energy and efficiency policy at the Pembina Institute. "As the province's polluting coal plants are phased out and its nuclear plants reach the end of their lives, the decisions Ontarians make today will determine how reliable, sustainable and affordable the province's electricity system will be twenty years from now."

Behind the switch: pricing Ontario electricity options examines how scaling back Ontario's plans to develop renewable energy would affect electricity prices, using an integrated energy system simulator to compare two main scenarios. The first scenario is based on Ontario's current Long-Term Energy Plan, in which a large part of new electricity generation comes from additional renewable capacity supported under the Green Energy Act; the second scenario tests the effect of eliminating the Act and largely expanding natural gas in place of future renewable resources.

The results indicate that consumer electricity prices are set to continue rising sharply over the next decade under either scenario — with prices peaking around 2022, when Ontario's nuclear fleet is currently scheduled to undergo significant shut downs. Even if future contracts for renewable energy were ended in 2011, the model shows there would be very little change to projected electricity price increases — amounting to roughly a $4 difference on the average household's monthly electricity bill.  

"Like many other provinces in Canada, Ontario's power system urgently needs significant upgrades to deliver the electricity Ontarians need now and into the future," Weis said. "There is no way to completely avoid price increases over the next decade. Ontario's ratepayers stand to lose more than they would gain in the short term by cancelling the Green Energy Act, because doing so would lead to higher costs and more risk in the long run."

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Learn more: Read the full report, Behind the switch: pricing Ontario electricity options, or get a quick overview of the research results in an interview with lead author Tim Weis on the Pembina Institute blog.

Contact:

Tim Weis
Director, Renewable energy and efficiency policy
780-667-6519

Julia Kilpatrick
Media manager
613-265-5579

Background:

About the modelling study

  • To ensure the results for this study would be accurate, objective and based on the best available data, the Pembina Institute hired technical modelling firm whatIf? Technologies to help develop and run a dynamic and complex model of Ontario's energy system and Navigant Consulting to assist in data collection and review.
  • By producing an integrated simulation of costs and generator dispatch within the Canadian Energy System Simulator (CanESS), the model estimates the average consumer cost of electricity for a given system under various scenarios.
  • We also used publicly available cost data from sources such as the U.S. Department of Energy to forecast future energy costs

Comparing two energy-use scenarios

  • The model tested two main scenarios of energy supply in Ontario — maintaining future growth in renewable energy capacity as planned under the Green Energy Act, and replacing future increases in renewable capacity with energy from other sources (primarily natural gas, as well as some hydro), which would be required if the Green Energy Act were eliminated.
  • Given the short time frame in which the new generation capacity — either renewable or otherwise — is required in Ontario, natural gas is the most likely replacement if renewable energy production is scaled back.

Ontario electricity prices continue to rise under either scenario

  • Modelling results show that prices rise in both energy-use scenarios, peaking around 2022 when Ontario's nuclear fleet (which supplies more than half of Ontario's electricity) is in the midst of significant rebuilding.
  • Replacing Ontario's current commitments to renewable energy largely with natural gas will have virtually no changes in electricity prices in the next few years, and is likely to result in only a slightly (less than 2%) slower increase in electricity rates from the years 2015 to 2025.

Virtually no difference in cost for consumers

  • Consumer prices are virtually identical between the two scenarios.
  • While prices in the scenario where natural gas replaces renewable energy are slightly lower at times, the biggest gap between the two scenarios is only 2%.
  • For residential consumers, this means that ending support for renewable energy in Ontario would lead to a savings of at most $4 a month on the average electricity bill.
  • In other words, continuing to support renewable energy under the Green Energy Act would cost an average family the equivalent of a muffin and coffee every month.
  • In fact, the model suggests consumers would see a small savings on electricity prices over the long term, because the cost of generating renewable energy typically decreases over time, whereas the cost of generating power from natural gas or other fossil fuels is projected to increase.

Increasing dependence on natural gas brings other challenges

  • While gas burns cleaner than coal, natural gas is still a fossil fuel and has much higher greenhouse gas emissions, smog precursors and other pollutants than renewable energy technologies (which are mostly "clean" or non-emitting).
  • Building additional gas-fired infrastructure now will increase the cost of taking more ambitious action to reduce greenhouse gas emissions in the future.
  • Finding appropriate sites to build additional gas plants — many of which would have to be located in the Greater Golden Horseshoe region — may prove challenging, given the recent strong opposition to proposed projects in Oakville and Mississauga.
  • Prices for natural gas are low and relatively stable at the moment, but they are expected to rise due to market uncertainty, bringing higher costs for gas-fired generation.

Greenhouse gas emissions would be higher without renewable energy investments

  • While average emissions fall from current levels in both scenarios due to the phase-out of coal power, air pollution and greenhouse gas emissions would be higher if the Green Energy Act were eliminated.

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