December 10, 2015
Choosing a green future: Notes from the renewables transition
With solar panels going up our roof on an unseasonably warm December day, and world leaders at the Paris climate summit, it seems appropriate to make a few observations about the transition to a 100 per cent renewable world.
There is much speculation as to when Ontario’s “feed-in-tariff” (FIT) program — 20-year, fixed-price contracts for renewable electricity which began in 2009 after passage of the Green Energy Act — will terminate. The FIT program has certainly benefited local companies and co-ops here in eastern Ontario. Our house is becoming a small electricity-generating business. Worldwide, solar and wind have followed the same path as computer technologies — more power, less cost.
However, Ontario’s FIT contract prices are not falling as fast as in other jurisdictions. Ontario Auditor General Bonnie Lysyk, in the Electricity Power System Planning section of her 2015 audit, criticizes the Ontario government for offering “significantly higher prices” to FIT generators than could be obtained through competitive procurement. She estimates that this price differential could be as high as $9.2 billion for existing FIT contracts over their 20-year duration (she also notes that Ontario’s Independent Energy Supply Operator (IESO) estimates the differential at $5.3 billion because solar generators will not receive a cost-escalator for inflation).
So, does this mean that Ontario’s Green Energy Act is responsible for Ontario’s high electricity prices?
Not according to Ms. Lysyk. She identifies “two key cost drivers that have had the most significant effect on electricity rates: surplus power and the Global Adjustment.” In covering her report, media focused exclusively on Global Adjustment, the difference between the market price of electricity and prices paid under regulatory agreements and contracts to nuclear, gas-fired, hydroelectric, wind and solar generators, running headlines such as “Ontarians paid $37 billion extra for electricity from 2006-14.”
Ms. Lysyk says:
“In some cases, surplus generation was so high that the Hourly Ontario Electricity Price went negative, which meant that Ontario either had to pay other jurisdictions to take its power or simply had to give it away for free… This situation is most likely to occur in markets with large amounts of inflexible generation and low demand. An example of inflexible generation is nuclear.”
But media coverage of Ms. Lysyk’s report ignored this concern about surplus nuclear power.
The costs of nuclear power
The provincial Conservatives jumped quickly to blame green energy. PC Energy Critic John Yakabuski said in a news release, “A shocking $9.2 billion more has been paid for these green energy contracts because of the political manipulations of this Government,” failing to note that this figure includes future costs under 20-year FIT contracts, and has not been adjusted for inflation.
Global Adjustment data on the IESO website combine renewable energy and nuclear refurbishment costs, making it impossible to examine each individually. Could this represent deliberate obfuscation — an unwillingness of Ontario’s public agencies to provide public information on the costs of nuclear power?
Mark Winfield, professor and co-chair of the Sustainable Energy Initiative at York University, in a letter published in the Toronto Star, says:
“Ms. Lysyk gives extensive attention to the impact of new renewable energy sources on electricity costs, but completely ignores the single largest driver of the Global Adjustment to electricity costs — the refurbishment of the province’s aging fleet of nuclear power plants. The enormous economic and technical risks associated with proposed refurbishments of the Bruce and Darlington nuclear facilities are also completely overlooked.”
There is absolutely no doubt that Ontario’s high electricity costs are largely attributable to nuclear power plants, with their cost over-runs, Global Adjustment and debt retirement charges, and payments to other jurisdictions to soak up surplus power.
Ontario must decide whether to seriously embrace renewables or to refurbish its aging nuclear fleet. But the current Liberal government wants to have it both ways. In a December 3 news release entitled “Ontario Commits to Future in Nuclear Energy,” Minister of Energy Bob Chiarelli announced that “Ontario has updated its contract with Bruce Power and will proceed with the refurbishment of six nuclear units at the Tiverton-based nuclear-generation station.”
Jack Gibbons of the Ontario Clean Air Alliance responded to Minister Chiarelli’s announcement with a press release entitled “Energy Minister announces yet another sweetheart nuclear deal.” He says:
“[T]his deal continues the long tradition of leaving ratepayers on the hook for capital cost overruns, whether it is through absorbing debt or paying a fat premium for power or both… Every Ontario nuclear project has gone massively over-budget — on average by 2.5 times. And the cost overruns have inevitably been passed on to Ontario’s electricity consumers and taxpayers.”
With regard to the Bruce refurbishment deal, Minister Chiarelli has stated that “We also have built into the process … some off-ramps.” Nonetheless, he is expected to soon announce refurbishment of two Darlington reactors — despite the auditor general’s warning about the economic risks of creating “inflexible” surplus generation capacity, and massive public concern about the lack of a means of evacuating Toronto in the event of a nuclear emergency.
Obstacles to a renewables transition
Some economic optimists maintain that a transition to renewables can emerge through market forces alone. They underestimate the fierce desire of bureaucracies and corporations to cling to the status quo of nuclear power. They ignore huge nuclear subsidies: government-backed financing for refurbishment, a federal bureaucracy (the Canadian Nuclear Safety Commission) to manage nuclear risks, a federal nuclear research laboratory in Chalk River, federal legislation to limit the liability of nuclear generators for damages from major accidents.
Now that climate change has taken fossil-fuel generating plants off the table, policy-makers must level the playing field between nuclear power, conservation and renewable energy. Surprisingly, Ms. Lysyk criticizes public investments in conservation: “We are concerned that the Ministry continues to invest in conservation efforts when Ontario already has significant surplus power.” Why on earth would Ontarians not welcome public conservation investments if they reduce electricity bills?
Ms. Lysyk is also critical of the inability of solar and wind energy to provide peak power, i.e., enough electricity to keep Toronto’s air conditioners humming on hot summer days. However, conservation measures (which can be as simple as closing window blinds) can drive down electricity demand for cooling, and solar generation peaks when the sun shines on hot summer days. New innovations such as two-sided solar panels on white-painted rooftops can increase peak capacity of solar power.
The worst-case scenario is that Bruce and Darlington refurbishment will raise electricity prices and create a surplus of “inflexible generation.” Higher prices will create a strong incentive for homeowners to conserve and will drive larger industrial consumers out of the province. Ontario will have to pay other jurisdictions to take our surplus. Rather than locking Ontarians into this treadmill, the provincial government should cancel — or greatly scale back — its nuclear refurbishment plans.
Taking an objective approach
We should not look at renewables with rose-coloured glasses. Mistakes have been made. Quebec’s massive James Bay projects triggered strong initial opposition until fairer deals were made with the Cree First Nations. Early solar installations under the Green Energy Act covered acres of prime farmland (this is no longer allowed). And the Ontario government allowed large corporations to impose wind turbines on local communities, triggering a backlash. In jurisdictions other than Ontario, co-ops and local businesses have a much larger share of the renewables market.
Hundreds of thousands of people marched in cities around the world just before the start of the Paris climate summit, demanding a transition to 100 per cent renewable energy by 2050. We need their vision of a peaceful world, built upon renewable economies and green jobs. We can have a future that does not involve endless wars over dwindling non-renewable resources, or risks of nuclear accidents, whether caused by humans, acts of nature, or a combination of both, as at Fukushima.
The renewables transition is shaking up existing power structures and meeting fierce resistance. It can happen — but only if public agencies make available complete and credible information on costs of different energy options, and citizens choose wisely through their democratic institutions.
Ole Hendrickson is a retired forest ecologist and a founding member of the Ottawa River Institute, a non-profit charitable organization based in the Ottawa Valley.