Ontario residents could end up paying some of the highest costs for electricity in the developed world because providing wind and solar energy will cost about 40 per cent more than government estimates, according to a new study.
Ratepayers should expect their electricity bills to rise by 65 per cent by 2015 and 141 per cent by 2030 — substantially more than current government predictions of 46 per cent and 100 per cent, the study found.
The average residential user’s annual bill, which currently stands at $1,700, will exceed $2,800 by 2015 and be over $4,100 by 2030, it predicts.
Certain costs weren’t included in the government’s estimates, such as inflation, transmitting electricity to the provincial grid from wind and solar facilities and backup generation for potential disruptions, the study found.
Those higher costs would erode the competitiveness of businesses in Ontario and pose challenges for low-income households, said University of Guelph professor and agricultural economist Glenn Fox, who co-authored the study with retired banker Parker Gallant.
Bills could climb even higher because the study didn’t include other potential costs, such as possible cost overruns as the province refurbishes its nuclear fleet.
The study found a number of omitted costs of renewable energy that weren’t included in Ontario’s long-term energy plan, which was released last year by the governing Liberals.
The plan underestimates the capital costs of wind turbines, for example, and fails to attach any individual dollar values to specific transmission projects to put renewable energy projects on the provincial grid, the study said.
The plan also lowballs the costs of backing up renewable energy with natural gas-fired plants when the wind isn’t blowing and the sun isn’t shining, saying it will cost $1.8 billion when it will likely cost closer to $9.6 billion.
The study also found that the government’s green energy policies are affecting the province’s finances.
Due to the costs of connecting renewables to the provincial grid, Hydro One has reduced its dividend payments to the province, affecting the government’s ability to reduce a provincial debt that currently stands at $230 billion.
Between 2004 and 2008, Hydro One’s average dividend payment to the province was 64 per cent of earnings. In the first nine months of 2010, it was down to less than five per cent, the study said.
Ontario Power Generation, which was excluded from wind and solar projects, will lose revenue because those project are put at the front of the line when accessing the provincial grid, the study said.
That means it will take longer for OPG to repay the stranded debt that was created when the former Ontario Hydro was split into three different entities, it said.
One of the largest hidden costs involves local distribution companies, who can apply for a rate increase if their revenues deteriorate due to energy conservation efforts and “the shortfall will be charged to ratepayers,” the study said.
It also casts doubt on Liberal claims that the Green Energy Act will create 50,000 new jobs.
Premier Dalton McGuinty often touted those job-creation claims during the Oct. 6 election campaign and made frequent stops at plants that manufacture wind and solar power components as he travelled the province.
How the government arrived at that number “has never been explained,” the study said. And creating those 50,000 new green energy jobs will require ratepayer subsidies of about $200,000 a year for each position.
“The theory is that, if new industries that are not competitive are subsidized, they will eventually mature and be able to function on their own,” Fox said in a release.
“The problem with that theory is that some kids never grow up and leave home.”