By Anthony Capkun
April 25, 2013 – Ontario’s Green Energy Act (GEA) will soon put the province at or near the top of North American electricity costs, concludes a new report from the Fraser Institute, with “serious consequences for the province’s economic growth and competitiveness”.
“Already, the GEA has caused major price increases for large energy consumers, and we’re anticipating additional hikes of 40% to 50% over the next few years,” said Ross McKitrick, Fraser Institute senior fellow and author of “Environmental and Economic Consequences of Ontario’s Green Energy Act”.
The report analyzes the GEA and its effects on economic competitiveness and environmental improvement in Ontario. The report calculates that the manufacturing and mining sectors will be particularly hard hit by rising energy costs, with returns to investment in manufacturing likely to decline by 29%, mining by 13% and forestry by less than 1%.
“Provincial efforts to shield these industries through energy subsidy programs only transfer the costs onto Ontario taxpayers, who are already dealing with skyrocketing residential electricity prices,” McKitrick said.
“Overall, GEA-related energy cost increases will yield a net loss of investment and employment in Ontario, in pursuit of environmental benefits that could have been obtained at a fraction of the cost.”
The study shows that the GEA’s focus on wind generation is particularly wasteful: 80% of Ontario’s wind-power generation occurs when electricity demand is so low that the entire output is surplus and must be dumped on the export market at a substantial loss.
The Auditor General of Ontario estimates that the province has already lost close to $2 billion on surplus wind exports, says the institute, and figures from the electricity grid operator show the ongoing losses are $200 million annually.
The wind grid is also inherently inefficient due to the fluctuating nature of the power source. The report calculates that, due to seasonal patterns, 7MW of wind energy are needed to provide a year-round replacement of one megawatt of conventional power.
“Consequently, the cost of achieving renewable energy targets for the coming years will be much higher than the Ontario government’s current projections,” said McKitrick. “In fact, air emissions may start going up under the GEA if the growing surplus of wind and solar power necessitates taking one of Ontario’s nuclear power plants offline.”
The Ontario government has also backtracked on its original claim that the GEA would create 50,000 jobs, a projection that failed to account for permanent job losses due to electricity price increases under the GEA. The province has also admitted that the vast majority of GEA-related jobs will be temporary.
“The overall effect of the GEA will be to increase unit production costs, diminish competitiveness, cut the rate of return to capital in key sectors, reduce employment and make households worse off,” McKitrick concluded. “And all for some small emission reductions that could have been obtained at a fraction of the cost.”