October 2, 2016
The Wynne government’s decision to cancel 1000 megawatts of renewable energy contracts, most of them just announced earlier this year, is being widely interpreted as the final step in the abandonment of the efforts to transform Ontario’s electricity system into a low-carbon sustainable system. It is also seen as the end of the province’s effort to build a viable renewable energy manufacturing and services industry.
There is no doubt that there were serious flaws in the original design of the province’s Feed-in Tariff program, established through the 2009 Green Energy and Green Economy Act. The program structure and rates were largely designed to meet the needs of community-based, cooperative, farm and aboriginal energy developers, but access to the program was left open to large commercial developers as well. The result was that these larger developers were able to obtain contracts at far higher rates than they needed for their projects to be commercially viable. That flaw in the program was later corrected, and the contracts cancelled last week had been established on a competitive bid system, which had produced prices that were competitive with non-renewable energy sources.
Contrary to the expectations of the province’s electricity system planners, electricity demand in Ontario has been flat for more than a decade, despite continued growth in the economy and population. The likelihood of any significant growth in the future is at best highly uncertain. The shift in demand reflects overall shifts in the character of Ontario’s economy, away from energy intensive manufacturing and resource extraction and processing activities, and towards less energy intensive knowledge and service based activities. The situation has left the province with potentially more electricity supply than it actually needs. That said, the province had a number of choices available to it to reduce supply other than cancelling renewable energy projects.
The most obvious of these would have been to choose not to proceed with the costly, risky and potentially dangerous "life-extension" of the aging Pickering nuclear power plant just east of Toronto. The refurbishments of the Bruce and Darlington nuclear plans would have been ideal candidates for reconsideration as well, given the central role that nuclear refurbishments have played in the increases in electricity costs over the past decade. The projected costs of further refurbishments, now placed by Ontario Power Generation at nearly 17 cents/kilowatt hour, exceed, with the exception of some solar technologies, those of the renewable energy alternatives, and those of other alternatives like hydroelectricity imports from Quebec.
Renewable energy sources offer the additional advantages of scale-ability and relatively-short planning and deployment timelines, important considerations in the context of uncertainty about the future direction of electricity demand. Developments in grid management and energy storage technologies mean that ways of managing the intermittent character of renewables are increasingly at hand. At the same time, renewables avoid the profound technological and electricity system lock-in effects associated large, centralized, long-lived sources of electricity like nuclear, to say nothing of the risks of catastrophic accidents, and the need to manage highly radioactive wastes over millennia.
Last week’s events raise even larger questions about the future direction of the province’s electricity system. An important subtext to the cancellations is the Wynne government’s decision, though legislation adopted last June, to remove any mechanism for the meaningful, public review of the province’s electricity plans. Specifically, Bill 135, eliminated the requirement that electricity system plans be subject to review by the Ontario Energy Board before proceeding. This means that there is no forum within which the impacts of the province’s current, nuclear focused plans, on rates and costs can be examined, and the potential economic, technical and environmental performance of alternative pathways considered. The implication is that electricity system decisions, like the one seen last week to cancel renewable energy contracts, will be made on the basis of political management considerations, as opposed to an open, evidence-based approach to decision-making. The situation should be cause for profound concern among Ontarians interested in the sustainability and cost of their electricity system.