Letter to Macleans magazine re "Absolute Power?" in June 5, 2010 issue

“Absolute Power?” (June 5, by Chris Sorensen) accurately portrays the concerns many electricity users in Ontario have about the province’s green energy strategy. What it fails to do is clearly articulate the many good reasons the government has – after lengthy consultations with many stakeholders – to establish a renewable Feed-In Tariff (FIT) program.

To end its dependency on coal, Ontario has been forced to make some difficult decisions. New generation is needed and regardless of the source it will result in higher costs than those from the fully depreciated plants being retired. There are no remaining economic opportunities for large-scale hydro in southern Ontario. A new nuclear plant would take 10 years to permit and build, with the risk of cost overruns and no clear plan for where to store spent fuel. Natural gas is an attractive choice at today’s fuel prices, but Ontario cannot depend for too much of its power on a fuel whose long-term price may be much higher than it is now.

Renewable energy generation under Ontario’s FIT program is attractive because the costs and risks of construction are borne by private companies rather than taxpayers. The average price for all of the projects awarded so far is about 18 cents per kilowatt-hour. While this is well above average prices today, it is largely fixed for 20 years and could easily represent good value over time. The highest rates paid are for solar energy, which is closely correlated with peak demand and best reduces the need for other new forms of generation. The program also pays a premium for distributed generation which eliminates the need for expensive new grid infrastructure.

When considering the headline number, it is important to remember the government is not just buying the electricity, but also the environmental attributes associated with clean generation  – at an implied price below what utilities and their customers pay for similar attributes in some nearby U.S. states. Electricity prices are rising across North America, and Ontario is unlikely to become uncompetitive because of its FIT program.