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Green Energy Prices Aren't High, Its Detractors Are!

05/02/2012 05:17 EDT | Updated 07/02/2012 05:12 EDT

If you live in Ontario, you know there's an all-out assault on renewable energy like windmills and solar power. What you might not know is that despite all the nay-saying, clean energy is actually responsible for emissions going down, not for prices going up.

New numbers released this week show that nuclear, natural gas, and coal are behind almost all of the increase in the bills. In spite of the impressive growth of renewable projects in Ontario, they still contribute just a small piece towards the big picture.

An honest look at energy costs shows that the cost of operating and refurbishing nuclear reactors is by far the biggest expense, along with costs associated with shutting down our dirty coal plants and building brand new natural gas plants. Because of years of neglect, Ontario's energy system simply needed rebuilding. This would have happened with or without renewable energy.

Why the confusion?

You might think the cost of generating electricity in Ontario is reflected in "market rates." In reality, due to the complexity of its energy system, the market rate doesn't come close to covering the cost of generating electricity anymore. To make up the difference, almost all major electricity generators in Ontario also have price contracts with the government. The total cost of these contracts make up what is known as the 'global adjustment'.

So when you hear someone say, "but the market rate for electricity is only 4 cents, why is my bill so high?" they are leaving out the cost of these contracts. And, contrary to what opponents of renewable energy say, windmills and solar power are not alone in having contracts with guaranteed prices. In fact, nuclear and gas also have them and the contracts are far bigger.

In fact, the cost of new contracts for wind power and natural gas are almost identical: about 11.5 cents per kilowatt hour (kWh). The reason is simple: Ontario needs more energy, and it won't be built without the generator making money.

Is this new?

Until recently, Ontarians were used to paying for electricity that was mostly generated from hydro projects like Niagara Falls and huge polluting coal plants like Nanticoke. These had been paid for long ago. And when Ontario did need new power from, say, a very pricey new nuclear plant, the cost was borne by taxpayers, or special levies (does the 'Debt Retirement Charge' sound familiar?). This all kept prices artificially low.

But Ontario's energy system is different today. Costs are paid for by consumers. It's a bit like going to an airport -- in the old days, we could fly for free, but as airports have privatized, we usually have to pay a surcharge on tickets.

And like airports, Ontario's energy system has also had to be rebuilt. Forty-year-old nuclear plants need to be retired, ageing transmission systems modernized and polluting coal plants are shut down, all while demand for power went up. It's here that opponents to renewable energy are most misleading. Because you can't compare new electricity -- from any source -- with plants paid for long ago. As you will see in this graph, whatever option Ontario chooses will cost more:

Want the lights to stay on?

Any new source of electricity will cost more than old ones. You might be surprised to learn that the average cost of building a new traditional power plant has doubled in the past decade. And with fossil fuel costs expected to rise, and building a new nuclear plant more expensive than ever, anyone who says fewer windmills means lower bills is just wrong. Really wrong.

The only kind of energy that is actually getting cheaper is green energy. Windmills and solar panels are dropping in price every year. It's a bit like computers or cellphones. The more we buy them, the cheaper they get. We're seeing this shift now take place with renewable energy, too: The prices paid to renewable energy producers just dropped, and Ontario is expected to lower its rates every year automatically. And unlike nuclear or fossil fuels, there is no fuel required. The wind will blow and the will sun shine, for free.

The other bit of good news is using more renewable energy means fewer of the nasty consequences of the old-school generation. No greenhouse gases contributing to global warming. No smog forming pollution making us sick. No toxic waste to dump on future generations. No hidden costs, contrary to what people like to tell you.