ANALYSIS: The Liberals’ new energy plan may predict lower prices — but it also assumes lower consumption
Electricity prices in Ontario will steadily rise until 2035, even though the government lowered residential bills by 25 per cent earlier this year. That’s according to the government’s long-term energy plan, which was released today.
The Ministry of Energy outlook report, published every four years, is a forecast document that lays out expected energy demand, capacity, technology changes, and pricing for the next 20 years.
“Our long-term energy plan… outlines additional work we will be undertaking to make our electricity system more cost-effective and efficient, continuing to prioritize affordability,” Ontario Energy Minister Glenn Thibeault said at a press conference in Toronto.
Here are some highlights of the 2017 report.
Household electricity bills will be lower than expected, but only if consumption falls
The Ontario government’s Fair Hydro Plan, which reduced electricity bills by an average of 25 per cent for residential customers, came into effect on July 1, 2017. Under it, prices will rise with the rate of inflation for the next four years — by 2024, they will have crept back up to early-2017 levels.
“The projected residential price for electricity will remain below the outlooks published in the 2010 and 2013 [reports],” the document says.
However, this year’s forecast assumes that the average Ontario residence will use 750 kilowatt-hours of electricity per month, while the 2013 and earlier energy plans said households would use 800 kilowatt-hours. So while the plan shows that prices will be lower than expected through 2035, direct price comparisons are difficult to make, because the government is not comparing apples to apples. The government has gone with the new estimate, the report indicates, because household consumption is expected to decline as a result of increased energy efficiency and conservation.
The average residential monthly bill, according this year’s plan, will be $196 in 2030 — in 2013, the government projected that the same bill would add up to $205 per month. After factoring in a 6.25 per cent reduction in consumption, the government is expecting a bill that is only 4 per cent lower; in other words, electricity prices would actually be higher per kilowatt-hour.
“We’ve now lowered rates by 25 per cent. That’s a fact,” Thibeault said. “So the progression that we’ve talked about, about amortizing, smoothing out, through the Fair Hydro Plan, all of our costs, this is what we’re projecting the costs will be. And so we’re starting from a lower place — we’re starting from a lot lower place than where we would have in 2013.”
Todd Smith, the Progressive Conservative energy critic, said the government’s pricing plan was purely political. “The minister said he wouldn’t want to freeze rates, but essentially that’s what he’s doing for a very, very short term. And this is all about getting Kathleen Wynne re-elected next year. They’re freezing rates to get us through the next election period because they know how detrimental this whole energy crisis is for Ontario.”
The government did not include overall electricity costs in its 2017 report, but the Financial Accountability Office says that by reducing electricity bills now and spreading the costs over 29 years, the Fair Hydro Plan alone will cost Ontario taxpayers a net minimum of $21 billion.
Even with more electric vehicles on the road, energy demand is expected to stay constant
There are an estimated 12,000 electric vehicles on the province’s roads today. By 2035, the report says, that number will have grown to 2.4 million. These new vehicles, along.with the various transit electrification projects currently underway in the province, will place increased demands on our electricity system.
Even so, the outlook report projects that demand will be relatively stable through 2035, because the new demand will be offset by conservation efforts.
In the early 2020s, Ontario will face a shortfall in capacity because of the closing of the Pickering nuclear power plant and the refurbishment of the Darlington and Bruce stations. In order to meet supply requirements, the government plans to hold capacity auctions, moving away from long-term, 20-year contracts to more short-term arrangements. “The auction will allow existing and new clean generation facilities to compete in a robust market with clean imports, demand-side initiatives and new emerging technologies,” the report says.
The plan makes small nods to energy innovation
“As more and more homeowners and businesses get on the new technology — the innovation bandwagon, so to speak — and start utilizing this invented generation that we know is coming … we’re going to ensure that we continue to have a strong electricity grid,” Thibeault said. “But we’re also going to make sure that we can support this innovation and make sure people can harness this to lower their bills and utilize the demand that we foresee coming.”
The government also plans to allow third parties to own net-metering systems (where electricity purchased from the local distribution company is offset by small, privately owned, renewable power sources). So, for example, if a resident hired a company to install solar panels on their roof, they’d be looking at a smaller upfront capital expense, because an outside company would provide the service instead.
The government also will expand the Green Button program, which allows customers to better understand their electricity usage by making it possible for them to analyze their usage data in mobile applications. Early next year, the government plans to propose new legislation that would require electricity and natural gas utilities to implement the Green Button program.