Over the last two weeks, Terence Corcoran of the National Post has written two articles critical of the exorbitant prices paid to Ontario renewable projects and questionable job claims associated with the projects. Last week a response from Jochen Bezner, president and chief executive of solar developer Orange Solar Inc. of Toronto, appeared on the National Post web site.
In his response, Bezner referenced 1,080 MW (1.08 million kW) of solar projects executed by the Ontario Power Authority, stating that they would add only $ 2.69 per year to annual residential electricity bills.
Bezner was WAY off the mark, by a factor of almost twenty. Using a conservative set of assumptions, the 1,080 MW of solar projects will increase the average Ontario annual residential electricity bill by $ 53. To be that wrong, one has to be either lying or bad at math. Let’s give Bezner the benefit of the doubt and assume the latter.
The math behind this is neither mysterious nor particularly complicated. The trick is knowing a few key inputs and how to apply them. The actual calculations can be done by a high school math student with a big-button calculator and knowledge of scientific notation. Here’s the math:
Using Bezner’s assumed mix of solar projects and OPA capacity factor assumptions, the 1.08 million kW of total rated output will produce electricity at a weighted capacity factor of 13.7%, generating 1.30 billion kWh per year. At an average blended Feed-In Tariff rate of 49.5 cents/kWh, the projects will earn gross revenue of $ 642 million per year.
Next, consider the alternative cost of electricity. A conservative value is 10 cents/kWh (see footnote at article-end); this is well above the all-in cost to generate electricity using natural gas and includes a premium for when solar energy is delivered. At that rate, 1.30 billion kWh of electricity per year produced by natural gas-fired generation would cost $ 130 million.
The additional annual cost for the solar energy is then $ 642 million less $ 130 million, i.e. $ 512 million.
Remaining assumptions are as follows:
- total annual Ontario electricity consumption of 143 TWh or 143 billion kWh
- average annual residential consumption of 10,080 kWh, derived from monthly metered consumption of 800 kWh and a local loss factor of 5%
- January 1, 2011 Global Adjustment cost shift of 4%, from Ontario’s largest consumers to remaining consumers
Adding HST, the result is a total increase on the average Ontario residential electricity bill of $ 53.
(The Ontario Clean Energy Benefit reduces that to about $ 48 but given that this reduction adds to the current provincial budget deficit and will have to be repaid at some point by future ratepayers, this dynamic can be ignored.)
Following this thread, if solar ultimately comprises 2,000 MW of the approximate 8,000 MW of FIT projects Ontario may have by 2018, the total annual bill increase resulting from solar alone would be $ 98.
Contrast that with what Bezner would say: about $ 5.
It’s extremely unfortunate that mistruths like this appear and, worse, that many people will take them at face value. While renewable energy developers often demonstrate such conveniently variable aptitudes for math, clearly they’re smart enough to know Ontario is a place to make outrageous amounts of money – all of it off the backs of ratepayers.
Here’s to hoping Ontario politicians and policy makers brush up on their math, before it’s too late.
(Alternative cost of electricity: Ontario is in a significant surplus situation that is continuing to trend that way and it can be argued that renewables are exacerbating the situation. This adds to surplus baseload generation issues and increased exports. The alternative cost of electricity could then be viewed as being in the order of a conservative 4 cents/kWh, i.e. the price exports are being sold at in the spot market as they make their way out of the province. Solar subsidies are so outrageous that changing this input doesn’t make that much of a difference when calculating the annual bill increase from solar. For 1,080 MW the annual increase rises to $ 61 while for 2,000 MW, the annual increase rises to $ 113.)