Tom Adams and Ross McKitrick, Financial Post
Wind and solar power are key drivers behind Ontario’s surging electricity prices
On Oct. 30 we published a Fraser Institute study entitled “What Goes Up… Ontario’s Soaring Electricity Prices and How to Get Them Down.” We analyzed the factors driving the rise in Ontario’s electricity prices, focusing on the so-called Global Adjustment (GA), which is a non-market surcharge set by the province to fund payments to electricity producers for above-market revenue guarantees. Our econometric analysis allowed us to track not only the impact of direct payments to power generating firms but also indirect effects arising when one distorted production decision subsequently distorts the incentives of others, boosting overall provincial liabilities. Among other things we found that adding wind power to the grid increases costs by about three times the amount of the direct payments to wind turbine operators, with the interaction effects making up the difference.
On November 3, The Canadian Wind Energy Association issued a response to our study prepared by the consulting firm Power Advisory LLC. CanWEA’s press release acknowledges that electricity prices are increasing but claims that these changes benefit Ontarians. While it is certainly true that rising prices — up 52% since 2004 in inflation-adjusted terms — have been enormously beneficial to CanWEA and its members, they are harmful to Ontario consumers and firms. It is important to understand the real factors behind price trends, and not simply to take at face value the claims of an industry group with an obvious conflict of interest in the matter. Read article