With the release of Ontario PC Leader Tim Hudak’s platform today, it’s clear where much of the focus of the campaign to be Ontario’s next Premier will be – on Ontarians’ electricity bills. Hudak announced no fewer than six major policy changes to Ontario’s electricity system:
- An end to Ontario’s Feed-in Tariff (FiT) program;
- An end to mandatory time of use pricing;
- Closing down the Ontario Power Authority;
- A return to centralized supply decisions, with a focus on gas and nuclear, with, “an open and fair process for alternative energy sources like solar, wind, and biomass;
- Removing the provincial share of the HST from electricity bills;
- Ending the debt retirement charge on electricity bills.
That’s a lot to cover in one post, so I won’t try. Let’s stick with the FiT.
A FiT, if you don’t know, sets a fixed price which the government or power utility pays entities (homeowners, farmers, or corporations) for the electricity they generate from desired (usually renewable) sources, and feed back into the grid. Because I have been critical of the Ontario FiT program, many people see me as being anti-FiT in general, which is not really true. In fact, I am generally in favour of the concept, but not the application in Ontario. But, if you are a free-market, small government party, a FiT is a great tool to have in your arsenal, and one which should not be thrown away as quickly as Tim Hudak seems prepared to do.
So, what’s the problem with the FiT in Ontario? The problem as I see it is that the prices paid were based on the costs of generating the electricity, not on the value of that electricity to the Province. The program, for example, pays 44.3c/kWh for ground-mounted, industrial solar power. Why? Because that’s what you had to pay 2 years ago to make it possible for industrial solar operators to make enough money to justify the investment in the panels. That is, and should be, irrelevant for Ontario ratepayers and taxpayers. They should ask, “what’s in it for me?” and their government should be able to tell them…and in much more detail than simply saying green economy over and over again. When new natural gas power plants can make money at 7-8c/kWh, you have to be able to justify why solar power is worth more than 5 times as much. It might be, but it’s certainly not worth much as a hedge against the high cost of fossil fuels. At a cost of $179,000 per job created, you can’t sell it on the basis of green jobs alone either.
The idea of a FiT doesn’t imply anything about how you set prices. In fact, a FiT program could be the best way to get to Tim Hudak’s, “open and fair process for alternative energy sources like solar, wind, and biomass.” But, to work for Ontario, the price paid for the power needs to reflect its value, not its cost. If producers using a particular technology can’t make money in that system, oh well.
The closest example of what I’m referring to is the Clean Power Call used in BC. The Clean Power Call asked potential power suppliers to bid their power to BC Hydro, defining all its attributes (location, generating technology, in-service date, etc.), the quantity and the price. BC Hydro was then able to step back and ask which power offers represented the best deal for BC residents. They adjusted for generation that was further away, that needed significant transmission upgrades, etc. They didn’t adjust for job creation, but they could have. At the end of the day, BC Hydro delivered a report to BC residents detailing how the projects were chosen and making the case that these projects represented the best clean power deals for them. I challenge you to find a similar document for Ontario’s FiT…if it exists, I haven’t seen it.
So, here’s the challenge for Mr. Hudak. Don’t throw the baby out with the bathwater – don’t make this about a FiT being a bad tool, make this about the fact that the case for the prices paid for electricity via the FiT was never made. By all means, highlight the fact that solar power purchases made through the FiT program at up to 80c/kWh were re-sold to ratepayers at less than 1/10 of that price. But don’t throw away the mechanism…you might need it.
It should be natural for a free enterprise, small government party to set out what they want to buy, and let the private sector and quasi-governmental organizations bid on the right to provide it. If a private firm can come to the table with a combination of gas and wind that delivers dispatchable, reliable power at a cost far less than new nuclear, I can’t imagine that a conservative government would not want to let them compete with Bruce Power.
A FiT need not be a boondoggle…it’s can be a policy that lets the government send clear price signals to the market and drive private enterprise to provide electricity at the highest possible value to ratepayers. It will only work well if the prices which are set reflect the value of the product to the ratepayers, and whoever the next Premier of Ontario is can learn a lot from BC in this regard.
NOTE 2: Tim Weis of Pembina (@weis_renewables) made the valid point that FiT programs are generally applied based on the cost of production, and that this has become the accepted definition of the class of policies. I define a feed-in tariff as a fixed price or price schedule paid on a contract for a particular type of electricity supply, based on IEA p.92 here, but don’t include how that price is set as a requirement for being called a FiT.
NOTE: Before you comment about an Albertan writing about the Ontario election, take note. While I now live in Alberta, I grew up in Ottawa and did all my schooling in Ontario. My parents also still live in Ontario. Hence my engagement in your politics.