The National Post is Canada’s second largest national paper.
High wind and solar costs hurt consumers as well as the environment
In May, 2009, Energy Minister George Smitherman oversaw the enactment of his Green Energy and Green Economy Act (GEA). It required that Ontario electricity consumers pay high prices for certain kinds of renewable power, including 13.5 cents/kWh for wind and up to 80.2 cents for small rooftop solar. Four years later Ontarians are asking if they can afford such big premiums for renewable power over the 8 cent cost of existing power.
As an environmentalist and past Director of the Sierra Club of Ontario, I like renewable power. As an electricity consumer I don’t want to pay too much. As an economist, environmentalist and consumer I believe that we should pay more for renewable power but the premium should not exceed the value of the avoided environmental and health effects plus the value of the avoided greenhouse gas damage from fossil power displaced.
Since Ontario is phasing out coal by the end of 2014, renewable power will mostly displace natural gas, which burns quite cleanly — its effects are very small, worth less than 1 cent per kWh. How much do we want to pay to reduce greenhouse gases? In my work I use $25/tonne of CO2 as a low estimate and $100/tonne as a high estimate based on studies of the future damage from global warming. These yield a total health, environmental and CO2 saving between 1.1 cents/kWh and 4.5 cents/kWh. This is the premium we could pay for clean electricity.
Calculating the money we save by displacing natural gas generation with renewable generation is complicated. The operating cost of generation depends on electricity demand – when demand is high, for example on a hot summer afternoon, we run inefficient, expensive generation. When demand is low, at night or on weekends, we run only our most efficient,low-cost generation.
Because wind may not generate during peak periods it does not displace much conventional capacity – we need gas generation in case the wind stops. Adding generation cost savings to the health, environmental and greenhouse gas values. I conclude that we should be prepared to pay from 6.9 cents to 10.9 cents/kWh for wind power in Ontario, much less than the current 11.5 cents.
Solar power matches better with Ontario’s demand because the sun is often shining on those hot summer afternoons. I conclude that we should be prepared to pay from 11.7 cents to 18.2 cents/kWh for solar power in Ontario, a fraction of the current solar prices of 35.5 cents to 54.9 cents.
For the rest of this article, click here: http://opinion.financialpost.com/2013/04/17/renewables-just-too-costly/