Ontario will spend $9-billion on solar power in the coming years, even though it's projected to provide just 1.5 per cent of the province's energy supply two decades from now.
It's not the whole story of why bills are set to go up so much. But the long-term energy plan Dalton McGuinty's government unveiled on Tuesday underscores what a big part of the story it is.
Ontarians are about to start paying heavily for green energy. And for the next few years, the investment will be wildly disproportionate to its role in the system.
Better late than never, Mr. McGuinty's Liberals are being honest about what that cost is. As recently as last year, then-energy-minister George Smitherman was still clinging to the idea that his Green Energy Act would increase hydro bills by just 1 per cent annually. Now, the government acknowledges that residential prices will go up by 46 per cent in the next five years - and that green energy will be responsible for more than half of that increase.
The solar costs are especially striking because the Liberals have committed to rates they themselves consider too high. This past summer, realizing they were overpaying, they tried retroactively to reduce the rates - paid largely to farmers - for small ground-mounted projects to 58.8 cents per kilowatt hour from 80.2. Then, in the face of a backlash in rural ridings, they dropped the retroactive part, and set a compromise (and still very high) price of 64.2 cents for new projects.
Wind power, for all the agonizing about turbines terrorizing unsuspecting communities, doesn't involve quite the same extravagance. If the government is correct that a $14-billion investment will get it up to 10 per cent of total supply, it will play a real role as a substitute for power from coal-fired plants (or "dirty coal," as Energy Minister Brad Duguid appears to be contractually bound to call it). The province may be overpaying through its feed-in-tariff program and its huge development deal with the Samsung Group, but it's at least getting something obvious in return - not least being help avoiding whatever price is eventually charged for carbon emissions.
Still, for either of these investments to prove visionary, they will need to transcend their role in the supply mix and prove their economic value. Merely creating some short-term jobs won't suffice; enough manufacturers will need to root themselves in Ontario for the province to remain a hub for alternative energy as more jurisdictions embrace it.
Having now clearly set out the price of this leap of faith, the Liberals can at least argue that their temporary 10-per-cent rebate on energy bills - initially reported last week as a pre-election price reduction, rather than a moderate blunting of price hikes - has some policy merits rather than just political ones.
Over the course of Mr. Duguid's 20-year plan, which projects a total capital expenditure of $87-billion, the green costs will level off considerably. Ultimately, by far the biggest expenditure will be on refurbishing and procuring nuclear reactors. And price increases are supposed to slow down as well, such that they fall below the inflation rate some time around 2022. (It bears noting that these projections become a much less exact science after the first few years.) So stretching the expenses on wind and solar over a longer period, by adding a billion dollars to the provincial debt each of the next five years, might be a reasonable balancing act.
But even with that clever accounting, there's no escaping the down payment. To give them their due, the Liberals have been more up-front about that cost than many governments would be at this point in their mandate. But it remains to be seen whether they can make Ontarians feel reasonably assured about what they're buying into.