It is an interesting time in Ontario when it comes to energy policy. Delivering on its election pledge to reduce electricity costs is an important priority for the Ford government. Diverse views about the way forward are to be expected, however, the notion of cancelling existing renewable energy contracts as a potential solution must be put to rest.
Investors rely on the rule of law and contract rights when they scope, build and operate projects in the province. Calls for cancelling contracts and stranding assets shakes investor confidence and risks undermining Ontario's investment climate - and at the wrong time and for the wrong reason. Today, the economics of wind-energy projects are stronger than ever before, and the province is on the cusp of a looming electricity supply shortage. Short-term action to terminate existing contracts will inevitably lead to increased perception of risk by investors - a risk that would inevitably be offset by an increase in the cost of the new supply needed to keep up with demand.
This would be an unfortunate outcome for Ontario ratepayers, especially since cancelling renewable energy contracts does not accurately target the underlying condition of electricity cost escalation in the province. In recent years, Ontario invested heavily to expand the capacity, improve the reliability, and reduce the carbon footprint of electricity generation. The run-up in system costs cannot be attributed to one type of generation. The investments were made across numerous sources of generation, as well as in other electricity infrastructure such as transmission and smart grid technologies.
Today, new wind energy is the lowest-cost option for new electricity supply in Ontario, across Canada, and throughout much of the world. A 2014 wind power procurement in Ontario resulted in a contract price of 6.45 cents per kilowatt hour, when the average price for electricity generation was more than 11 cents. Three years later (in December 2017), in Alberta the weighted average for new wind power contracts set a record low of 3.7 cents per kilowatt hour. Similarly, in October 2018, a competitive procurement in Saskatchewan resulted in an average bid price of 3.75 cents per kilowatt hour for the price of new wind energy.
Looking ahead, costs are forecast to keep declining - the anticipated drop in world wind energy costs between 2017-2040 is 47 per cent (Bloomberg 2017), driven by continuing technological improvements. Add to that the fact that wind energy's fuel is cost-free and inflation-proof, and the economic case is undeniably compelling.
We also need to keep in mind the diversity of the returns on Ontario's strategic investment in renewable energy. These include its role in eliminating smog days and reducing carbon emissions, as well as sustained revenue for municipal and Indigenous partners and for landowners - objectives that remain important for Ontarians.
Finally, the scope of the wind energy industry's importance within the Ontario economy further underscores the imprudence of eroding investment in Ontario. The province's wind sector will generate $12.5 billion in investment in Ontario in the 2006-2030 timeframe. Along with that investment will come 64,500 person-years of employment, $4.6 billion in earnings for Ontarians, and an additional $6.2 billion in provincial GDP.
In the early 2020s, Ontario will have a need for new electricity generation. The key to securing the most competitive prices for ratepayers for that new power is taking steps to encourage confidence, competition and investment in the Ontario marketplace.
The wind energy industry remains committed to supporting Ontario in its pursuit of a power supply system that is reliable and cost-competitive while also promoting economic development and protecting the environment. No other source of potential new electricity generation in Ontario can better meet these multiple priorities than wind energy.
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