cutting wind in Ontario

If the wind project is paid $0.08/kWh (the average tariff for projects in the province’s first renewable RFP)…

The quote is from a 2005 document, Ontario Landowner’s Guide to Wind Energy, produced by the Ontario Sustainable Energy Association.

The Bank of Canada’s inflation calculator indicates 8 2005 cents equate to 9.6 2016 cents.

In 2016, Ontario announced new Large Renewable Procurement (LRP) contracts at 8.6 cents/kWh

5 wind contracts totalling 299.5 MW, with a weighted average price of $85.94/MW…

Comparing the cost of industrial wind turbines in Ontario by the procurement cited in the 2005 report, and the one run by the IESO in 2016, there has been little change in price.

In between these two procurements, over a decade apart, prices soared. There are no consumer benefits from the feed-in tariff mechanisms, introduced after the passage of the Green Energy Act.  Between the start of 2009 and the end of 2012 the government, through the Ontario Power Authority, contracted about 4,400 megawatts of industrial wind turbine capacity at rates around $135/MWh. The increase in rates above those shown in 2005, $40/MWh (4 cents/kWh), would add about $500 million a year to Ontario’s electricity costs for the 20-year terms of the contracts.

Ten billion dollars is not the full-term cost of the contracts, only the incremental cost of the feed-in tariff mechanism employed – and/or the rank political culture that employed it.

In a recent article I noted the Wynne government’s action to delay payment of contracts beyond the 20-year terms of the contracts was a de facto recognition of a tariff deficit. Ontario should look to Spain for an example of dealing with a tariff deficit – and unilaterally move to cut prices.

In another recent article I calculated the additional cost of contacting industrial wind turbines at the high feed-in tariff rates, compared to the rates realized under the recent LRP , at $13.6 billion. This approach provides a methodology for implementing Spanish style unilateral contact revisions to lower rates.

Using the rates from 2004-05, as I’ve indicated here, is another possible method for adjusting contract rates.

An argument against altering contracts is that it would make Ontario unattractive to investors attracted by government policy. Given the inability of all this investment to measurably improve the value of the industrial wind turbine product offering in Ontario, maybe discouraging mediocre developers from taking advantage of poor government policy is another positive of unilaterally cutting contracts.

I think this is a far better approach than adding $25 billion in costs by foisting charges further into the future, onto whoever is occupying Ontario at that time.

 

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2 thoughts on “cutting wind in Ontario

  1. What is contract law in regard to unilaterally cutting contracted wind pricing? Could wind farm owners not take IESO, and by extension the government, to court to recover financial losses due to such price cuts?

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