Power Prices in Context

Electricity inflation has seemingly been very low when put into proper context.

A recent article (January 12) in the Toronto Star by John Spears made an interesting point about power price increases in context of most other consumer costs.  The article quoted Paul Murphy, the head of the IESO (the agency that runs Ontario’s electricity markets), who examined his own bills over the past 15 years to see how prices have changed.

He noted that while his electricity bill is up 30% in 15 years (and expected to climb another 45% in the next 5 years), his taxes increased by 240%, his cable bill went up 200% and his water bill rose 90% over the same time period.

It probably shouldn’t be surprising, in that context, that Ontario ratepayers are likely to see a large increase to their electricity bills.  Yet even the 45% expected increase won’t put the (then) 20 year price increases for electricity in the same ball park as some of the other everyday expenses borne by the average Ontarian.

Renewable energy is often quoted as a primary reason for this increase, but as we have noted several times, large electricity rate increases are coming regardless of whether the province invests in renewable energy or traditional energy sources.  The installed and operating costs of almost every form of non-renewable energy generation are far above what they were when Ontario’s existing infrastructure was built.  Nuclear in particular is much more expensive to build today than it was in the past.  There is also increasing evidence for and acknowledgement of the health and environmental costs of traditional energy generation sources.

On the other hand, renewable energy costs have been coming down.  Wind is now one of the cheapest forms of energy available.  And ClearSky Advisors has demonstrated that the actual premium for solar energy, for example, is much less than most people believe (click here for article).

As Ontario makes many big decisions over the coming years about renewing its energy generation infrastructure, the ratepayers and taxpayers need to be informed of the real benefits and costs associated with renewable energy (and its alternatives).

Article image courtesy of brendan.wood.