Even though the shock should be nulled by now, jaws of homeowners across Ontario continue to drop wider and wider every month when their power bills arrive. These exorbitant payments have become monthly expectation since the passing of Ontario’s Green Energy Act in 2009. In my classmate Ansel’s blog post he argues that the Canadian government should capitalize more on the growing green power industry; however, I would argue—with Ontario as evidence—that government subsidization of green energy can do more harm than good.
Per data taken from Ontario Power Generation, solar power costs a stunning 50¢/KWH and wind 13.5¢/KWH compared to 5.6¢/KWH and 3.5¢/KWH for Nuclear and Hydro respectively. These prices directly tie in to shareholder theory in a very complicated way. Although by subsidizing green alternatives, Ontario is benefiting communities by creating new jobs and a cleaner environment, the large size of power bills has resulted in many Ontarians near the poverty line struggling to make ends meet. It also has made Ontario unattractive to new businesses by raising variable costs and has resulted in more night shifts to produce during off-peak hours. Therefore, green power subsidies have become a very polarizing topic in Ontario as supporters argue they are necessary to transition to a cleaner brighter future, but opponents hold that the increased cost to consumers and loss of industry growth and jobs clearly outweigh the benefits. Due to this pushback, the Ontario government recently had to cancel almost four billion dollars in green projects.
The subsidies have promoted a saturation of the power-market as new green energy firms rush to take advantage of the higher power prices. This has resulted in an oversupply of power in Ontario which becomes a very complicated problem. Normally, when the number of suppliers increases, prices drop and firms leave the industry. However, the fixed contracts in the power industry have resulted in too many suppliers and no increase in price to encourage firms to leave the industry. As power cannot be stockpiled, Ontario must sell off the surplus–usually at a loss. A study done by the Fraser Institute found that the GEA is costing Ontario five billion dollars a year but the same environmental results could be achievable by policies that would cost 1/10th as much.
Although the growth of green power is vital to the continued sustainability of society and the environment, it is crucial that in rushing to go green society does not end up worse off than before. Government interference can often do more harm than good and it is important that the government can recognize an ineffective policy and find better alternatives.
Sources:
https://cna.ca/why-nuclear-energy/affordable/power-rates/
http://www.desmog.ca/2016/10/17/ontario-cancels-nearly-4-billion-clean-energy-projects
https://www.fraserinstitute.org/sites/default/files/environmental-and-economic-consequences-ontarios-green-energy-act.pdf
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