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Ontario’s new gas plants will cause your hydro rates to rise, report says

Ontario’s new gas plants will drive up hydro prices and make it more difficult to reduce carbon emissions to net-zero, according to an expert report published Wednesday.

Rather than relying on natural-gas-fired generation to meet growing electricity demand, Ontario’s cheapest and most reliable options require new wind and solar, while keeping gas plants for backup, says the report, prepared by Power Advisory, an electrical systems consultancy that has provided advice for provinces and states across North America, including Ontario.

The conclusions contradict those of Ontario’s Independent Electricity System Operator (IESO), which has been ramping up the use of natural gas generation and last month put out a contract for the construction of new gas plants. The procurement came after the IESO concluded last year that ending natural gas generation would lead to a $100 increase in average monthly electricity bills and rolling blackouts across the province.

It’s a debate that comes down to gas or no gas.

The competing visions for the future of Ontario’s grid are clashing at a critical time when demand for electricity is projected to soar. People, governments and businesses are switching en masse to electricity as a power source for cars, heating and heavy industry in an effort to lower carbon emissions and avoid the worst effects of climate change.

“We all share three key goals around electricity,” said Bryan Purcell, vice-president of policy and programs at The Atmospheric Fund, which commissioned the new report. “We need it to be reliable. We need it to be affordable. And increasingly, I think people agree we need it to be clean.

“Our message is really that these priorities are actually aligned: the most cost-effective pathway is also the most reliable and the lowest carbon.”

As the federal government finalizes its Clean Energy Standard, which will mandate net-zero electricity from coast to coast by 2035, the report says Ontario needs to start making significant investments in its grid, especially considering the lengthy timelines required to build the transmission, generation and storage required to simultaneously meet demand and reduce emissions. Getting to net-zero means shifting to systems that don’t produce greenhouse gas emissions, while offsetting remaining emissions.

Business leaders and municipalities have also been urging the Ontario government to start building more renewables. All construction was halted in 2018 when Premier Doug Ford was first elected. Ford, who at the time railed against electric vehicle (EV) subsidies, has since handed out hundreds of millions of dollars in taxpayer money to attract mining and manufacturing companies to Ontario to ensure the local economy benefits from the EV supply chain.

Those businesses want clean electricity to reduce their own emissions and they are increasingly wary of relying on natural gas after prices spiked this year following the Russian invasion of Ukraine.

“It’s very clear that if we’re going to go to net-zero, renewables are going to be part of the mix,” said Travis Lusney, the report’s author and director of power systems at Power Advisory. “How far you go is dependent on a lot of factors, even outside of the electricity sector.”

With widespread demand for renewables from both households and businesses, and a significant amount of capital that wants to invest in renewable generation, Lusney said, Ontario has a limited time to harness these forces to meet our climate goals.

The Power Authority report lays out three paths to a net-zero grid by 2035, all of which reduce reliance on natural gas generation to less than three per cent.

In the first scenario, significant conservation programs would reduce demand while nuclear refurbishments would keep the Pickering plant in operation and add a new small nuclear reactor at Darlington. In the second scenario, there’s no new conservation. In the third, there’s no new nuclear.

In all three scenarios, the report finds that a 97 per cent non-emitting grid can be achieved by building new transmission lines, solar and wind generation as well as energy storage facilities. This would allow the grid to reduce its dependence on natural gas to a few peak demand days in mid summer.

The result: Instead of a 400 per cent rise in electricity emissions, as the IESO currently projects, carbon emissions will be 85 per cent lower by 2035.

In each scenario, hydro prices will be lower than they would be if the province goes through with its plan to build new gas plants, the report concludes, mostly because gas is expected to get more expensive, a rise that will be exacerbated by the increase in carbon tax. Meanwhile, prices for wind and solar, which are already cheaper than natural gas, are expected to fall.

The IESO is scheduled to produce its own report in December laying out the pathway to a net-zero grid while meeting increased demand.

“So really, the question for IESO is: If not renewables, what do you expect to actually fill that void?” said Lusney. “We don’t think there’s much that can do that quickly other than renewables and conservation.”


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