The Future of Electricity

The cost of electricity is “lightening rod” for public anger and frustration in Ontario. It has become a political hot potato with political parties vying to promise lower electricity bills. Yet, regardless of any political promises, the electricity market is going to be dramatically changed in coming decades by evolving technological innovations and economics.

Ontario doesn’t have an abundance of cheap hydro-electric power like Quebec or Labrador. (Or cheap – and dirty – coal power like some US states) It’s questionable whether we would want to flood significant natural areas to create hydro power anyway. Renewable sources (wind, solar and water) make up 36% of Ontario’s total generating capacity. We have put our money on nuclear power as a carbon-free form of energy although it has significant environmental and financial risks as well.

Electricity prices are relatively high because Ontario has ended up with a substantial over capacity of generating resources. The average electricity demand is about half of total generating capacity – that still has to be paid for. Although nuclear generation is about 35% of total capacity, it supplies 65% of our electric demand. Wind and solar make up 13% of capacity but supply less than 7% of demand. And overall demand in Ontario dropped 4% in 2017.

About half, or more, of a typical residential bill consists of an added “Global Adjustment”. This is described as “a total dollar amount for each month based on the difference between market revenues and [a list of] components” (IESO website). The largest of those ‘components’ is related to nuclear power:

  • Nuclear (non-OPG) and natural gas
  • OPG regulated nuclear and hydro

Although Ontario has a higher average rate for electricity than most Canadian provinces, it pales in comparison to some major American cities according to figures published by Hydro Quebec (2017 Comparison of Electricity Prices in Major North American Cities):

Average monthly bill (including taxes) per 1,000 kWh (April 2017):

  • Toronto $186.24
  • Detroit $231.30
  • Boston $284.50
  • San Francisco $310.86
  • New York $322.70

There are some current trends that will drastically change our electricity market and prices in coming years.

  • Solar technology is reaching price parity with gas and nuclear power, at least in the United States. “solar is already getting to the point where it will beat already built and operating coal, nuclear, and natural gas power — but breakthroughs might be on the horizon as well. (Clean Technica, Feb. 2018) The difference will be significant enough that some people are projecting nuclear power will be begin phasing out around 2050. We can expect a steady increase in renewable energy installations.
  • Just as the cost of solar panels has dropped precipitously, so adoption of battery storage technology is moving quickly. “… the energy storage industry will grow to 35 gigawatts by 2025 and create hundreds of thousands of new jobs along the way. Energy storage will account for $4 billion in cumulative operational savings during that time while avoiding 3.6 million metric tons of carbon emissions (Clean Technica, April, 2018). Battery storage of off-peak electricity will eventually replace current stand-by gas-fired plants in Ontario.
  • Adoption of electric power in transportation, such as Metrolinx electrification of GO Transit and various municipal LRT projects, as well as growing sales of electric and hybrid vehicles, means that consumer purchasing will shift from gasoline to our already available electric capacity. Demand will be more in balance with capacity, revenues will be higher, and the average costs of generation and distribution will be lower. Conservation can help meet peak demand without added capacity.
  • Software innovations like block-chain will allow local neighbourhood generators to form micro-grids. “These private grids, which can serve just a few houses or neighbourhoods, allow consumers and companies to disconnect partly or completely from the existing grid infrastructure. Micro grids are becoming reality thanks to a number of developments like local generation and improved storage capacity in batteries, electric cars, or heat. The more renewable energy sources are connected to local grids, the more storage becomes key. And at the same time, better storage could mean less dependence on being connected to the public grid.” (Will the micro-grid put major power companies out of business?, The Guardian, July, 2014)

All of these changes are leading some to predict that the economic model of paying for metered consumption of electricity will disappear altogether and be replaced by a monthly flat-fee subscription for access to the distribution network. Keep these trends in mind when politicians talk about power. Change is coming but it doesn’t belong to a political party.