Ontario's Electricity Future

Electricity lines bring low cost power to Ontario Hydro users
 Most industry experts agree that the cost of electricity in Ontario will rise over the coming years.

Here we outline many factors which currently point to an upward trend in Ontario electricity prices:

Increasing Demand

Ontario currently has a generation capacity of approximately 25,000 megawatts of electricity. On an average day, Ontario demand peaks around 21,000 megawatts. However, on many days (mainly due to hot weather), the demand sometimes exceeds 26,000 megawatts, requiring the Independent Electricity System Operator (IESO) to import electricity from neighbouring jurisdictions - usually the USA.

As our population increases and relies more and more on technology, overall Ontario electricity demand is expected to continue rising. Additionally, the electricity supply does not typically run at 100% of capacity, as nuclear plants are often taken out of service for maintenance, and hydroelectric plants are affected by reduced water levels in the Great Lakes.
Nuclear Facts
Ontario has 20 of Canada's 22 nuclear reactors
80% of all electricity generating plants in Ontario will need to be refurbished or replaced in the next 15 to 20 years
441 nuclear power reactors are operating in 30 countries
Electricity Facts
Electricity Sources  Ontario's Electricity Mix 
Hydroelectric and other renewables 22%
Nuclear Energy 52%
Natural Gas and Other 8%
Coal or Oil 18%

Coal Plants Closing

There are currently four coal plants operating in Ontario following the 2005 closure of the Lakeview plant in Toronto. The McGuinty government has committed to close the Lambton, Thunder Bay, and Atikokan plants by the end of 2007, and the Nanticoke plant by the end of 2009, or as soon as possible thereafter.

Closing these coal plants will reduce Ontario's supply by 6,438 megawatts. This lost output will have to be replaced by electricity from other sources, including natural gas. Coal is currently one of the least expensive methods of producing electricity.

Natural Gas

Natural gas is being relied upon to provide electricity in increasing amounts. Production costs are considerably higher than for coal or hydroelectric, and fluctuate greatly depending on the market price for natural gas.

Many climatologists predict a dramatic increase in the number of tropical storms in the Gulf of Mexico in the coming years, which could push the price of natural gas to unexpectedly high levels.

Additionally, many experts believe that the world supply of oil has peaked which could lead to greatly increased natural gas prices in the coming years.

Incentives for Renewable Energy

The McGuinty government has announced incentives to entrepreneurs who are developing alternative sources of energy. This includes a price of 80.2 cents per kWh for solar energy.

These prices are indicative of the very high costs of production for alternative energy sources. These costs will be borne by Ontario electricity consumers.

Government Commitments

The Ontario government has made clear that it is committed to charging consumers the actual costs of producing electricity.

The government has also stated recently that new initiatives will be undertaken to promote conservation. This could take the form of lowering the RPP threshold for the higher-tier rate and/or increasing the gap between the lower-tier and higher-tier rates. Such changes would definitely result in higher electricity prices.

New Nuclear Facilities

In order to meet the future supply requirements, it is expected that Ontario will soon announce the construction of new nuclear facilities. These facilities have an enormous up-front cost, and it can only be assumed that Ontario electricity consumers will be asked to pay for this construction.

Importing Power

In order to meet increased supply requirements in the future, Ontario may have to import electricity from other jurisdictions, usually in the USA, at increased prices.

Climate Change

There is scientific consensus that due to global warming, our summers will be longer and hotter, driving up the demand for electricity primarily due to the increased usage of air conditioners.

Climate change could also affect water levels in the Great Lakes, reducing the amount of hydroelectric generation capacity (as was the case in 2005).