Houston — Ontario's new Conservative government has expended much effort in rolling back clean energy programs since assuming office June 29, but the power market impacts of those actions are so far unclear, industry observers said Friday.
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Cancelling Ontario's participation in a carbon-dioxide cap-and-trade program with California and Quebec was the first act committed by the new premier, Doug Ford, upon taking office, and this went into effect on July 3.
During a speech on Thursday, Ford said his government would oppose all other carbon tax schemes, but Canada's federal government plans to impose a $20/mt "backstop" carbon tax on Ontario if it does not have a plan in place by January.
The new government had announced in June that it would wind down the Green Ontario Fund, which was financed by cap-and-trade, by September. It was designed to help people to retrofit homes and businesses with greener technologies.
On Friday, the government announced that it will cancel and wind down 758 renewable energy contracts, saving Ontario ratepayers about C$790 million.
But wpd Canada, the developer of one of those projects, the 18.5-MW White Pines Wind project, said cancelling the project would end up costing more than C$100 million.
'A FAIR BIT OF CONSTERNATION' IN MARKETS
"The rollback efforts will actually cause these markets a fair bit of consternation; every time a major shift in policy happens the entire market needs time to recalibrate and there will be costs," said Warren Mabee, director of the Queen's Institute for Energy & Environmental Policy at Queen's University in Kingston.
"I also think that the markets will use this confusion and lack of clear policy direction from government as a strategic opportunity; they will look to create a more favourable situation for the industry and this may also lead to additional costs," Mabee said in an email Friday. "We can expect that the cost of adjusting to the new policy direction will be passed along to consumers."
A.J. Goulding, an adjunct associate professor of economics at Columbia University in New York, who also serves as president of London Economics International and is based in the company's Toronto office, pointed out that Ontario already has most of its power from zero-emissions sources. As of 3 pm EDT Friday, Ontario was deriving more than 80% of its power from nuclear, hydro, wind, solar and biofuel.
"[While] the new government is clearly shifting the focus away from 'clean' to 'cost,' procurements were already being scaled back under the previous government," Goulding said in an email Friday. "Success for the current government will be if consumer bills are lower when the next election is called than they are today. This is feasible if the government approaches the sector thoughtfully - however, if the new government is simply reactive, it will likely end up increasing costs."
Manan Ahuja, senior director for power at S&P Global Platts Analytics, said the clean energy rollback would likely result in lower prices "mostly in on-peak hours in peak summer or winter months."
"Apart from that, in the shoulder months/off-peak hours, gas is not on the margin (and there's no coal gen) in Ontario, so impact would be minimal in those periods," Ahuja said in an email Friday. "At the same time, wholesale prices could move up if the western New York congestion issues are resolved and exports to New York increase (which is unlikely to happen before end-2022)."
GENEROUS EV REBATES KILLED
One of the programs Ontario's cap-and-trade program was to fund was Ontario's Electric and Hydrogen Vehicle Incentive Program and Electric Vehicle Charging Incentive Program. The Ontario rebate reached as much as C$14,000 for consumers to buy EVs.
Power sector observers have held out EVs as a light of hope to an industry that has had flat or declining demand over the past several years, as various electric devices have improved efficiency.
However, Roman Kramarchuk, managing director of global power, emissions and clean energy at Platts Analytics, said Friday, "Experience in regions ranging from the state of Georgia, to Hong Kong, and even in green-leaning Denmark, new EV sales dropped off considerably as soon as generous subsidy programs expired."
Mark Winfield, who co-chairs the Sustainable Energy Initiative in York University's Faculty of Environmental Studies in Toronto, said, "The marginal cost differences for hybrids/EVs and conventional are significant, so the loss of support, as well as the likely loss of support for charging infrastructure, is likely to affect the market."
VOTERS FELT 'GREEN FATIGUE'
Goulding said Ford's election "reflects a degree of 'green fatigue' among voters," and lower-income consumers who cannot afford green alternatives without government support are unlikely to opt for more expensive, non-emitting energy sources.
"However, engaged consumers will continue to seek green alternatives regardless of subsidies, and corporations concerned about brand equity are likely to continue to make environmentally conscious choices," Goulding said.
Mabee, of Queen's University, said that EVs "may become more attractive than gasoline power for many users as range improves and as costs come down."
And the global corporate appetite for renewable power seems undiminished, he noted.
"It is hard to see that the energy rollbacks can 'turn back the clock,'" Mabee said. "The cost of renewables continues to drop and the business case for 'old' technologies (up to and including nuclear) is far less compelling than it was. Moreover, there is now an experienced group of companies that are prepared to push ahead with projects, and I am sure that they will fight to keep the existing projects (i.e. those under contract) alive."
York University's Winfield said in an email Friday that if the Ford government starts "actually cancelling contracts for renewables that are under construction or in service, that will have an obvious impact on investor confidence in Ontario."
"Where they are headed overall on electricity is unclear other than an apparent double-down on refurbishing existing nuclear and a pull-back on renewables and ... conservation," Winfield said. "Given flat demand, that leaves relatively little room for innovation or distributed generation."
--Mark Watson, firstname.lastname@example.org
--Edited by Richard Rubin, email@example.com