It is widely accepted that conventional energy sources are in need of improvement and reform. However, renewable energy has yet to break through the market as dominate energy providers even with generous government subsidies. Renewable energy technology is unreliable and does not meet current energy needs. While the cost of all energy production is subsidized in Canada, special treatment is given to renewable sources.
Energy utilities in Canada are purchasing energy from renewable providers at a premium compared to the current market price. Through the Feed-In Tariff (FIT) program, different levels of tariff are set for electricity from various renewable sources. This means that the Ontario Power Authority will pay different rates for energy depending on its renewable source. According to the OPA FIT price schedule for 2014, it is willing to pay 11.5₵/kWh for energy from on-shore wind projects while paying 29.1₵/kWh for energy from solar projects. The program arbitrarily awards subsidies to different technologies, instead of according to their cost-effectiveness. In contrast, Ontario households currently pay 7.2₵/kWh during off-peak times. There will no doubt be an increase in energy prices as the Ontario energy mix shifts towards renewable sources. Europe is a perfect example of this. Since 2008, electricity prices have raised just under 20% for households and just over 20% for businesses, according to Eurostat, because of similar programs.
In addition, wind power tends to be produced at times when it is least needed. According to a 2013 study by the Fraser Institute, eighty percent of wind power generated in Ontario is so far out of phase with demand that the entire output is surplus and is exported at a substantial loss. The conservative study estimates “that the province has already lost close to $2-billion on such exports.” Moreover, wind and solar facilities are generally built in rural and remote locations, far from peak demand. The long transmission distances further increases electricity costs.
The Ontario Green Energy Act, introduced in 2009 by former premier Dalton McGuinty, promised to create 50,000 jobs. However, it was reported by Jim McCarter, Ontario’s former Auditor General that only 30,000 jobs were created with a large majority belonging in construction, lasting only one to three years. Furthermore, McCarter noted that, “studies in other countries have shown that for each job created through renewable energy programs, about two to four jobs are often lost in other sectors of the economy because of higher electricity prices.”
Utilities across Europe began closing fossil-fuel power plants because they were less profitable than the highly subsidized renewable energy producers. This included the closing of 50 GWs of gas-fired plants, which is making a huge entrance as the next viable energy source in North America. The intermittent nature of wind and solar power generation means that buffers such as on-off gas plants are required to meet grid demand.
In a twisted fate of free market economics, the EU issued a call for reform to high subsidies for renewable energy on November 5, 2013. The press release called for more “back-up capacities for renewable energy, mostly fossil fuel energy which is produced when there is no sun or wind.” The communication also stated that financial support for renewable energy should limited to what is necessary.
Energy subsidies undermine the working of the free market and should be eliminated for all sources to ensure that the best and most efficient energy provider wins out. The supply and demand for energy should determine the price of the commodity. It is clear that government intervention in an area this complex has unpredictable results. Even with the rising cost of oil and the falling cost of renewable energy, there is still doubt that wind and solar energy will ever reach grid parity in the long term. Regardless of any government incentives, this will only happen with the technology is ready to supply what the market demands.
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