The TRUE Cost of Electricity

By Cam Mather

Macleans magazine recently had another article on the high cost of green power. I openly admit to being biased (extremely biased in this department) so feel free to factor this into your perception of this tirade. But once again the mainstream media got the numbers wrong.

I’m sure it’s tough for a reporter trying to cover a topic as big as electricity, so they tend to get it wrong. Since I moved off the electricity grid I’ve been a huge electricity market nerd and I follow the topic religiously and I pay attention and remember the numbers.

When I talk about the true cost of electricity I’m not talking about externalities. These are the costs that capitalism doesn’t incorporate into the price of any product. These would include the degradation of the natural environment, the production of greenhouse gases, increased death rates from burning coal, etc. Nope, I’m just talking about what it really costs to generate electricity.

The article in Macleans claimed that green power is going to leave Ontario ratepayers on the hook for higher electricity rates. It ignores the fact that right now we’re on the hook for debt that was accrued because we never paid the actual cost of the electricity we’ve been using for decades, so now we have this stilted perception of what electricity really costs.

Ontario is heavily dependent on nuclear power plants that were really expensive to build. The plants were financed with bonds, which basically postponed paying for their construction. So we had a premier named Mike Harris who decided to break up our power utility Ontario Hydro. When he did, it had $38 billion in debt. If this debt had been reflected in people’s electricity bills the bills would have been much higher. What successive governments did though was sliced and diced this debt, made accounting entries, hid some here, moved some there, and whittled away at the amount on paper, but the number never changed. When I wrote a letter to the Globe and Mail last year, they changed my $38 billion number to $24 billion. Apparently this is what the current website said it was, but they were wrong.

These nuclear plants make a lot of nuclear waste and Atomic Energy of Canada Limited (AECL) says it’s going to cost us about $30 billion to dispose of it. That is also not incorporated into people’s electricity rates. It’s a direct cost of generating nuclear powered electricity, but we don’t pay for it. It’s like how if I put up a million dollar wind turbine I have to pay for the liability insurance, but the liability on a nuclear plant is so big that taxpayers cover it. Again, another amount that is not factored into the cost.

Now we have to replace or refurbish almost 80% of the existing generation in the province in the next 15 years because the plants are old. Originally the government had figured that would be $40 billion. Plus they had to refurbish some older plants to squeeze a few years out of them and that was about $20 billion. So what’s that, 40, 30, 40, 20, … $130 billion? Ouch. This is all money that electricity ratepayers are not paying on their electricity bills.

So you can see how a green power promoter might get a little tired of people suggesting that green power is expensive. Sure it is. So is traditional electricity, we just don’t charge the real cost. In Ontario the Independent Electricity System Operator (IESO) purchases electricity on behalf of users. Their website tracks the daily fluctuation in price Macleans chose to compare the current prices being offered for solar and wind power to a time when the market price for electricity was 4.3¢. Now 44¢ for large-scale solar seems pretty expensive compared to this price (remember, which doesn’t factor in any of the things I mentioned previously) but I’ve seen the spot price for electricity on this website at over $1. Think about it. You buy a product for $1 and sell it back to consumers for a nickel. Does this sound like a good business model? Selling it so inexpensively sure doesn’t encourage consumers to use it responsibly.

And the time when grid power is most expensive, peak hours, is the time when solar power is most available to run all those air conditioners.

As someone who lives off-the-electricity-grid I know electricity is expensive and hard to generate. I also know it is not infinite and should be treated with a real appreciation for what a miracle it is and how much better it makes our lives. To say green power is expensive compared to electricity from coal or nukes is absolutely ludicrous. To not factor in the true costs of coal and nuclear power is false and misleading. For governments and utilities to not charge the true cost of electricity distorts the market and people’s perception of the value of this service.

In Ontario the government has finally had the kahunas to put a realistic price on electricity, this being green power. Once traditional electricity is accounted for at its true cost renewable energy will suddenly be shown as being very competitive. No CO2 from coal. No legacy of nuclear waste and nuclear weapons proliferation. No oil and gas having to be purchased and burned at rising costs. No oil spills in the gulf to fuel the Lennox Generating Station near my home that burns crude oil. I’ll take green power every time. Bring it on!

Michelle & Cam in front of their solar panels

3 Responses to “The TRUE Cost of Electricity”

  • David:

    Interesting. Though to be sure, solar panels are not exactly green. As they need to be manufactured.

    We live in a complex society, where complexity may be our undoing. Winding down complexity has never gone smoothly.

    Passive solar, is a more elegant approach to solar energy use than active. But alas our world is less than elegant, and complexity has determined to create a world that is an technological marvel, though not sustainable in anyway.

  • Hi Neil
    Sure did! Check out the latest Maclean’s Letters to the Editor! 🙂

  • Neil B.:

    Awesome article Cam!

    I hope you wrote to Macleans Magazine and straightened them out.

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About Cam
Cam Mather and his wife Michelle live independently off the electricity grid using the sun and wind to power their home and their CSA. Cam is working towards the goal of making his home “zero-carbon” and with his extensive garden he aims to grow as much of his own food as possible. He is available to speak at conferences and other events and has motivated many people to integrate renewable energy into their lives, reduce their footprint on the planet and get started on the path to personal food, fuel and financial independence.
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