The Ontario Energy Board recently announced that time-of-use hydro rates will increase by 0.5 ¢/kWh as of November 1, 2013, equivalent to a 3% monthly increase for the average household or small business. The Ontario Energy Board cites “…more generation from sources including renewables along with higher costs related to the market price of natural gas” as factors contributing to the rate increase. However, the relative impacts of renewables and conventional energy sources (e.g. natural gas, coal, hydro etc…) on Ontario energy prices have not been well communicated to the Ontario consumer by the government or the media – as a result, the merits of Ontario’s Green Energy Act are being fiercely debated in the province. To get a more objective view of where Ontario’s Clean Energy initiatives may be taking the province, look towards Germany’s own energy revolution, or Energiewende, already well underway.
Like the Ontario experience, the success of Germany’s energy revolution experience is a subject of public debate. Amory Lovins at the Rocky Mountain Institute recently took aim at three of the more common concerns surrounding the Energiewende, namely 1) Coal use has increased as a result of adopting renewables, 2) Renewables make the grid unreliable, and 3) Subsidies are negatively affecting the German economy. The German experience described by Lovins (summarized below) may offer several key insights to inform the debate in Ontario.
1) Coal use has increased as a result of renewables – Many news stories have claimed that Germany has been building numerous coal-fired plants to deal with the variable output of renewable sources. Closer inspection reveals that many planned coal projects have been cancelled or shelved, and that some of the newly commissioned coal plants are intended to replace older, less efficient plants. Although the German Energy Agency is planning on adding 11.3 GW of new coal capacity by 2020, it also expects 18.5 GW of existing coal-fired generation to be retired in the same period, for a net decline of 7.2 GW.
2) Renewables are making the grid unreliable – The German grid is not being destabilized by renewables – Germany ranks #1 in European grid reliability. Further, Germany and other countries with high shares of renewable power (Spain – 22%, Denmark – 30%) are far more reliable than the fossil-fueled US power grid. In fact, high shares of renewable power correlate with more reliable power delivery across Europe.
3) Subsidies negatively affect the economy – In 2012, German energy prices were roughly 26 ¢/kWh, 3.6 ¢/kWh of which is the renewable energy surcharge. However, this surcharge is not applied evenly to all consumers – many surcharge exemptions are given to industry, inflating the surcharge on other ratepayers by an estimated 150%. In 2012, the surcharge represented only 3% of the average German’s household energy costs. Further, the surcharge is expected to decrease in the coming years, as some fixed-price renewable contracts (which gave higher prices to renewable energy generators than contracts offer today) begin to expire.
Despite the small renewable surcharge, the aim of the Energiewende seems to be well supported by the German public, with 84% of residents in support of reaching 100% renewables “as quickly as possible”. Aside from the 382,000 jobs related to the renewable energy industry, many Germans have a direct financial stake in the energy system. Nearly 50% of the country’s solar and wind power installations are owned locally, an approach which undoubtedly reduces siting disputes (i.e. NIMBYism) while delivering consistent revenue streams to local economies.
The energy revolution in Germany has yielded significant value to the national economy. Between 1991 and 2011, coal generation fell 14%, nuclear generation fell 30%, and renewables grew by 614%. Renewables now supply 23% of the total national electricity consumption, roughly 85% of which comes from non-hydro sources like wind, solar, and biomass. Far from crashing the economy during this period, the energy revolution decreased primary energy use by 11% and decreased carbon emissions by 26%, while German real GDP rose 37%.
The global transition towards renewables appears to be well underway – Germany, China, Japan, and India now generate more electricity from non-hydro renewables than they do from nuclear power, and global banks are forecasting further reductions to installed renewable energy costs. Ontario’s current nuclear refurbishment plans and loud public opposition to the green energy strategy appear to be in direct opposition to these global trends. The German experience should be closely examined in Ontario to inform both the public and government policy. The merits of a revolutionized energy system, and the risks of maintaining the status quo, should be well-understood and carefully considered by Ontario governments and ratepayers.
Sources:
[1] Lovins, Amory. “Separating Fact from Fiction in Accounts of Germany’s Renewables Revolution”. August 15, 2013 – accessed at http://blog.rmi.org.
[2] Lovins, Amory. “Germany’s Renewables Revolution”. April 18, 2013 – accessed at http://blog.rmi.org.
[3] Farrell, John. “3 Reasons Germans are Going Renewables ‘At All Costs’ ”. October 23, 2013 – accessed at http://www.renewableenergyworld.com.
[4] Ontario Energy Board. “Regulated Price Plan: Price Report (Nov 2013 – Oct 2014). October 17, 2013 – accessed at http://www.ontarioenergyboard.ca/.