Understanding Ontario’s energy-storage opportunity with Enel X: Part 1

Electricity costs have increased substantially in Toronto over the past decade.

In this four-part article, Enel X North America discusses how electricity costs can be managed with energy storage in Ontario. This first part looks at the factors behind the province’s rising energy costs.

Large businesses in Ontario have experienced a drastic increase in electricity costs in the past decade. In Toronto and Ottawa, for example, electricity costs grew 53 per cent and 46 per cent from 2010 to 2016, compared to an average increase of 14 per cent in other Canadian cities over that period, according to a report from the Fraser Institute. By 2016, large industrial organizations in Toronto and Ottawa were paying nearly three times as much for electricity as their counterparts in Montreal and Calgary, the report added.

However, this increase in total electricity costs has coincided with a steady decline in hourly energy prices in Ontario. The Fraser Institute’s report shows that while the total commodity cost for electricity has grown from about 8¢/KWh in 2005 to nearly 12¢/KWh in 2016, the hourly Ontario energy price has declined from roughly 9¢/KWh to less than 2¢/KWh.

What’s behind rising electricity costs in Ontario?

While it’s clear that electricity costs in Ontario are high, it’s helpful to understand what’s behind this problem.

The primary driver of increased electricity costs in Ontario has been the Global Adjustment (GA) charge, which can account for as much as 70 per cent of Ontario customers’ electricity bills. Energy providers impose GA charges to cover their costs of providing adequate generating capacity and conservation programs throughout Ontario. Generally, when the wholesale market price for energy is low, the GA is higher to cover generation costs. The GA rate is also impacted when new conservation projects are launched, when contract payments take effect, and when electricity demand shifts in Ontario. GA costs spiked in 2009 and continue to drive up overall commodity costs for customers.

Much of the increase in GA costs is a result of the Feed-in Tariff, which was introduced as part of legislation passed in 2009 and offered long-term contracts with fixed, above-market prices for power generators with capacity from renewable sources. These prices were based on the Hourly Ontario Energy Price (HOEP), which fluctuates based on supply and demand and on the GA.

As evolving energy-market factors have brought down the HOEP over the past decade, the GA has risen to cover the remaining cost to fulfill these contracts.

Coming in Part 2: How Ontario businesses can lower electricity costs with Enel X.

For more information, contact Enel X.

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