For the first time in history, the cost of new wind power has come in below the average cost of electricity production in Ontario. The Hon. Bob Chiarelli, Minister of Energy, confirmed the historic milestone in a speech delivered on April 5 at which he announced the results of the latest round of competitive bidding for new renewable energy, also known as Large Renewable Procurement (LRP I).
“Among the best news released last month was the price for wind – with a weighted average price of just 8.5 cents per kilowatt hour – it is evident that the competitive process has served Ontario ratepayers well,” Minister Chiarelli said, noting further that, “[T]he price for wind power is now... below the average cost of electricity production in our province.”
“This price breakthrough is particularly remarkable considering that it is a price for output from new capacity, compared against the average cost of the entire system, which includes large amounts of older depreciated capacity,” notes APPrO Executive Director Jake Brooks. New projects are generally required to meet more stringent standards for environment, siting and community engagement, compared to legacy projects. “It is uncommon for new capacity to be less expensive than old capacity, and even more noteworthy when an entire class of projects collectively undercut system average prices. It bodes well for the future of wind energy.”
Five projects were collectively able to supply, at 8.5 cents per kWh, the 300 MW of wind power solicited in the LRP I procurement process that began in 2014. However, because the volume of proposals far exceeded the 300 MW upper limit set for this round of procurement, it is quite likely that more wind energy capacity can be built in Ontario at similar prices.
Minister Chiarelli took particular pride in stressing how falling prices of wind energy have improved the projected long term cost of power for the system as a whole: “As compared to the total costs built into the 2013 LTEP assumptions, the actual results come in $3.3 billion lower than anticipated, over the life of the contracts. In fact, the results of LRP I will mean the average Ontario residential electricity bill will be about $20 lower per year, compared to what we had projected in the 2013 Long Term Energy Plan.”
He also observed that “of 16 renewable contracts awarded, 13 of them were supported by willing host communities.”