Ontario’s Green Energy Act continues to drive further diversification into the energy sector, as evidenced by the dozens of wind farms and solar panels which are prevalent on many Ontario farms and fields.
With the reduction in electricity demand and the continued introduction of new sources of wind and solar power, the available generation exceeds demand resulting in low prices. The real question for industrial and commercial users remains as to whether prices will stabilize or increase in the coming years, and how to best prepare for a surge in pricing.
All factors suggest that prices will remain low for the next two years, followed by a slow but steady increase during the next decade. The factors influencing the current low pricing includes:
1. Loss of industrial demand:
The loss of large energy intensive industries, such as steel production, during the recession of 2009-10 created a dramatic drop in demand.
2. Conservation at work:
Numerous programs implemented by the Ontario Power Authority for consumers and industry to conserve energy are starting to have an impact on reducing consumption.
3. Continued addition of capacity:
The continued addition of green energy to the grid (i.e. wind farms and solar power) is creating additional capacity, which is helping to ensure pricing remains low.
4. Cost effective alternatives:
The low price of natural gas has provided an option a less carbon producing solution for many coal fired plants, offering cleaner power generation at considerably lower prices.
Although there is a belief that Electric powered motor vehicles will create an increase in demand, it will take significant time before electric powered vehicles become main-stream and the infrastructure to support operation (i.e. Electricity charging stations) is in place. The slow increase in demand will likely result from the slow return of at least a portion of manufacturing demand in conjunction with the removal of coal-fired power plants from the power grid (although many are shut down at present due to the additional capacity and retrofit).
As electricity pricing plans are typically between one to five years in duration, holding off for another couple of years before seeking a long-term electricity pricing agreement is a safe bet.
© Shawn Casemore 2011. All rights reserved.