Ontario's Mining Industry and Rapidly Rising Energy Rates


[DRAFT 1.0] Politicians across Ontario and Canada have been voicing their concerns over the future of the Ontario mining sector, which plays a significant role in the Ontario and Canadian economies.  Recent reports have found that Ontario has experienced a sharp decline in the global mining industry as a desirable place to conduct mining operations. An article in the Financial Post, for instance, reported that Ontario has slipped from 7th to 20th in ranking of best places to mine in the world. As reported by the Ontario Mining Association, part of the challenges in attracting the type of capital investments that allows a mining project to reach the stage of a profitable commercial enterprise are high energy costs. 

To date, the Progressive Conservative Party of Ontario has taken some actions as response to growing concerns over high energy costs for commercial and industrial businesses in Ontario.  These actions have included repealing the Green Energy Act, vocalized concerns over the federal clean fuel standard, removal of the carbon tax from fuel bills, and the implementation of a "Made-in-Ontario Environment Plan", which would include measures that, if accepted by the federal government, would reduce the expected impact on electricity rates.

While competitive long-term energy prices may be key to attracting capital investment and maximizing the value of Ontario's mineral resources, it is highly doubtful that the above-mentioned actions by the Progressive Conservative Party of Ontario will effectively bring a permanent long-term solution to Ontario's high electricity rates.

For instance, the Green Energy Act and the guaranteed above-market tariffs promised thereunder to generators of renewable energy sources (wind, solar, bio-mass) has often been blamed as part of the reason for Ontario's high electricity rates. The Fraser Institute has recently underscored in its report, entitled "Electricity Reforms in Ontario - Getting Power Prices Down", the fact that despite accounting for under 7% of Ontario electricity supply mix (Figure 1.0), renewable sources of energy now represent nearly 40% of the Global Adjustment ("GA"), the component of electricity rates that includes the cost of building new electricity infrastructure in the province, maintaining existing resources, as well as providing conservation and demand management programs. By repealing the Green Energy Act, the Progressive Conservative Party of Ontario argued that doing so would nullify the costly above-market feed-in tariffs promised to generators of renewable energy sources, and therefore, reduce or at least control Ontario electricity rates.

However appealing this may sound, the truth of the matter is that Ontario's struggle with high and rapidly rising electricity rates pre-dates the Green Energy Act, and are due to exploited energy sources.  During the post-WWII economic boom that lead to Ontario's supply-demand problems, and when environmental concerns and climate change were not a consideration, a substantial portion (approximately 25%) of Ontario's electricity was coal-generated; since 2014, due to environmental concerns and climate change, Ontario became the first jurisdiction to achieve a 100% phase-out of coal-generate electricity. In turn, however, this meant that Ontario would need to attribute the missing 25% of coal-generated electricity to other sources.

The Green Energy Act would have been an important solution in the sense of adding energy sources to Ontario's electricity supply mix. While the Progressive Conservative Party of Ontario was right in pointing out that clean and renewable energy sources are initially very expensive and, in that sense, do contribute towards high electricity rates in Ontario, the truth of the matter is that clean and renewable energy sources follow the same trend as new technologies: expensive and inaccessible at first, inexpensive and accessible in the long term. In other words, while the Green Energy Act may not provide immediate gratification to Ontario's high electricity rates, it offered feasible long-term, low-cost, clean and renewable sources of energy that could help address Ontario's high energy rates in the long run. In that sense, repealing the Green Energy Act may rightly be seen as a strategically good, short-term political move by the Progressive Conservative Party of Ontario.

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