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Electricity - Where are Prices Going?

Ontario, Canada

Ontario's Hourly Spot Price - Driven by weather, economic activity and generation available.

Electricity is priced each hour in Ontario based on supply and demand. The hourly demand is based on business and home use, driven by economic activity and weather. Supply is based on available generation, imports and mechanical breakdowns in the system.

Factors affecting prices

  • Manufacturing plant electricity demand.
  • New generation required in Ontario will come from expensive sources. For example, the government is paying 13.5 cents/kWh for new wind power and 54 to 80.2 cents/kWh for some solar.
  • Ontario has closed the coal generation units.
  • Electricity use is expected to increase long term at 2-3% per year.
  • Central air conditioners continue to be installed in high numbers in Ontario.
  • Several refurbished nuclear generation units are coming back online.

The result is that base load generation, which is on 24/7, is increasing while peaking capability is decreasing. It is likely that this will cause off peak prices to be lower, but peak prices to be more volatile.

We've seen gas prices a Dawn (Ontario's main gas trading hub) increase substantially during the winter of 2018/2019, this has pushed the wholesale electricty rates up about 30%. This is becuase gas is used to satify the demand for peak electricity generation.

Global Adjustment. The GA is forecasted to drop about 3.3 c to 7.05 cents/kWh for the next year. About half of this drop is due to the governments recently implemented Fair Hydro Plan. The rest is due to higher forecasted wholesale electricity rates driven by higher natural gas rates and lower financing costs of the old hydro assets. In general higher HOEP prices result in lower a GA's'.

  • Nuclear power reliability. Since 38% of Ontario power is supplied by nuclear plants if a nuclear plant goes off-line then the shortfall will need to be imported or produced by natural gas.
  • Natural gas prices. Since 28% of Ontario power is supplied by natural gas then a spike in gas will definintely affect power prices.

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