The Future Cost of Hydro in Ontario Compared to The Price of Residential Solar Power

What Is the Current Hydro/Time-Of-Use (TOU) Prices for Ontario

The province of Ontario prides itself on its ability to produce clean hydro-generated power. Although, due to a province wide increase in demand, supply has become limited. As such, the cost of traditional sources of energy has increased by more than 50% within the last 8 years alone and is likely to continue to see an additional increase of 6-7%each year.

Currently most Hydro customers in Ontario pay Time-Of-Use (TOU) prices, which vary throughout each weekday. This depends on whether demand is on-peak from 7am to 11am and 5pm to 7pm, mid-peak from 11am to 5pm, or off-peak from 7pm to 7am. These varying TOU price periods were put in place to help consumers determine when energy demand and cost are high or low based on the time of day. 

As mentioned earlier TOU pricing has three periods: on-peak, when energy demand and cost is high, mid-peak, when energy demand and cost is moderate, and off-peak, when energy demand and cost is low. Presently, off-peak prices are set to 8.2 cents per kWh, while mid-peak prices are set to 11.3 cents per kWh, and on-peak prices are 17.0 cents per kWh. Additionally, as a bonus, you can get low-cost electricity at off-peak times like over the weekends and holidays. As seen in the circle graph listed below. 

Typically, the Ontario Energy Board (OEB) sets these prices twice a year on May 1st and November 1st. Additionally, with TOU pricing homeowners and small business owners in Ontario are provided more control over their electricity bill costs. By simply adjusting their usage habits. Thus, hydro, TOU prices allow you to save on costs when electricity is more expensive. However, despite these efforts to reduce customers' monthly energy costs, the price of hydro in Ontario continues to increase annually.

Therefore, in today’s economy, residents of Ontario are being encouraged to use rooftop solar panel systems to power their Ontario homes and reduce energy consumption. In fact, Hydro One recommends that customers reduce power consumption and consider methods of self-generation from solar as a key component in cutting back on future Hydro costs.

How Much Will Hydro Cost in Ontario Over the Next 10 Years?

Ontario Hydro is a public utility company that provides electricity to most of Ontario. It is responsible for generating, transmitting, and distributing electricity to homes, businesses, and industries across the province. The company provides electricity to more than 1.3 million customers, generating over 60% of all electricity in Ontario. This utility was first established in 1906. Since then, it has undergone intensive price increases to meet demand.

After years of declining consumption, Ontario has entered a period of increasing electricity demand across the province. This is consistent with the new forecasts from the Independent Electricity System Operator’s (IESO) upcoming Annual Planning Outlook. As stated by this year’s forecast, the province of Ontario is set to see a steady average growth in electricity demand of about 1.7% a year. Accordingly, Ontario Power Generation (OPG) is said to have among the highest hydro rates in all of Canada.

Under this section of the article, we will be providing you a lot of information on the historical trend of hydro costs in Ontario over the last 10+ years, in addition to information about how much hydro costs on average today, along with what it will cost in the future.

The Trend of Historical Electricity Rates (last 10+ years)

The Ontario Energy Board (OEB) has released a report outlining the estimated costs of hydro in the province over the course of the last 10+ years. This report states that, in 2020 to 2021, residential hydro rates increased by 5%. What is more, between 2018 and 2021, the ‘Ontario Financial Accountability Office’ (FAO), estimated that the typical residential ratepayer saw an increase in the price of their electricity of 4.3% on their hydro bills. Despite a report on "Hydro Bills," released on February 16, 2022, by the FAO, which stated that the province of Ontario is committed to lowering its residential electricity bills by 12%.

These are just a few examples of the annual increases to consumers' hydro rates evident over the course of the last 10+ years. Additionally, with information provided by the OEB, with regards to TOU pricing from May 1st, 2006, to February 8th, 2022, it can be estimated that residents of Ontario have seen an overall average increase to their hydro rates of 69.74%. This is further illustrated by the line graph listed below, which highlights the Residential Hydro Price Per kWh Trend throughout 2006 to 2022. 

"Historical Electricity Rates." Historical Electricity Rates | Ontario Energy Board. Web. 16 Mar. 2022.

*Disclaimer; This line graph was created using accurate historical information on TOU rates, provided by the Ontario Energy Board, from which the Average Price per kWh (¢ per kWh) was calculated and included. 

For more information on the historical trend of hydro rates throughout the years with regards to the price per kWh (¢ per kWh), for Ontario consumers please refer to the table below. This table provides accurate historical information on the average price per kWh in Ontario, dating back from May 1, 2006, through to Feb 8, 2022. Highlighting the price per kWh for off-peak hours, mid-peak hours, on-peak hours, in addition to the overall average price per kWh. 

"Historical Electricity Rates." Historical Electricity Rates | Ontario Energy Board. Web. 16 Mar. 2022.

The Average Increase of Hydro Rates Per Year

As the province of Ontario begins to open back up, after the recent uncertainty of the world's global economy, the government's “electricity-rate-relief” program, has come to an end. This program was implemented by the Ontario government to assist families, small businesses, and workers with their increased electricity consumption needs. As such, under the current Ontario government policy, the rate of residential electricity is on track to see an increase of 2% on average per year through to 2040. With no chance of it subsiding soon.

Estimated Historical Trend of Future Hydro Rates (10+ years)

Hydro rates in Ontario have been on the rise for years now. Though, recently, the Liberal Government has made several changes to the way that they are going to go about providing hydro to their residents.

To keep up with the growing demand and make sure that Ontario Hydro can provide electricity for everyone, they have implemented new rates that will be in place until 2024 at least. This increase will be phased in gradually over time, so it won't have an immediate impact on people's budgets or their lifestyles. However, by 2028, Ontarians will see a significant increase in their hydro bills - as much as $200 per year, which is far more than the current provincial average.

How Residential Solar Power Can Save Residents Money on Their Hydro Bills?

The global energy consumption projections for 2040, alongside annually increasing hydro rates, makes a strong argument for investing in new renewable resources such as solar power. Moreover, as consumer needs continue to increase across the province, expensive upgrades and new forms of power generation will be needed to meet the increasing demand. Therefore, Hydro One recommends that customers reduce power consumption and consider new methods of self-generation.

Solar power can now be recognized as the cheapest form of electricity, as stated by the International Energy Agency (IEA) World Energy Outlook 2020.In fact, over the course of the last 8 years the price of solar power has reduced by more than half. Additionally, as stated in a detailed analysis, solar power on average is 20-50% cheaper than the traditional means of power generation, such as Hydro.

Therefore, solar power is a renewable energy source that can save residents money on their hydro bills. With the implementation of solar panels, Ontario residents have been able to save an average of $1,000 per year on their hydro bills. Considering solar installations, provide a clean, financially beneficial power source with considerable savings compared to current utility prices. Thus, it is no surprise that the ‘International Energy Association’ (IEA) expects a 43% increase in solar power by the year 2040.

The Historical Trend of Solar Power (PV) Systems Efficiency & Price

Solar power is rapidly becoming a growing source of electricity for Canadians, specifically for the residents of Ontario. Considering, 98% of Canada’s solar power generation capacity is in Ontario, as many of the regulations have historically been limited to Ontario alone. Furthermore, solar power generation in Canada has seen significant growth since 2010, with installed capacity at the end of 2020 being 3,325 MW.

Additionally, continuous improvements in PV panel manufacturing have significantly reduced the production costs of solar power over time. As such, PV module costs have fallen from $6.18/watt in 2004 to $0.85/watt in 2014. Making solar power a more affordable and attainable renewable resource for Ontarians. Yet despite the increase of available solar energy over the past 10 years, in 2015 solar power (PV) only accounted for 5% of Ontario's overall energy capacity. 

However, due to sharply declining costs, universal access to solar paneling systems is quickly becoming a reality. In fact, solar electricity has grown at a compound annual rate of nearly50% in the past decade. Additionally, over the past two decades, the cost of solar power (PV) has declined by nearly 90%, with future projections indicating another 15%-20%decrease over the course of the next 10 years. For instance, in 2006 to 2016 residents saw a 56.70% decrease in the average price of a 6.5 kW solar power (PV) system. As such, the International Electricity Agency (IEA) forecasts that by 2050, solar electricity could account for nearly 27% of the world’s energy mix. 

Conclusion: Is There a Better Alternative to Ontario Hydro?

Ontario Hydro is an electricity distribution company which is the largest in Canada. What is more, Ontario Hydro has been a part of the Canadian energy sector for more than a hundred years.

The company's history can be divided into five stages: generation and transmission, regulation, power conservation, retailing and financing, and finally restructuring. The company has had many ups and downs in its history. Though for the residents of Ontario, the biggest issue with hydro power will continue to be the annual increase to the cost of electricity. Now more than ever with the ever-increasing demand across the province.

As such, residential solar power (PV) systems present a great alternative to traditional electricity providers. Considering, solar energy is an abundant resource that can be used to provide power to homes and businesses at a fixed rate. Providing you with the ability to reduce or potentially eliminate your hydro costs all together. For all your solar power needs, be sure to contact a professional solar panel installation company, such as SolarUp to ensure you get the most out of your investment.