You could look at the Ontario time-of-use electricity rates, from the point of view of the rate-payers who pay them, as a de facto carbon tax. We pay higher rates during the day because special fossil fired generators must (it is alleged) fire up and meet the extra demand that we make on the system during those hours. During off-peak hours our demands on the system are lower. The zero-carbon nuclear fleet meets by far most of the demand in off peak hours, so prices are lower. The huge low-cost nuclear output keeps a lid on off-peak prices, which would be far higher if there were more wind in our system; wind output tends to be higher in the middle of the night.
The de facto Ontario electricity carbon tax applies only to energy consumption at the retail level. Producers of fossil-fired electricity certainly don’t pay any carbon tax; if they did, our power bills would be higher. As far as the producers of fossil-fired power are concerned, the rate that electricity customers currently pay them covers the high cost of their intermittent operation.
But what if fossil-fired generators did pay a carbon tax? What if they paid what the current U.S. administration considers to have been an informed estimate of the social cost of emitting a metric ton of carbon dioxide in 2015? That estimate is US$37 (in 2007 U.S. dollars); see the Technical Support Document of the informal working group that arrived at the estimate. That was roughly $35 in 2007 Canadian dollars. The US$37 figure is based on a discount rate of 3 percent. The discount rate (not to be confused with the Fed discount rate, which is the rate at which the U.S. central bank lends money to commercial banks) is one of the many, many parameters used in the three assessment models that, combined, were the basis of the US$37 estimate for 2015. So keep in mind that this is not exact science.
If such a social cost of carbon were in effect right now in Canada, what kind of price tag would have come with the output of gas fired generators over the past week?
Well, let’s see. Here is some data for natural gas-fired generators in Ontario during the week of August 25 to August 31:
|Date||kWh||Tons CO2||Cost of CO2||CO2 $/kWh|
|Mon Aug 25||57,828,000||30,731||$1,075,585||$0.0186|
|Tue Aug 26||64,450,000||34,222||$1,197,770||$0.0186|
|Wed Aug 27||53,502,000||28,420||$994,700||$0.0186|
|Thu Aug 28||33,869,000||17,676||$618,660||$0.0183|
|Fri Aug 29||20,695,000||11,393||$398,755||$0.0193|
|Sat Aug 30||11,767,000||6,466||$226,310||$0.0192|
|Sun Aug 31||25,957,000||14,010||$490,350||$0.0189|
|Total for week||268,068,000||142,918||$5,002,130||$0.0187|
So, just over $5 million worth of carbon was dumped into the air in one week. That is if you go by the U.S. administration’s estimate of US$37 per ton, which is $35 in 2007 Canadian dollars.
Looking at these numbers, a few things jump out:
- If that were an average week, then the gas-fired fleet would dump roughly 7.4 million tons of CO2 per year (142,918 tons x 52 weeks).
- 7.4 million tons of CO2 at CAN$35 per ton works out to an annual social cost of carbon of $260,110,760 from Ontario gas-fired power plants.
- … which works out to over $2.6 billion over the next decade for the cost of carbon just from Ontario gas-fired power plants.
- … and that was from a fleet that contributed just 8.97 percent of Ontario’s in-province generated electricity.
So, $5 million for one week, from the fleet that produced less than 10 percent of our electricity. Should we pay that now or later?
I think we should be fair with our electricity pricing, and start adding the cost of carbon into the price. We pay for waste up front with our nuclear fleet. Included in the 5.6 to 7 cent per kWh rate for nuclear power is the estimated cost of dealing with the used fuel bundles. That cost was estimated as $5.94 billion for the first 2.23 million fuel bundles. It was estimated that 2.23 million bundles would have been accumulated by 2012. It would therefore represent the total fuel bundles accumulated since the Ontario nuclear program started in earnest in the early 1970s—four decades ago.
Well, over four decades at current levels of output, the provincial gas-fired fleet will dump $10.4 billion worth of carbon into the air. That is based on one week of operation, a week that saw the gas fleet producing less than 10 percent of our electricity.
Versus zero dollars worth of carbon, from the nuclear fleet which produced 1.93 billion kWh in that week—64.74 percent of the total—for which we paid an average of about six cents per kWh.
Oh, and the cost of waste disposal was included in the six cents per kWh.