OPINION: Solar and wind power make electricity more expensive

Published Jan 01, 2025 • Last updated Jan 01, 2025 • 2 minute read

Workers install solar panels at the new community solar farm in Shediac, which began operating in 2023.

As a new year dawns and winter takes hold, it’s worth considering the cost of energy. After a meeting in Italy last spring, the G7 countries (including Canada) pledged to triple renewable energy sources (e.g. wind, solar) globally to ensure an “affordable” energy future. But while direct costs for wind and solar are dropping, they remain expensive due in part to the backup energy sources required when renewables are not available.

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In short, an “affordable” energy future is incompatible with increased reliance on renewables. Here’s why.

Wind and solar energy are intermittent, meaning they aren’t consistently available, so we need an alternative power source when there’s no sunlight or wind given the current limited ability to store energy from solar and wind. So we must maintain enough energy capacity in a parallel system, typically powered by natural gas. Constructing and upkeeping a secondary energy source results in higher overall energy costs because two energy systems cost more than one.

Therefore, when evaluating the costs of renewables, we must consider the costs of backup energy.

Often, when proponents claim that wind and solar sources are cheaper than fossil fuels, they ignore these costs. A recent study published in Energy, a peer-reviewed energy and engineering journal, found that—after accounting for backup, energy storage, and associated indirect costs—solar power costs skyrocketed from US$36 per megawatt-hour (MWh) to as high as US$1,548 ,and wind generation costs increase from US$40 to up to US$504 per MWh.

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This is why, when governments phase out fossil fuels to expand the role of renewable sources in the electricity grid, electricity becomes more expensive. A study by University of Chicago economists showed that between 1990 and 2015, U.S. states that mandated minimum renewable power sources experienced significant electricity price increases after accounting for backup infrastructure and other costs. Specifically, in those states electricity prices increased by an average of 11%, costing consumers an additional $30 billion annually. The study also found electricity prices grew more expensive over time and, by the 12th year, electricity prices were 17% higher (on average).

Europe is another case in point. Between 2006 and 2019, solar and wind sources went from representing around 5% of Germany’s electricity generation to almost 30% in 2019. During that same period, German households experienced an increase in electricity prices from 19.46¢ to 30.46¢ per kilowatt hour — a rise of more than 56%. This surge in prices occurred before the war in Ukraine, which led to an unprecedented price spike in 2022.

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For Canada, the outlook is also dire. In a recent report, TD Bank estimated that replacing existing gas generators with renewables (such as solar and wind) in Ontario could increase average electricity costs by 20% by 2035 compared to 2021.

In Alberta, electricity prices would increase by up to 66% by 2035 compared to a scenario without changes. These increases are on top of the 15% to 20% increase in average generation costs expected by 2035 under current government policies.

When accounting for backup costs, renewable-powered electricity is more expensive than fossil fuels. Policymakers in Ottawa and across Canada must recognize that integrating renewables into electricity grids can lead to significant price increases for consumers — and they should be honest about that fact with Canadians in 2025 and beyond.

Julio Mejia and Elmira Aliakbari are analysts at the Fraser Institute

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