Solar and wind power make electricity more expensive—that’s a fact

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.

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 skyrocket 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.

Which is why when governments phase out fossil fuels to expand the role of renewable sources in the electricity grid, electricity become more expensive. In fact, 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 per cent, costing consumers an additional $30 billion annually. The study also found that electricity prices grew more expensive over time, and by the twelfth year, electricity prices were 17 per cent higher (on average).

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

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 per cent by 2035 compared to 2021. In Alberta, electricity prices would increase by up to 66 per cent by 2035 compared to an scenario without changes. These increases are on top of the 15 to 20 per cent increase in average generation costs expected by 2035 under current government policies.

Clearly, 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 Mejía

Policy Analyst

Elmira Aliakbari

Director, Natural Resource Studies, Fraser Institute

Related Topics:#AffordableEnergy #ElmiraAliakbari #FraserInstitute #JulioMejía #SolarPower #WindPower Energy

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US government buys stakes in two Canadian mining companies

Published on October 20, 2025

Todayville

From the Fraser Institute

By Steven Globerman

Prime Minister Mark Carney recently visited the White House for meetings with President Donald Trump. In front of the cameras, the mood was congenial, with both men complimenting each other and promising future cooperation in several areas despite the looming threat of Trump tariffs.

But in the last two weeks, in an effort to secure U.S. access to key critical minerals, the Trump administration has purchased sizable stakes in in two Canadian mining companies—Trilogy Metals and Lithium Americas Corp (LAC). And these aggressive moves by Washington have created a dilemma for Ottawa.

Since news broke of the investments, the Carney government has been quiet, stating only it “welcomes foreign direct investment that benefits Canada’s economy. As part of this process, reviews of foreign investments in critical minerals will be conducted in the best interests of Canadians.”

In the case of LAC, lithium is included in Ottawa’s list of critical minerals that are “essential to Canada’s economic or national security.” And the Investment Canada Act (ICA) requires the government to scrutinize all foreign investments by state-owned investors on national security grounds. Indeed, the ICA specifically notes the potential impact of an investment on critical minerals and critical mineral supply chains.

But since the lithium will be mined and processed in Nevada and presumably utilized in the United States, the Trump administration’s investment will likely have little impact on Canada’s critical mineral supply chain. But here’s the problem. If the Carney government initiates a review, it may enrage Trump at a critical moment in the bilateral relationship, particularly as both governments prepare to renegotiate the Canada-U.S.-Mexico Agreement (CUSMA).

A second dilemma is whether the Carney government should apply the ICA’s “net benefits” test, which measures the investment’s impact on employment, innovation, productivity and economic activity in Canada. The investment must also comport with Canada’s industrial, economic and cultural policies.

Here, the Trump administration’s investment in LAC will likely fail the ICA test, since the main benefit to Canada is that Canadian investors in LAC have been substantially enriched by the U.S. government’s initiative (a week before the Trump administration announced the investment, LAC’s shares were trading at around US$3; two days after the announcement, the shares were trading at US$8.50). And despite any arguments to the contrary, the ICA has never viewed capital gains by Canadian investors as a benefit to Canada.

Similarly, the shares of Trilogy Minerals surged some 200 per cent after the Trump administration announced its investment to support Trilogy’s mineral exploration in Alaska. Again, Canadian shareholders benefited, yet according to the ICA’s current net benefits test, that’s irrelevant.

But in reality, inflows of foreign capital augment domestic savings, which, in turn, provide financing for domestic business investment in Canada. And the prospect of realizing capital gains from acquisitions made by foreign investors encourages startup Canadian companies.

So, what should the Carney government do?

In short, it should revise the ICA so that national security grounds are the sole basis for approving or rejecting investments by foreign governments in Canadian companies. This may still not sit well in Washington, but the prospect of retaliation by the Trump administration should not prevent Canada from applying its sovereign laws. However, the Carney government should eliminate the net benefits test, or at least recognize that foreign investments that enrich Canadian shareholders convey benefits to Canada.

These recent investments by the Trump administration may not be unique. There are hundreds of Canadian-owned mining companies operating in the U.S. and in other jurisdictions, and future investments in some of those companies by the U.S. or other foreign governments are quite possible. Going forward, Canada’s review process should be robust while recognizing all the benefits of foreign investment.

Steven Globerman

Senior Fellow and Addington Chair in Measurement, Fraser Institute

Business

Over two thirds of Canadians say Ottawa should reduce size of federal bureaucracy

Published on October 19, 2025

Todayville

From the Fraser Institute

By Matthew Lau

From 2015 to 2024, headcount at Natural Resources Canada increased 39 per cent even though employment in Canada’s natural resources sector actually fell one per cent. Similarly, there was 382 per cent headcount growth at the federal department for Women and Gender Equality—obviously far higher than the actual growth in Canada’s female population.

According to a recent poll, there’s widespread support among Canadians for reducing the size of the federal bureaucracy. The support extends across the political spectrum. Among the political right, 82.8 per cent agree to reduce the federal bureaucracy compared to only 5.8 per cent who disagree (with the balance neither agreeing nor disagreeing); among political moderates 68.4 per cent agree and only 10.0 per cent disagree; and among the political left 44.8 per cent agree and 26.3 per cent disagree.

Taken together, “67 per cent agreed the federal bureaucracy should be significantly reduced. Only 12 per cent disagreed.” These results shouldn’t be surprising. The federal bureaucracy is ripe for cuts. From 2015 to 2024, the federal government added more than 110,000 new bureaucrats, a 43 per cent increase, which was nearly triple the rate of population growth.

This bureaucratic expansion was totally unjustified. From 2015 to 2024, headcount at Natural Resources Canada increased 39 per cent even though employment in Canada’s natural resources sector actually fell one per cent. Similarly, there was 382 per cent headcount growth at the federal department for Women and Gender Equality—obviously far higher than the actual growth in Canada’s female population. And there are many similar examples.

While in 2025 the number of federal public service jobs fell by three per cent, the cost of the federal bureaucracy actually increased as the number of fulltime equivalents, which accounts for whether those jobs were fulltime or part-time, went up. With the tax burden created by the federal bureaucracy rising so significantly in the past decade, it’s no wonder Canadians overwhelmingly support its reduction.

Another interesting poll result: “While 42 per cent of those surveyed supported the government using artificial intelligence tools to resolve bottlenecks in service delivery, 32 per cent opposed it, with 25 per cent on the fence.” The authors of the poll say the “plurality in favour is surprising, given the novelty of the technology.”

Yet if 67 per cent of Canadians agree with significantly shrinking the federal bureaucracy, then solid support for using AI to increasing efficiency should not be too surprising, even if the technology is relatively new. Separate research finds 58 per cent of Canadian workers say they use AI tools provided by their workplace, and although many of them do not necessarily use AI regularly, of those who report using AI the majority say it improves their productivity.

In fact, there’s massive potential for the government to leverage AI to increase efficiency and control labour expenses. According to a recent study by a think-tank at Toronto Metropolitan University (formerly known as Ryerson), while the federal public service and the overall Canadian workforce are similar in terms of the percentage of roles that could be made more productive by AI, federal employees were twice as likely (58 per cent versus 29 per cent) to have jobs “comprised of tasks that are more likely to be substituted or replaced” by AI.

The opportunity to improve public service efficiency and deliver massive savings to taxpayers is clearly there. However, whether the Carney government will take advantage of this opportunity is questionable. Unlike private businesses, which must continuously innovate and improve operational efficiency to compete in a free market, federal bureaucracies face no competition. As a result, there’s little pressure or incentive to reduce costs and increase efficiency, whether through AI or other process or organizational improvements.

In its upcoming budget and beyond, it would be a shame if the federal government does not, through AI or other changes, restrain the cost of its workforce. Taxpayers deserve, and clearly demand, a break from this ever-increasing burden.