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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From the Frontier Centre for Public Policy

By Ian Madsen

Canada’s growing LNG exports are opening global markets and reducing dependence on U.S. prices, if Ottawa allows the pipelines and export facilities needed to reach those markets

Canada’s LNG advantage is clear, but federal bottlenecks still risk turning a rare opening into another missed opportunity

Canada is finally in a position to profit from global LNG demand. But that opportunity will slip away unless Ottawa supports the pipelines and export capacity needed to reach those markets.

Most major LNG and pipeline projects still need federal impact assessments and approvals, which means Ottawa can delay or block them even when provincial and Indigenous governments are onside. Several major projects are already moving ahead, which makes Ottawa’s role even more important.

The Ksi Lisims floating liquefaction and export facility near Prince Rupert, British Columbia, along with the LNG Canada terminal at Kitimat, B.C., Cedar LNG and a likely expansion of LNG Canada, are all increasing Canada’s export capacity. For the first time, Canada will be able to sell natural gas to overseas buyers instead of relying solely on the U.S. market and its lower prices.

These projects give the northeast B.C. and northwest Alberta Montney region a long-needed outlet for its natural gas. Horizontal drilling and hydraulic fracturing made it possible to tap these reserves at scale. Until 2025, producers had no choice but to sell into the saturated U.S. market at whatever price American buyers offered. Gaining access to world markets marks one of the most significant changes for an industry long tied to U.S. pricing.

According to an International Gas Union report, “Global liquefied natural gas (LNG) trade grew by 2.4 per cent in 2024 to 411.24 million tonnes, connecting 22 exporting markets with 48 importing markets.” LNG still represents a small share of global natural gas production, but it opens the door to buyers willing to pay more than U.S. markets.

LNG Canada is expected to export a meaningful share of Canada’s natural gas when fully operational. Statistics Canada reports that Canada already contributes to global LNG exports, and that contribution is poised to rise as new facilities come online.

Higher returns have encouraged more development in the Montney region, which produces more than half of Canada’s natural gas. A growing share now goes directly to LNG Canada.

Canadian LNG projects have lower estimated break-even costs than several U.S. or Mexican facilities. That gives Canada a cost advantage in Asia, where LNG demand continues to grow.

Asian LNG prices are higher because major buyers such as Japan and South Korea lack domestic natural gas and rely heavily on imports tied to global price benchmarks. In June 2025, LNG in East Asia sold well above Canadian break-even levels. This price difference, combined with Canada’s competitive costs, gives exporters strong margins compared with sales into North American markets.

The International Energy Agency expects global LNG exports to rise significantly by 2030 as Europe replaces Russian pipeline gas and Asian economies increase their LNG use. Canada is entering the global market at the right time, which strengthens the case for expanding LNG capacity.

As Canadian and U.S. LNG exports grow, North American supply will tighten and local prices will rise. Higher domestic prices will raise revenues and shrink the discount that drains billions from Canada’s economy.

Canada loses more than $20 billion a year because of an estimated $20-per-barrel discount on oil and about $2 per gigajoule on natural gas, according to the Frontier Centre for Public Policy’s energy discount tracker. Those losses appear directly in public budgets. Higher natural gas revenues help fund provincial services, health care, infrastructure and Indigenous revenue-sharing agreements that rely on resource income.

Canada is already seeing early gains from selling more natural gas into global markets. Government support for more pipelines and LNG export capacity would build on those gains and lift GDP and incomes. Ottawa’s job is straightforward. Let the industry reach the markets willing to pay.

Ian Madsen is a senior policy analyst at the Frontier Centre for Public Policy.