Dalton McGuinty


 Marc Gunther notes the obvious in the September issue of Wired:

Wind farms rely on big tax breaks to be competitive, and right now that money is being wasted. When more people catch wind of that fact, this promising form of alt energy could be labeled a boondoggle for farm states, as corn ethanol has been.

All too true. Yet his proposed solution comes right out of Dalton McGuinty’s playbook:

To make wind power work, then, the government needs to do more than just subsidize turbines. We need to give the federal government more power to overrule local objections and buy rights of way to get high-capacity transmission lines built across several states—say, from the Dakotas to the big cities of the Midwest. That’s how the interstate highway system and natural gas pipelines got built.

Scary.

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Someone thinks Samsung is going to be a force to be reckoned with in renewable energy:

Samsung announced its plans for world domination Tuesday.

The South Korean conglomerate said it would invest approximately $20.6 billion and boost employment by around 45,000 as part of its expansion into solar, energy efficiency, light-emitting diodes and other green markets. Samsung has already said it wants to be number one in solar by 2015.

In January, Samsung said it would invest around $6.6 billion into solar and wind projects into Ontario.

If you work at a green company, this is probably really scary news.

Samsung may indeed have a good shot at dominating renewable energy markets. But as an Ontarian, I’m more afraid of how much it is going to cost me. Dalton’s Samsung giveaway is expected to be as much as $10 billion.

Spain is typically put forward by advocates of renewable energy as the country that other jurisdictions should emulate.  Yet Spain is clearly having second thoughts about its head-long rush into the renewable-energy subsidy game.

For now, electricity generation from the sun’s rays needs to be subsidized because it requires the purchase of new equipment and investment in evolving technologies. But costs are rapidly dropping. And regulators are still learning how to structure stimulus payments so that they yield a stable green industry that supports itself, rather than just costly energy and an economic flash in the pan like Spain’s.

“The industry as a whole learned a lot from what happened in Spain,” said Cassidy DeLine, who analyzes the European solar market for Emerging Energy Research, a firm based in Cambridge, Mass. She noted that other countries had since set subsidies lower and issued stricter standards for solar plants.

Unfortunately, McGuinty and company appear to be slow learners.

When it was announced in the summer of 2007, Spain’s premium payment for solar power was the most generous anywhere — 58 cents per kilowatt-hour — with few strings attached.

In retrospect it was far too high. “Everyone from all over the world was installing in Spain as fast as they could, and every biologist who could add was working in solar,” said Pedro Banda, director general of the Institute of Concentration Photovoltaic Systems, one of the research institutes in Puertollano.

Even inefficient, poorly designed plants could make a profit, and speculation in solar building permits was common.

Despite large declines in solar panel prices since 2007, Ontario is offering 44.3 to 80.2 cents per kilowatt-hour for solar PV projects under its Feed-in Tariff program. This is either very courageous or very stupid. You decide.

In an interesting note on his blog, Tom Adams argues that the politicization of the Ontario Energy Board by the McGuinty government has sacrificed the interests of consumers to political expediency:

The Green Energy Act moved the Ontario Energy Board further away from its once-clear mandate as a dedicated independent arbiter reconciling the interests of gas and electricity providers with the interests of consumers. The gold standard used to be rates that were just and reasonable. Instead, the Green Energy Act has pushed the OEB further towards being yet another puppet agency pushing prevailing government policy.

This legislative change, together with the government’s appointments practices in recent years, have weakened the Board. Other than the Chair and the one part-time member, only one member of the OEB is currently appointed to a term that extends beyond seven months from now. The lack of tenure security gives the government undue influence over the Board, something we don’t allow with our courts. 

Adams also questions whether the debt-strapped McGuinty government is changing the rules to pump up the value of Hydro One before privatizing it: 

About the time the deficit-addled McGuinty government started suggesting that it might privatize Hydro One, the Ontario Energy Board released a decision on the cost of capital, dramatically boosting your future electricity and gas rates and the profitability of utilities…

Could this decision have been influenced by the McGuinty’s government’s proposed privatization of Hydro One or a desire to bailout municipalities, who own most of Ontario’s electricity distribution utilities, without adding to the provincial deficit?

He discouragingly concludes: 

Facing the combined effects of renewing aging infrastructure and imprudent policy adventures, Ontario electricity consumers face a bleak outlook. If we are to strike a more reasonable balance for consumers, Ontario must rebuild the legal foundation of our energy utilities, re-establishing regulatory independence from government fiat. Utility regulators need the protection of long and firm terms of appointment. We can green our energy system without trashing consumers, but to achieve that balance, utility regulation must focus on rates and service quality while environmental regulators focus on issues like emission controls and habitat protection. The Green Energy Act is stuffing your power bill with hidden charges. The Act will blow over eventually, but it will leave a legacy of damage long after it is struck down. 

With the Green Energy Act in effect, Ontario is unlikely to be able to escape its have-not status any time soon.

Poor Brad Duguid. Three days into his new job as Minister of Energy and Infrastructure and he’s stuck with the blame for the $10 billion bill that his predecessor George Smitherman left behind for Ontario electricity ratepayers.

When government and industry talk about green energy, what they mean by green is the green stuff that will be going into the pockets of special corporate and government interests.

In a dramatic move yesterday, Ontario Premier Dalton McGuinty struck a green electricity deal — allegedly the biggest of its kind in the world — that will transmit a subsidy worth as much as $10-billion into the hands of a Korean state enterprise and corporate giant Samsung.

Green economics is a wonderful thing, except for consumers.

The subsidy means that over the next 25 years Ontario electricity users will pay 50% more for the wind and solar electricity produced under the Samsung deal than they would buying the same power from conventional sources. In return for the subsidy, the only thing the average consumer will receive is a warm and fuzzy feeling for having saved the planet from global warming.

With a start like this, it is going to be hard to live up to his name and “do good” for Ontarians.

But not to worry, the Toronto Star is in your corner spouting nonsense.

What’s not to like about a $7 billion investment that will bring four new manufacturing plants and 16,000 jobs to Ontario, as well as supplying 2,500 megawatts of clean energy?

Plenty, according to the provincial opposition parties.

The Conservatives dumped all over the agreement signed yesterday between the Ontario government and a Korean consortium that includes the giant Samsung corporation. They called it a “sweetheart deal” and “a massive multi-billion-dollar giveaway to a foreign-based conglomerate.” The New Democrats described it as a “backroom deal.” The Greens said it was “shocking.”

If this reaction sounds overwrought, it is. As Premier Dalton McGuinty pointed out yesterday, the Samsung agreement is similar to past deals that lured foreign investors to Ontario and away from competing American jurisdictions. As an example, he cited the subsidy to Toyota to put an auto assembly plant in Woodstock.

The aim, said McGuinty, is to make Ontario “the place to be for green energy manufacturing in North America,” and the Samsung deal provides the “critical mass” to achieve that goal.

The horse has already left the barn on this one. Such reactive,  interventionist, industrial policy is doomed to fail.  Assembling wind turbines and solar panels using foreign technology is not the way to prosperity. This is simply bad public policy.

It is only a matter of time before the reality of Smitherman’s and McGuinty’s green legerdemain becomes fully evident. While wholesale electricity costs have been going down, Ontario consumers’ electricity bills have been going up.

Ontario has a power problem.

A strategy to subsidize the province’s nascent green energy industry is starting to sting businesses and many households that find themselves paying the biggest markups on electricity pricing in the country.

Even as electricity demand — and market prices — dropped last year with the global economic downturn, electricity bills have risen steadily on the back of generous contracts signed by the province’s power planning agency. Now, the government of Premier Dalton McGuinty is preparing for a looming political backlash.

[…]

The government is sitting on a “political time bomb,” said Toronto energy lawyer Peter Murphy. “While renewable energy is a great thing for the environment, it’s also expensive.”

[…]

Ontario does not have the highest electricity costs on the continent, but it stands out for the gap between the market price of power and the price charged to consumers. Toronto ranked in the middle of the pack among North American cities, according to a study of consumer prices done by Hydro-Québec last April. But industry observers say prices will increase substantially in Ontario over the next two years as the cost of higher priced renewable energy flows through to consumers.