Green Energy Act

It was only a matter of time:

Japan files trade dispute over Ontario solar power rates


GENEVA — Japan has initiated a trade dispute against Canada related to renewable energy equipment in the province of Ontario, the World Trade Organization confirmed on Monday.

The Japanese mission to the WTO said the dispute centres on guaranteed long-term pricing for solar and wind generators made with a certain percentage of locally-produced components.

Some industrial strategy.

You can now add the cost of compensating farmers plus lost rent to the cost of the Samsung deal.

A group of farm families are today vacating land on which they’ve toiled for decades to make way for a South Korean company’s plan to build wind and solar energy projects.

Nineteen farmers were advised a month ago they would need to make way for testing procedures by a consortium led by Samsung, which was given a controversial $7-billion deal by the Liberal government in January to create power facilities by 2015.


The 19 farmers who lease 35 properties have received letters but ORC spokesperson Caroline Knight would not provide a breakdown of how many have to leave the land and how many are required only to provide access, because she said it would impact Samsung’s proprietary information.

Kelly said they were at first leery about the move because of the land loss but the government late last week provided a compensation package that took some of the sting away. Kelly said the province is compensating farmers for what they would have received from the selling of produce, plus compensation for what they spent on growing crops.

The Kellys planted 32 hectares of corn before they received the letter telling them they were losing the 202 hectares they lease.

“It’s pretty good compensation considering that we won’t be able to plant our crops and we won’t be able to rent it anymore,” said Kelly, who declined to give the dollar figure. “No farmer ever wants to lose land.”

And what about the restrictions on the use of prime agricultural land? I guess those rules don’t apply to the government.

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.

Brad Duguid, Ontario’s Energy dictator (aka the Minister of Energy and Infrastructure), has decreed that the Ontario Energy Board must “establish electricity conservation and demand management (“CDM”) targets to be met by licensed electricity distributors” to reduce overall provincial peak electricity demand through such measures by 1330 MW by the end of 2014.

This reduction is apparently in addition to reductions the Green Energy Act will achieve by driving energy prices through the roof.

Markets simply don’t matter when you are dictator. Unfortunately, this dictator is far from benign.

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.

Gerson Lehrman Group provides an interesting assessment of Ontario’s $10 billion dollar deal with Samsung:
Ontario governments like to crow about how great this province is. The Samsung deal reflects a much different reality, a tacit admission that the best the Province is capable of is assembling things under careful supervision from foreign companies (Auto-Pact revisited.) To make it even more vivid, Samsung, which is a relative newcomer to the green energy business, has said it is looking to use expertise from its other heavy industry divisions, including its shipbuilding group, to establish itself as a major manufacturer of wind turbines!
[2.2] the deal had a familiar shape of a developing country “standard”. One partner was a successful international consortium with deep pockets and manufacturing expertise, the other a backward jurisdiction so hungry for jobs that it had to pay the big company what amounts to a bribe to do the deal. The whole thing was arranged directly with the jurisdiction’s leader without the bother of competition. It’s the kind of deal one might expect in the Third World, except that it was Ontario on the Third World side of the equation. But the worst is yet to come: 
[2.3]   there are numerous Ontario companies trying to get a foothold in the green energy business. After all, “wind turbines derived from the shipbuilding”, as was Samsung claim, don’t seem to be a rocket science métier.  If the government had cut a similar deal to support made-in-Ontario innovation, it could perhaps have been justified. Instead, it is slamming the door on these Ontario companies right in their own backyard.
“The Samsung deal is not just about manufacturing wind turbines,” said OEC spokesperson Paul Kahnert.”…It’s a private scheme to generate electricity at outrageous … rates -for years to come….” Kahnert said the province’s electrical utilities operators can buy, install and maintain made-in- Ontario windmills more cheaply without Samsung in the picture. The fact of the matter is therefore quite simple.  The Ontario Government has given away $7B of taxpayer’s money to offshore interests with NO assurance that Ontario society’s investment will create the promised jobs and economies of scale for alternative power generation.
Too true.

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