Green Energy in Ontario – R.I.P.

The PC government is preparing to repeal the Green Energy Act in Ontario

In a news release on Thursday, September 20, 2018 the government announced it has introduced Bill 34, legislation to repeal the Green Energy Act.

There is nothing newsworthy in the announcement since there are no investments planned in green energy left following the July 13, 2018 Ministry announcement of the cancellation of 758 renewable energy contracts and the July 25, 2018 passing of Bill 2 terminating the White Pines Wind Project. It is simply a matter of finishing up the paperwork.

So why the big announcement?

Maybe it’s a slow news week

I wouldn’t have paid any attention to it myself except that the wording of the announcement by Minister Greg Rickford misleads the public about what the government has accomplished thus far in the electricity sector. The rhetoric is enough to make informed individuals gag. It overshadows the positive steps taken thus far in their term. Bear in mind that the government has only dismantled initiatives from the previous government and not yet created anything that would resemble a sustainable plan for the future.

Promises, promises

The televised Ministry announcement has a number of references that reek of political vengefulness to the point of damaging the government’s credibility.

Here are some quotes from the announcement that reference promises from the election campaign:

• “Promised to repeal the green energy act”
• “Promised that they would give families relief from the skyrocketing hydro prices that the act helped usher in”
• “Promised to once again restore the local decision-making that the green energy act stripped from Ontario Communities”

Greg Rickford states “Promise made, promise kept”.

Well… yes and no.

Yes, the Green Energy Act is being repealed. In fact this is a housekeeping gesture to clean up the legislation.

The government has yet to do anything that will lower our electricity cost. No promise kept.

Yes, local decision-making has been restored to Ontario communities. There is nothing left to decide since there are no projects….

Perhaps two out of three isn’t bad?

Not in my view. I expect much better from our new government.

Look at the quick facts posted with the Ministry announcement. The repeal of the Green Energy Act does nothing to improve the current situation.

• According to the Ontario Energy Board and the Independent Electricity System Operator, wind and solar added $3.75 billion in costs to electricity bills in 2017. Nothing Changes
• Wind and solar represent just 11 per cent of total generation in Ontario, but reflect 30 per cent of Global Adjustment costs that are borne by electricity customers. Nothing Changes
• In 2017, 26 per cent of electricity generated from wind and solar was curtailed, or wasted. This is electricity that Ontarians paid for, but didn’t need or use. Nothing Changes

It’s nice that the government has recognized the reality of the situation but frustrating that there hasn’t been anything done to improve it yet.

Let’s set aside the rhetoric and have a look at how we got here. Then we will see what is really happening and importantly what is not.

What is the Green Energy Act?

The Green Energy Act (formally the Green Energy and Green Economy Act, 2009) was passed by the former Liberal government as a mechanism to expand renewable energy and create ‘green’ jobs in Ontario. Wikipedia has an extensive description of it should anyone feel the urge to learn more.

The Act was created as a result of government policy dating back to a 2005 decision to eliminate coal as a fuel for generation in Ontario and establish a leadership role in the trillion-dollar international green energy industry. It triggered the beginning of the ‘Feed-in-Tariff (FIT)’ era where renewable generators would be offered long-term guaranteed price contracts and a fast-track approval process for grid connection. Contracts were offered for 20 years for all renewable projects except waterpower which was 40 years.

The term ‘FIT’ is an industry buzzword that simply defines the terms for a generator supplying energy to the electrical grid.

It was also intended to create jobs in Ontario. The projection for job creation was from 50 to 75 thousand.

The Act was consistent with provincial and national initiatives to reduce greenhouse gas emissions.

The Green Energy Highlights (and Low-lights)

The initial FIT contract offerings in 2009 were so lucrative that there was a stampede of investors vying for a place in the queue for the assessment and approval process. The applications exceeded the capacity of the distribution system and many investors didn’t make the cut-off.

2009 FIT Pricing

2017 FIT Pricing

Source: Ieso.ca

There were 5 phases of the FIT program which are largely responsible for more than 3,880 MW of contracted embedded generation as of year-end 2017. That is in the ballpark of 10% of Ontario’s total generation capacity. The contract pricing has been reduced over the last few years of the program however it remains unreasonably high.

The building of new infrastructure has indeed created many construction jobs in Ontario. A report from the Environmental Defense claims direct and indirect job creation of 91,000 in solar and 89,000 in wind sectors.

In 2010 the Ontario government signed a 9.7 billion dollar deal with a South Korean consortium (including Samsung) to set up production facilities in Ontario for wind and solar energy equipment. The plan also included development of large-scale wind and solar farms.

The green energy would be near-zero emissions and reduce the carbon output of generation in Ontario.

The final FIT application period was held in 2016.

The reality check please…

On the downside of the initiative, the contract offer price was well in excess of market value – as high as 80 cents per kWh for rooftop solar energy. The result was overpriced energy with long-term contracts. When the rising electricity rates caught public attention it became apparent that the ‘green’ part of green energy was more about money than the environment.

The major share of renewable generation procured under the FIT programs is not ‘grid friendly’. It is not visible to system operators, provides no voltage support and cannot be curtailed when there is excess generation capacity. Wind generation dispatch capability was not introduced until 2013 and only applies to transmission-connected wind resources.

Somebody – not going to say who – led the public to believe that the renewable generation was to compensate for the closure of the coal plants in Ontario. That would be inaccurate. The performance characteristics of renewable generators are not comparable to a fossil fuel burning plant. The province would still require new gas generators in addition to the renewables. All of this has contributed to an over-supply of generation in Ontario.

An independent study by the conservative Fraser Institute in 2013 “Environmental and Economic Consequences of Ontario’s Green Energy Act (GEA)” authored by Ross McKitrick concluded that 80% of Ontario’s wind power is generated when it isn’t needed. Note that the information presented in the report is very difficult to validate so it warrants some degree of scepticism.

In 2012 the World Trade Organization (WTO) ruled part of the Ontario Green Energy and Green Economy Act (GEA) illegal. The GEA required project proposals to have 60% Ontario content to be considered. It was determined that ‘Buy Local’ terms on renewable power projects, intended to ensure local development and jobs for Ontarians, violate international free-trade rules. Ontario appealed the ruling and lost. So much for the jobs.

Fast tracking approvals sidelined local authorities with objections to wind and solar farms.

In 2013 the government slashed $3.7 billion from the 2010 $9.7 billion Samsung deal.

In 2017 Siemens announced it is closing its windmill-blade factory in Tillsonburg with a loss of 350 jobs.

All and all, the Green Energy Act looks like a swing… and a miss.

Where does that leave Ontario now?

With the July 2018 FIT application cancellations and the termination of the White Pines wind project there won’t be any new renewable projects any time soon. The cancellation of the White Pines project will incur an estimated cost of $100 million which will find its way into electricity rates.

The renewable generation that was completed through the FIT programs has contract guarantees for 20 to 40 years. That’s a very long time. Ratepayers will continue to pay for this renewable energy at the contracted rate.

The cancellation of planned renewable generation to date save ratepayers nothing. The action avoids future costs and associated rate increases. There’s a difference between ‘saving’ and ‘avoiding’ costs that people should understand.

The real opportunity for savings lies with the existing renewable energy contracts. There are those who claim that the government should pass legislation declaring the lucrative contracts void. I cannot believe anyone in their right mind would think that is a good idea. However, strange things are happening in Queen’s Park these days…

A more creative approach would be to change the tax structure to recover some of the money from the renewable generators and use it to lower rates. That would be easy.

While you may not be able to touch the long-term renewable contracts, tax rates are at the government’s discretion…

There remains a great deal of uncertainty about the long-term energy plan for Ontario as the new government has yet to figure things out.

The takeaway

Halting the green energy initiatives at this point in time is what the majority of Ontarians seem to want. Much as the use of renewable energy sources is an environmentally responsible choice, the initiative in Ontario has been entirely about making money.

The repeal of the Green Energy Act announced on September 20 does nothing to lower our existing electricity cost and will not lower our bills.

I bring attention to this fact because the government is telling us that they have kept a promise of lowering electricity costs – and they have not. Truthfully they have only increased short-term costs. The challenge of any material cost reduction remains untouched.

Once again the government announcement misleads the public. I’m seeing a pattern here.

Once again I say stop the nonsense and get on with the job you were elected to do.

Call a news conference when you’ve done something meaningful and sustainable.

If I want to see a circus show I’ll get tickets for Cirque du Soleil next time they’re in town. The one happening at Queens Park is not worth the price of admission.

Derek

Author: Derek Hughes

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