What voters don’t know about Ontario electricity costs

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Here from Ottawa-based energy economist Robert Lyman, a summary of the “hidden” costs of generating electric power from renewable sources…what the government has done over the past five years.

THE HIDDEN COSTS OF ONTARIO RENEWABLE ELECTRICITY GENERATION

Ontario residents can be forgiven if they fail to understand the public debate during the current (2014) provincial election about the costs of different types of electricity generation and why these have caused electricity rates for consumers to rise so much over the past ten years. The complexity of the system makes it difficult to explain the costs associated with one source of supply, namely the renewable energy generation  (industrial wind turbines and solar power generators). In this note, I will nonetheless try to explain in layperson’s terms why these costs are significant.

Electricity supply in Ontario takes place within the framework of the policy and legislative framework established by the Ontario government, an important part of which is the Green Energy and Economy Act of 2009 (GEA). Historically, the goal of Ontario electricity policy was to keep electricity rates for consumers as low as possible consistent with the goal of maintaining adequate and reliable supply. Within the current framework, however, that is no longer the goal. The GEA seeks to stimulate investment in renewable energy projects (such as wind, solar, hydro, biomass and biogas) and to increase energy conservation.  To do this, it:

  • Changed the review process for renewable energy projects to reduce environmental assessment and hasten approvals
  • Created a Feed-in-Tariff that the Independent Electricity Systems Operator (IESO) must pay, guaranteeing the specific rates for energy generated from renewable sources (typically, the rates are fixed for the full term of the twenty year contracts, with inflation escalators)
  • Established the right to connect to the electricity grid for renewable energy projects and gave renewable energy source preferential access over other sources of generation
  • Implemented a “smart” grid to support the development of renewable energy projects
  • Eliminated local approval requirements that local governments previously could impose on renewable energy projects

The guaranteed rates paid under the FIT system are not negotiated based upon the actual costs of production. In fact, the actual costs of production are largely unknown…

Read more of Robert Lyman’s summary here: THE HIDDEN COSTS OF ONTARIO RENEWABLE ELECTRICITY GENERATION

Wind power: not free, not reliable

Last week the wind power industry lobby organization, the Canadian Wind Energy Association or CanWEA, put out a news release stating that wind power ought to be part of every government’s (or governments-in-waiting) energy strategy because it is inexpensive and reliable.

Not so, says this Alberta letter writer.

Wind power is neither reliable or inexpensive

By Letter to the Editor on May 17, 2014.

Re: Wind energy has proven to be reliable and cost competitive Herald May 6, 2014

Mr. Weis, representing the Canadian Wind Energy Association (CanWEA), told us that wind generation is reliable and inexpensive. Wind power is neither.

Weis failed to mention that over time, wind facilities produce a mere 32 per cent of their design capacity because they are so unreliable. Over the past half day, the output of wind turbines in Alberta has been less than one per cent of their design capacity! Reliable? And all of this “nothingness” for a few billion dollars? CanWEA also will not tell you that when the wind is blowing, coal and gas plants remain running to stabilize the power grid. As a result, there is little or no reduction of carbon dioxide.

You will recall the decades-old mantra, “Reduce. Reuse. Recycle.” However, installing wind facilities is the opposite of “reduce,” because wind farms duplicate existing generation capacity. They also require massive investments in new inefficient transmission lines. In 2012, Alberta Energy reported, “The existing capacity of the transmission system . . . is insufficient for additional wind-powered generation.” They estimated the cost, in the next four years, at $2.8 billion. Inexpensive? You and I will pay for these lines.

CanWEA does not want you to know that wind turbines are slaughtering thousands of bats and birds annually in Alberta. The Alberta government recently wrote, “Post-construction surveys (showed) . . . 16 bat mortalities per turbine.” Mitigation practices have been studied and proposed, but apparently best practices are not followed and wind companies are not monitoring mortalities at new wind facilities. If monitoring is being done, then animal deaths are being covered up by CanWEA members because they don’t want you to know the gory statistics.

“an expensive environmental scam paid for by Alberta’s citizens”

If we received actual economic or environmental benefits from wind turbines we would all support their development. But wind generation duplicates efficient conventional generation; wind facilities are expensive; wind generation does little or nothing to reduce emissions; wind generation compromises the stability of the power grid and turbines kill thousands of bats and birds in Alberta annually.

Reliable and inexpensive? Hardly. Wind electrical production is an expensive environmental scam paid for by Alberta’s citizens and businesses.

Clive Schaupmeyer

Big Thunder a no-go; Horizon wind loses

A report from Thunder Bay via The NetNewsLedger says that Horizon Wind has not been successful in its attempt to force the Ontario Ministry of the Environment to approve its application for the Big Thunder wind power generation project atop the Nor’Wester escarpment.

The Big Thunder application was filed well over a year ago, and the Ministry has not made a final decision on it.

The project is the subject of numerous legal actions, including one from the Fort William First Nation which has said it was not consulted properly on the wind power generation project.

Big Thunder has been controversial since its beginning: the project was to have required the razing of hundreds of ancient sugar maples in what is the northernmost stand of the trees in Canada, and significant alteration to the landscape.

See the NetNewsLedger report here ; and the Thunder Bay News report here —more news as we receive it will be posted.

 

Enniskillen Mayor: don’t talk to wind power developers

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Mayor urging township residents to not speak to wind developers

By Paul Morden, Sarnia Observer

Thursday, May 15, 2014 12:48:34 EDT

Enniskillen Township residents should feel free to exercise their right to remain silent when wind energy companies come calling, says Mayor Kevin Marriott.

EDF EN Canada has reportedly been approaching residents and groups about its Churchill Wind Project proposal, a 100 to 150-MW wind farm it wants to build in Enniskillen and neighbouring Plympton-Wyoming.

Marriott said he turned down a request from the company to meet with township council, and urged others in the community to do the same.

“We’re unwilling hosts,” Marriott said. “We’re not interested, end of discussion.”

Enniskillen was among approximately 80 Ontario municipalities declaring themselves unwilling hosts for wind turbines after the provincial government said it was changing how it awards renewable energy contracts.

The 2009 Green Energy Act took away municipalities’ planning powers for wind projects, leading to an outcry from many rural communities and municipal councils. Last year, the province said a new system of awarding renewable energy projects will require companies to work with municipalities.

“It will be very, very difficult for a developer to be approved without municipal engagement, in some significant way,” Energy Minister Bob Chiarelli said last June.

But, Marriott said that until the province clarifies what it means by municipal engagement, “We’re being vigilant.”

He advised the anti-wind turbine group, Conservation of Rural Enniskillen (CORE), against meeting with the company.

“I said, ‘Whatever you do, don’t consult with them because they may be able to use that as a check mark,'” Marriott said.

“Who knows what could be construed as public consultation.”

Read the full story here.

Can government end “green” contracts? YES, says Queens law prof

Killing green energy contracts

Hudak’s Ontario Conservatives can easily and legally negate the giveaways the Liberals had lavished on renewables developers

Tim Hudak says the Ontario Conservatives, if elected, will cancel lucrative wind and solar contracts put in place under the Liberals’ green energy program. Can he do so without racking up huge compensation costs?

The answer is yes – if he does it the right way.

The wrong way is to direct the Ontario Power Authority to simply terminate existing contracts, which have robust compensation clauses. The liabilities would dwarf the $1.1-billion paid out by the Liberals for cancelled gas plants.

The right way is to legislate: to enact a statute that declares green contracts to be null and void, and the province to be free from liability. The compensation clauses in the contract will be rendered inoperative if the statute says so.

Statutes can override iron-clad provisions in a contract because that is the nature of legislative supremacy: Legislatures can pass laws of any kind, as long as they are within their jurisdiction and do not offend the constitution. Legislating on electricity production is clearly a provincial power, as are “property and civil rights.”

Since the Canadian constitution does not guarantee property or contract rights, there are no obvious constitutional limitations on a provincial legislature’s ability to change any contract as it likes. Unlike the U.S. Constitution, in Canada there is no constitutional right to compensation for property expropriated by government.
Courts interpret ambiguous statutes as implicitly requiring compensation be paid to the owner of expropriated property. But if the statute is clear that no compensation shall be paid, the words of the statute govern. Where a statute and a contract are in conflict, the statute prevails. Although unilateral and retroactive changes to established contracts might seem to offend the rule of law, the Supreme Court of Canada has said that prospectivity is not a constitutional requirement for legislation.

What about NAFTA? Could a U.S. or Mexican firm with a cancelled green energy contract in Ontario seek compensation for discriminatory expropriation under Chapter 11? If government action singled out a specific party’s contract for termination, it could well be characterized as discriminatory. But if Hudak’s statute cancelled large numbers of contracts for a public policy objective and treated domestic and foreign firms similarly, then NAFTA protections are unlikely to apply.

So, done the right way, a new PC government could indeed rip up green energy contracts with no liability. …

Read the full story and comments here.

Bruce Pardy is Professor of Law at Queen’s University.

Editor’s note: This is one approach to the idea of whether the contracts can be cancelled; another is that they are simply not fulfilled. Under the Environmental Protection Act (section 47), it is clearly stated that the Director of the Ministry of the Environment has the power to choose NOT to approve a Renewable Energy project, and even to rescind an approval, if it is in the “public interest.”

Wind Concerns Ontario wrote to the Minister of Energy Mr Bob Chiarelli some months ago on this topic, citing legal precedents; we received an acknowledgement but have received no response to our questions on this issue

Public sector investment doesn’t=jobs in Ontario

Here, from today’s Financial Post, an opinion piece by Philip Cross, former Chief Economic Analyst at Statistics Canada.

Philip Cross: Public sector investment never ‘kick-starts’ more business investment

Philip Cross, Special to Financial Post | May 13, 2014 | Last Updated: May 13 10:12 AM ET

Ontario public sector investment has tripled, while business investment stagnates

Business investment is the most important dynamic in a growing economy. It commits a firm to a plan for its growth and creates jobs. Investments made today determine what our industrial structure will look like years from now, and how productive those industries will be. For Canada, watching business investment pour into our energy sector 10 times faster than the rest of the economy so far this century locks in that our future lies in producing oil and gas and transporting this to new markets inside and outside of Canada.

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So what does investment say about Ontario’s future? A look at the graph to the right tells an alarming story, with public sector investment tripling since 1998 while private sector investment has stagnated. Over the past 16 years, private sector investment in Ontario rose a total of only 17% from $39.8-billion to $46.4-billion, or 1% a year. Meanwhile, investment by the public sector soared 293% from $9.9-billion to $29.0-billion, or 18% a year (the public sector includes public administration, health, education and utilities, since Ontario’s electricity utilities clearly make decisions at the behest of their political masters, not on the basis of market principles). After a spike related to infrastructure spending during the 2009 recession, public sector investment has settled back into its long-term growth path. As a result, public sector investment has risen from one-quarter the size of private sector investment in 1998 to nearly two-thirds this year. Private and public sector investment are actually converging more than the graph shows, since the billions government is spending on urban transit cannot be separated out from the rest of transportation, which is allocated to the private sector.

One insight jumps out from comparing private versus public sector investment in Ontario. Public sector investment never “kick-starts” more business investment, creating the virtuous circle governments always hope for when launching the latest wave of government capital spending. Instead, more public sector spending creates a vicious circle, where a “failure” of business investment to respond to higher public sector spending justifies the perceived need to further boost public sector investment “to fill the gap.” Repeated enough times over more than a decade of parochial provincial budgets, and the result is a tripling of public service spending while business investment stagnates.

What businesses have been the most reluctant to invest in Ontario’s future, despite the much-vaunted benefits of an engorged public sector, including a highly-educated labour force? Pretty much all of them. Since the peak in 2008, business investment has fallen by $3-billion. The drop is widespread across all industries. Overall, 11 major industry groups have cut back, while only five have invested more. Manufacturing posted the largest drop, with 15 of its 22 member industries paring investment outlays. Before 2008, manufacturing consistently was the largest industry investing in Ontario. Now it has slipped to fourth place. But this is far more than a story of weak manufacturing investment, with important declines also occurring in finance, retail and wholesale trade, recreation, and information and culture among others.

It is not just that public sector investment crowds out business investment, although that clearly is a factor. The aggressive expansion of public sector investment is symptomatic of a wide range of public sector policies that discourage business spending in Ontario— uncompetitive electricity rates, higher minimum wages, more regulation, a new pension plan tax, and high budget deficits that promise future tax hikes….

Read the full story here.

MPAC releases property assessment report

More than a year past its scheduled release, the report from Ontario’s Municipal Property Assessment Corporation (MPAC) on the effect wind turbines may have on property values has just been released.

You may see the report and its statistical appendices here: http://www.mpac.ca/property_owners/IndustrialWindTurbines.asp

We will be conducting an analysis of the report and will provide an opinion on the findings, soon.

Institute for Energy Research: Germany’s green energy experiment a failure

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The Washington D.C.-based energy policy “think tank” the Institute for Energy Research (which receives no funding from either government or industry) has reported that Germany’s experience with “green” energy has been an economic failure.

The Institute reports higher energy prices, energy poverty for Germany’s citizens, and “lavish subsidies” for renewable power generators.

North America (including Ontario) has looked to Germany as an example of green power generation; we can only hope they now heed these lessons.

See the news story and report, here.

Shelburne Mayor: this has got to stop

Shelburne has been living with industrial wind turbines since 2006 so when the people there say wind power is affecting communities negatively, they have a point–they know what damage has been done. Now, the Shelburne mayor is reacting to the government’s plan to pay for curtailed production. If you can cancel gas plants, he says…
  Here is the Orangeville Banner story.

Shelburne mayor asks premier to cancel wind turbine projects

Orangeville Banner

Wind turbine projects should be cancelled in the same manner as power plants in the Greater Toronto Area, according to Shelburne Mayor Ed Crewson.
At county council on Thursday (Sept. 12), Crewson urged his fellow councillors to support a motion asking Premier Kathleen Wynne to cancel wind projects still in the development stage and reimburse investors.
His motion, which will appear on the county’s next council agenda, follows an announcement from the province that wind farm operators will be paid to not generate electricity.
“Someone’s got to say ‘This has got to stop’,” Crewson said. “This is not viable. It is not sustainable.”
Since 2006, Ontario has generated a surplus of electricity and wind farm operators were paid for power regardless of need.
As of Sept. 11, when supply exceeds demand, wind farm operators will be paid a reduced rate to cease generating power.
Crewson questions why the province is allowing new projects to develop, despite the lack of need for more energy.
“We don’t need the electricity and we’re paying a premium to get it,” Crewson said. “It’s our province and it’s our money.”
If the province is able to spend more than $500 million on cancelling power plants in Mississauga and Oakville, the government should do the same for project such as Dufferin Wind in Melancthon, according to Crewson.
“They should get paid too,” Crewson said. “The people who’ve invested the money to date should be compensated as those who invested money in constructing the gas powered facilities.”
Currently, wind power generates about 2,100 megawatts of electricity province-wide. However, that number will nearly triple when all wind projects connect to the grid.
“The cost of this is going to be just incredible as all these wind farms come into production,” Crewson said. “We’re the ones paying the cost.”
Dufferin Wind spokesperson Connie Roberts declined to comment on Crewson’s motion before receiving a copy from the county.
However, the company planning to construct 49-turbines in Melancthon endorsed the province’s announcement.
“Regardless of which political wind you listen to, the Ministry of Energy is ‘getting it right’ and making sure wind energy plays its part,” Roberts said in an email to The Banner.
She added reduced payments during times of oversupply are “an effective tool” for gas-fired, nuclear, and hydroelectric suppliers.
“The inclusion of wind energy as a dispatchable source of generation in the province’s electrical supply is a smart choice for Ontario and Ontarians,” Roberts said.
According to the Ministry of Energy, paying wind farm operators to not generate electricity will save Ontario at least $200 million every year.
“Supply and demand conditions vary throughout the course of a day,” said ministry spokesperson Andrea Arbuthnot in an email to The Banner. “We have to ensure that our electricity system is flexible enough to respond to changing conditions.”
The Ontario Power Authority will continue to honour existing renewable energy contracts to fill a possible upcoming void.
“Wind generators provide power for 20 years and will be an essential source of electricity for Ontario during the nuclear refurbishment period,” Arbuthnot said.