Samsung: Not playing nice in the [Wind] Yard

A Samsung consultant, Jason Chee-Aloy spoke out recently to John Spears in the Toronto Star about the Independent Electricity System Operator (IESO) and how they are giving his clients a rough time. He infers that his clients; Samsung, Pattern Energy Group, NextEra Energy Canada and IPR-GDF North America need to get IESO’s blessing sooner to ensure their planned investments are not impacted. Chee-Aloy said “Things have to move faster,”. What Chee-Aloy sees as a risk is the possibility that industrial wind generation may be curtailed. He is also annoyed with the slowness of the approval process. The not so subtle, innuendo, is that these foreign entities will take their money and go home meaning, promised jobs wouldn’t happen nor would targets for renewable energy, in the Long-Term Energy Plan (crafted as a “guide” by former Energy Minister, Brad Duguid) be achieved.

The missing part of Mr Chee-Aloy’s concern was that consulting fees for his employer “Power Advisory LLC” (of Carlisle, Massachusetts) may also be at risk. Mr, Chee-Aloy’s past life found him as the Director of Generation Procurement at the Ontario Power Authority where he was responsible for procuring over 13,000 MW of generation (the 2010 Sunshine list shows Mr. Chee-Aloy earned $132,176 and in 2009 he earned $176,931). Mr. Chee-Aloy also worked for IESO and should have been well aware of the issue he now says is causing all of the problems. It is labelled as SE-91 by IESO and is a committee that seeks to deal with the intermittent nature of wind generation (and our surplus power problems) perhaps even constraining IWTs without payment. So when Mr. Chee-Aloy was negotiating those OPA contracts would he have ensured that the Ontario ratepayers were protected by framing the contracts to do that; as his position would demand? One wonders if protecting Ontario ratepayers was on his mind or whether he was having visions of a bigger personal payday! One also wonders what the “conflict of interest” rules are that apply to Ontario’s public service sector. My research on this took me to the Ontario Lobbyist Registry but a search for both Power Advisory LLC and Mr. Jason Chee-Aloy produced no results. Are our watchdogs watching is something that certainly came to mind as a visit to the Conflict of Interest Commissioner on Ontario’s website states that former public servants are prohibited from a number of activities. In my opinion this appears to be a situation that needs to be looked at to determine if Mr. Chee-Aloy breached the “conflict of interest” rules.
The interesting part of the quote above is that when Mr. Chee-Aloy uttered the words on June 14, 2012 that “Things have to move faster,” did he realize that the following day the Environmental Registry would suddenly bless both the Haldimand (140 MW) and the South Kent (270 MW) applications. Both of these have Samsung written all over them. So Samsung is now ready to proceed with the capital expenditures to establish both the 410 MW of wind and 100 MW of solar.

The estimated capital costs of those three projects will be approximately $600 million based on the “levelized unit energy costs”or LUEC ($1 million per MW for wind and $2 million per MW for solar) issued by the Institute for Energy Research. That $600 million investment may also qualify Samsung for those cheap industrial rates announced June 12, 2012 by Chris Bentley, Minister of Energy. Those 20 year guaranteed rates are set at 5.5 cents per kWh under the proviso that an investment of $250 million dollars is made. The $600 million of capital costs would therefore seem to bestow that benefit to Samsung, meaning the 1300 jobs they are reputedly obliged to create under the Smitherman negotiated contract will ensure that Samsung’s Ontario factories are not harmed by increasing electricity rates. That sure begs the question—will Ontario’s ratepayers wind up subsidizing the Samsung electricity rates while they face all of the other, economic, health, nature, property value declines, etc. that wind turbines impose?

If one examines the capital costs of the three Samsung approved generation facilities to determine how quickly they will recover their investment you must look to the actual production that will be generated from the 410 MW of wind and the 100 MW of solar capacity.

The 2011 Ontario experience for wind generation is that it will produce 27.8% of its rated capacity and for solar the accepted norm is approximately 13% at Southern Ontario’s latitude but the latter statistics are not available in Ontario’s public domain.

Allowing for the foregoing the calculation to produce the anticipated revenue for those two Samsung generation sources can be calculated easily as per the following.

For wind:
410 MW X 27.8% X 8760 (hours in a year) X $135.00 per MWh (the contracted amount to be paid per MW delivered to the grid.

The foregoing calculation would indicate that the 410 MW of wind generation should, on average, produce revenue of approximately $134 million for each of the next 20 years or $2.68 billion over the life of the contract.

For solar:
100 MW X 13% x 8760 X $446.00 per MWh produces an annual value of approximately $51 million or $1.2 billion over the full 20 years of the contract.

So those three approved renewable generation sources will produce gross revenue of almost $3.9 billion dollars allowing Samsung/Pattern to recoup their capital costs in only 6 1/2 years, The other 12 plus years will be pure gravy.

In the writer’s opinion it would appear that Mr. Chee-Aloy will enjoy the benefits of some significant consulting fees for his new employer all at the expense of Ontario’s ratepayers. Was that on his mind while he went about contracting for those 13,000 MW while gainfully employed at the OPA?

The story behind the Samsung contracts is something that demands a public enquiry but it presumably is something that the Liberals don’t want and something that the NDP won’t endorse given their penchant to believe that renewable energy will eventually resolve climate change.

Parker Gallant,
June 19, 2012

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