Ontario still coddling the top 1% with power freebees

(September 17, 2015) Big Business is still the biggest beneficiary of Ontario’s generous renewable energy subsidies.

Ontario’s generous renewable energy subsidies will continue to flow to large, multinational companies with billions of dollars in annual revenues. The cost of those subsidies will also continue to be borne by Ontario ratepayers through their monthly hydro bills.

The province’s electricity market operator, known as the Independent Electricity System Operator (IESO), recently released its list of companies vying to get access to renewable energy contracts that offer them a guaranteed rate for the output.

In total, projects totalling 3,600 (MW) of capacity were tabled by a host of companies. The province currently has about 34,000 MW of capacity, meaning the projects being proposed total about 11% of installed capacity. Industrial wind turbines and large scale solar projects accounted for a majority of the new, proposed capacity, at 56% and 43%, respectively – or about 99% of all projects.

The electricity rates these generators will receive for their output is 11 times the market rate – which has averaged about $26 per MWh (2.6 cents per KWh) in 2015 – for large scale solar producers and nearly 5 times for industrial wind turbines. Non-rooftop solar farms – those that dot farms across Ontario – could earn as much as $275 per MWh (27.5 cents per KWh), while industrial wind turbines could earn $115 per MWh (11.5 cents per KWh).

The biggest recipients of these energy handouts will be big businesses, who in many cases have annual revenues in the billions and operations in countries around the world.

In total, nearly 90% of all of the proposed projects are being proposed by companies with more than $240 million in annual revenue, $20 billion in assets under management or more than 1,000 employees. Export Development Canada (EDC) defines a small business as a company with annual revenues below $1 million, while Industry Canada defines it as a business with less than 100 employees.

Some of those companies include international energy heavyweights such as Suncor, Samsung and NextEra energy – all of which reported tens of billions of dollars in annual revenue last year. Samsung, for example, posted $217 billion in revenue last year.

Ontario has a track record of funnelling renewable energy subsidies to big, multinational companies. An analysis by Energy Probe and the Consumer Policy Institute last year found that 80% of all wind subsidies went to nine companies with annual revenues over $1 billion, while 60% of the subsidies went to six companies with more than $10 billion in annual revenue.

Small-scale or local owners accounted for just 10% of wind subsidies.

The study also found that since 2006 – when the province began subsidizing industrial wind turbines – the province has provided more than $1.92 billion in subsidies. That figure could reach as much as $13 billion over the next 20 years.

Those subsidies are paid for by ratepayers each month in a charge called the Global Adjustment, which accounts for the difference between what power sells for on the province’s wholesale electricity market and the rate guaranteed to generators. In 2006, the Global Adjustment charged to ratepayers averaged $4.55 per MWh, or about 10% of the price of power on the wholesale market. In 2015, the cost of the Global Adjustment to residential ratepayers is now 16 times higher, averaging $74 per MWh, or nearly three times the cost of power on the wholesale market.

The latest round of renewable energy procurement shows that ratepayers, particularly residential ratepayers, will continue to be on the hook for generous contracts offered to companies the need little help.

Brady Yauch is an economist and Executive Director of the Consumer Policy Institute (CPI), a division of Energy Probe Research Foundation. You can reach Brady by email at: bradyyauch (at) consumerpolicyinstitute.org or by phone at (416) 964-9223 ext 236

This entry was posted in Power Generation in Ontario, Reforming Ontario's Electrical Generation Sector, Reforming Ontario's Local Electrical Distribution Sector, Utility Reform and tagged , , , , , , , , , , . Bookmark the permalink.

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