Energy Probe

Mark Brosens
TVO
January 24, 2010

Ontario signed a $7-billion renewable energy deal with Samsung to build wind and solar energy clusters throughout the province. By 2016, the project is expected to generate 2,500 megawatts of energy, or about 4 per cent of Ontario’s total energy consumption. The deal will create upwards of 16,000 new jobs, making Ontario the leader in Canada’s green energy equipment sector (Premier Dalton McGuinty wants to create 50,000 jobs in the renewable energy sector in the next 3 years).

However, Ontario Progressive Conservative leader Tim Hudak compared this deal to the eHealth scandal, claiming that the Samsung deal is a sole-sourced contract that likely violates Ontario’s procurement rules. Hudak called on Auditor General Jim McCarter to review the deal.

Meanwhile, the local renewable energy industry is complaining that Samsung will receive preferential rates for its energy and will get priority access to Ontario’s transmission system (which has limited capacity).

Some are challenging the economics of the Samsung deal. In the National Post, Lawrence Solomon notes that a proposed private wind farm project in Texas designed produce 4,000 megawatts of energy fell apart when financiers couldn’t be convinced the project made any business sense. Additionally, Solomon writes that in Spain every government-created green job cost two jobs elsewhere else in the economy.

Similarly, Randall Denley writes that the incentives given to Samsung in this deal shows that Ontario has become economically uncompetitive.

The Samsung deal is even controversial in the Ontario Liberal caucus. Some unnamed Liberal MPPs are complaining that they were not consulted on a deal that could raise residential energy prices and undermine local renewable energy suppliers.

Earlier this month on The Agenda, a panel debated whether green jobs can save the economy.

http://www.tvo.org/video/tvoplayersm.swf

Lawrence Solomon
Financial Post
January 23, 2010

In a signing ceremony Thursday for a $7-billion deal with Samsung to build wind and solar facilities, Ontario Premier Dalton McGuinty said: “This means Ontario is officially the place to be for green energy manufacturing in North America.”

Quite right. Texas lost that title last week when billionaire T. Boone Pickens abandoned his plan to build 4000 MW of wind capacity in Texas — twice as much as the Samsung wind plan — when no financier could see how building the things made any financial sense. Other jurisdictions have also seen plans for wind vanish, along with plans for solar and other forms of renewable energy. Stock prices of most players in the wind industry, such as Broadwind Energy, GE’s supplier, are heading south.

But Ontario is different. Just as it built nuclear reactors into the 1990s after everyone else in North America bailed out to stop the bleeding — Ontario’s Darlington Nuclear complex was the last to be completed — Ontario has positioned itself to be the last gung-ho jurisdiction for so-called green technologies.

McGuinty estimates the Samsung deal will create 16,000 jobs, part of the 50,000 estimated jobs that his Green Energy Act aims to create. Here’s a better estimate, based on a study last year of Spain’s experience: For every green job that governments make happen, two jobs get lost elsewhere in the economy. By this reckoning, the Samsung deal will be costing the province 32,000 jobs while creating 16,000 jobs, for a net loss of 16,000 and the Green Energy Act will be costing 100,000 jobs while creating 50,000, a net loss of 50,000.

McGuinty is also wrong to expect Ontario, on the strength of its to-be-retrained workforce of former auto workers, to become a major exporter of windmills to the North American market. Michigan, with its own out-of-work auto workers, was also gung-ho on this plan — until the Chinese began to export wind technology to the U.S. China, now the world’s third-largest wind turbine manufacturer, is expected to soon become #1.

Not that China’s entrance into the U.S. wind business is likely to be any more of a winner than Ontario’s might have been. Thanks to new natural gas extraction technology, the U.S. is now awash in natural gas for electricity production, and is likely to remain so for decades. Natural gas is much less expensive and much more reliable than wind, blowing wind out of the running.

Not that wind, which can be economic in niche applications, ever was in the running as a major source of economically generated power. Wind power in North America costs several times as much as power produced from conventional sources. Its sole competitive advantage came from climate change fears that presaged cap and trade legislation in the U.S., which was expected to sideline coal and other CO2-intensive ways of producing power. That cap and trade legislation is now gone gone gone — after Copenhagen’s failure, the Climategate emails, and President Obama’s loss of grace, there is approximately zero chance that it will now come to pass. Meaning that meaningful U.S. curbs on CO2 are no longer in the offing.

Meaning that Canadian curbs on CO2 — seen as inevitable if we were to avoid trade sanctions following the U.S. legislation — are also dead. Now Canada has no trade sanctions to avoid, and no economic rationale to avoid CO2 emissions by switching to wind. So, too, among America’s other trading partners. Meaning that wind, as a large-scale commercial technology, is dead dead dead, even if its obituary has not made it to the official press.

McGuinty is among those who have yet to read the obit. Thinking that wind has a future, he has signed a sweetheart deal with the Samsung consortium that commits Ontario to paying Samsung more than twice the going rate for electricity and more still if it builds its wind and solar plants for export. He will give Samsung preferential access to the provincial grid, at the expense of Ontario’s domestic wind producers. And to quell opposition from communities that will object to having transmission corridors and windmills for neighbours, McGuinty has also promised to override local laws that give Ontarians a say in this green economy.

All of which is so crazy that it’s hard to see the deal coming to full fruition. McGuinty may not come to his senses but Samsung surely will once the demise of cap and trade legislation gets official standing — Samsung prudently gave itself the option to back out of the Ontario deal, just as Boone Pickens did in Texas when he saw which way the wind was blowing.

Lawrence Solomon is executive director of Energy Probe and Urban Renaissance Institute.