Beware of renewable energy windfalls

The virtue of solar power alone cannot justify government guarantees of outrageous rates of return. And due diligence ought to be as important for green energy entrepreneurs as any other investors. If it sounds too good to be true, it probably is.

Globe and Mail

The prospect of a 24-per-cent return on investment should elicit attention. The prospect of such a rate guaranteed by government for 20 years should set off alarm bells.

Earlier this month, the Ontario government announced a dramatic cut in its solar-power program. The rate paid for electricity from small-scale, ground-mounted solar installations, what is called the “feed-in tariff,” was reduced from 80.2 cents per kilowatt hour to 58.8 cents per kWh. Rooftop solar projects still qualify for the more generous original rate.

This solar-power price chop has led to a barrage of criticism from environmentalists, farmers (many of whom see solar power as a new cash crop) and those selling solar-power systems. Last week the province’s environmental commissioner entered the fray; Gord Miller demanded an explanation for the changes. Otherwise, “people will lose confidence in Ontario’s commitment to green energy,” he said.

It seems rather far-fetched to question the McGuinty government’s commitment to renewable power. If anything, the province has been all too eager to demonstrate its dedication. The recent $7-billion, 25-year deal with Samsung Group to build a green energy industry in the province has been properly criticized as improvident. Nonetheless, it represents a massive commitment.

With its changes to the feed-in tariffs, Ontario is leavening its commitment to solar power with a dash of common sense.

Ground-mounted solar-panel arrays are far cheaper to install and more efficient to operate than rooftop installations. It was thus a mistake for the province to treat both systems equally in the first place.

According to the province’s calculations, a small-scale, ground-mounted solar project could pay back its capital costs in just seven years, and provide a return on investment of 24 per cent – more than twice what rooftop installations earn. And this is guaranteed by Ontario for 20 years. Such outsized returns attracted thousands of opportunistic solar-power entrepreneurs. Many built before they received provincial contracts, simply to beat the rush. Not surprisingly, these disappointed folks are the loudest critics of the new regime.

Renewable energy is deserving of public support, both as a source of clean power and as an economic driver. And it is reasonable that preferential treatment will be necessary at the nascent stages of this industry. But government involvement must always be judicious. The average 2010 market rate for electricity in Ontario is 3.6 cents per kWh. Even a feed-in tariff of 58.8 cents per kWh is a massive level of support.

The virtue of solar power alone cannot justify government guarantees of outrageous rates of return. And due diligence ought to be as important for green energy entrepreneurs as any other investors. If it sounds too good to be true, it probably is.

22 thoughts on “Beware of renewable energy windfalls

  1. There is NO question and there should be NO discussion about whether Green Renewable Energy Policies in Ontario are worthy or able to succeed at all.

    Ontario is the ONLY jurisdiction in the World at present offering these subsidy rates for “renewable power investments!”.

    Every other country in the World has cancelled their Subsidization of renewables like Wind and Solar. Call it the FIT Program or whatever you like, McGuinty is selling a no win proposition to the Ontario Citizen!

    Is the media Dyslexic? Do the media think the Ontario readers are Dyslexic? Who is writing this crap and LIES?

    Wind and Solar which is subsidized by the citizens cannot sustain itself because the subsidization eventually causes the citizenry’s bank accounts to empty, their energy costs to rise beyond affordability and then Industry removes itself from the mix so that eventually you end up with a BANKRUPT State!

    I guess that’s what McGuinty and all his minions have in mind for us……total destruction of our infrastructure, economy and life styles!

    Google any country such as Spain, Denmark, Germany who have experience with outrageous subsidization and you will see where we as Ontarians are headed!

    Adio Ontario!

  2. Where is the investigative journalism in reporting the failures of Green Jobs and the subsidies?

    Why are they not asking the Ontario government to explain how Spain, Germany are terminating their programs as unsustainable?

    Has the Canadian media been reduced a tabloid chasing gossip and silly stuff?

  3. I’m sure that the Toronto Star won’t be on this becuase they are a waste of space, skin and wood pulp….

  4. There is no more Canadian Media that does “reporting”. The “Canadian Press”, a not for profit reporting agency, sold out two weeks ago and is now called “Canadian Press Enterprises”…………..
    Good Luck Canada.the first thing that is destroyed in a war is it’s NEWS!

  5. There are many fradulent ideas out there now for renewable energy so everyone is trying to make a buck off it.

  6. I tend to disagree with some of the above comments.

    I think that anything that can create clean energy should be supported with some kind of subsidy so that I as a citizen can join in the generation of electricity like any big power provider can.
    I’ve wanted to put up solar panels on my house/garage for years (i believe that a roof is wasted space) but solar has always been more a luxury hobby item than a cost effective electricity producer.

    Now that I see this Microfit program collapsing, I’m seeing all kinds of deals on these same solar 10kw solar panels. You can now buy (on the internet) a 10kw system for on your house for less than $30000 vs $10000 a few months ago.
    Why did the price drop so dtasically? Because a industry and market was created by subsidation and now that the volumes are there and subsidation being taken away, a real market value is being place on it.

    The same thing happened with the CFL bulbs. Remember when they were over $20 a piece? Now they are a common household item and that is what the “powers that be” want to see solar as becoming.

    So chastising what the liberals are trying to do is overly simplistic and a knee jerk reaction.

    We need to take this direction because sooner or later we will run out of cheap energy whether we like it or not.

  7. Sam….The Liberal Energy subsidies are not designed to create more energy and they won’t…They are designed to reduce demand for energy by drastically increasing the costs for businesses and the citizens of Ontario…Spending over $20 Billion on the Green Energy Act is going to make energy more expensive….Hence —> the “Ontario Liberal War Against Affordable Energy”….

  8. Sam:

    To put Randy’s points another way. You want me to pay through my taxes for Solar cells on the roof of _your_ house. 🙁

    You may be a nice guy but your proposition does not interest me. :-((

  9. Sam…………I agree about wanting solar panels for my roof but unable to afford them………….do you seriously think McGuinty wants you and I to get off the grid?……………NOT!
    He wants us all tied into the grid with promises of a return on our investment to keep us hooked up………..it’s all BS…………..buy your panels now that they are cheap and buy some expensive batteries to store the power and keep the Government out of your house!
    Now your talking!

  10. Just want to remind you folks that just prior to the G20 Prime Minister Stephen Harper appeared in a full front page picture, Star I believe, warning Canadians to realize we are strong economically and not to get sucked into other countries falling and failed economies. Call me bias if you will but I took that to be a warning about the failed European economies that have been subsidizing so called green energy and have NOW stopped subsidizing so called green energy. To me it seems, the false green bubble has burst and Ontario seems to be the only ego inflated populous that does not seem to understand this. Our hydro infrastructure should have been updated all along, not used as an excuse to allow us to be exploited by non green, expensive government subsidized projects that allowed people to think there was a gold rush in Ontario and stampede the opened flood gate.

    Just my humble opinion.

  11. Randy
    I don’t think that we as citizens are entitled to cheap electricity. This may have been the case in the 1950’s when everything was plentiful but now we are in a different reality. Nuclear and coal are just a bandaid solution for the next 50 years and then we need some type of revolution.
    Having cheap electricity in Canada is like the Venezuelans feeling entitled to cheap gasoline and look how their oil industry is doing.

    Our electrical industry has been neglected too long because it has been running below the cost of production. I think that Green Energy is the fall guy for what was inevitable anyway. Rates have to go up to have a sustainable grid.

    David R
    My taxes may be paying for your highways (if you commute) and might be paying for your health care bills (if you smoke) so whether your electrical bill is paying for my panel is arbitrary. Anyway, if the price of energy goes up and solar panels come down in price, there will be a point where you CAN go off grid.

    The point is that we aren’t going to get out of this mess by going with the status quo. Innovation needs to be given direction and the direction should be clean free energy instead of dirty “cheap” energy with longlasting downsides.

    A Green energy system doesn’t just appear out of thin air. It requires leadership, investment and some short term pain.

  12. Sam….The reality is that rates are going to up substantially with no net increase in the supply of energy…as a result of Government folly.

    The Green Energy Act is only a political solution that was supposed to happen in advance of a Cap and Trade type system to reduce energy demand and increase Government revenues.

    I would rather that the Ontario Liberals did nothing that embark on a $25 Billion Boondoggle..

    Even if we bought energy from Quebec (paid at market rates) and improved the distribution grid, it would cost less than the Green Energy Act will cost us…..without creating Industrial (Wind and solar) Junkyards right across Ontario..

  13. Sam:

    Arbitrary? I agree if we can agree on this sense of the word: capricious; unreasonable; unsupported.

    Since you said this: “Innovation needs to be given direction and the direction should be clean free energy instead of dirty “cheap” energy with long-lasting downsides.”

    How can you prove that say wind power is the above vs Hydro or nuclear.

    Feel free to provide references or offer proof that can be derived. That’s the way science works. You made the assertion — so prove it or offer a reference.

    I backed up everything in my paper — surely you can do the same for one simple sentence.

  14. Also Sam………………the Province will never allow YOU or me to get off the grid!…………..that is just plain stupid naivety…..why would McGuinty want you and me to stop buying his electricity?

    It’s like producing cars and trucks that won’t use fossil fuels……………the oil companies would have him whacked!

    What “planet” are you living on? Maybe you’ve been hanging out with the new eco-religious wing nuts like Suzuki and company.

    The reality of this Green Dream is that it is a fake Industry for massive investment schemes all started by the Enron criminals…..do some research man!

  15. Quixote,
    First of all I do not appreciate being talked down to.
    If I wanted to get off grid, I could do it tomorrow (I just can’t afford it right now and it wouldn’t make economic sense)
    Going off grid is a wedge that the consumer can use to keep the Government honest. If they make electricity too expensive than we the people can either use less or produce our own.
    Many Amish communities are doing this right now, so WHAT PLANET ARE YOU FROM??

    “What “planet” are you living on? Maybe you’ve been hanging out with the new eco-religious wing nuts like Suzuki and company.”

    I’m not hanging out with anyone, what nuts are you hanging out with? I just like to think for myself and abhore the herd mentality that you are trying to culture.

  16. David
    Thankyou for correcting me on the improper use of the word “arbitrary”

    Nuclear is limited because there is only so much uranium on this planet and if the Chinese and Indians (and the US) go the nuclear route then it doesn’t take a rocket scientist to figure out that it is a finite energy source.
    Wind and solar is infinite so it should be supported for the future.
    The hadron collider may yield some limitless energy supply someday.

  17. Sam:

    As to arbitrary I did not disagree or correct you. I thought it was an excellent choice for a word in that context. I just wanted be sure that were on the same page. 😉

    Now, you have left me hanging… Why is nuclear power “limited and finite”? Are you referring only to Fission Power?

    Again, you are making unsupported statements. Please provide a reference showing that say fusion power would be in some way limited to using only radioactive material. (Reference please.)

    As for the Hadron Collider “yielding” limitless energy — perhaps you are referring to the DaVinci Code movie where a black hole is created — but even that movie could not supply the exact method of siphoning off the power in such a way as to provide electricity, say…

    (just sayin’)

    If Solar is infinite then why do stars go Nova or slowly die out? If the sun dies will we still have wind? If we have wind after the driving force is removed does that mean we have invented a perpetual motion machine — i.e. truly limitless energy? I await your thoughts on this.

    On the other hand we could limit our discussion to the practical and eschew flights of fancy and likewise eliminate “Star Treckian” lines of inquiry as well.

    One researcher to another eh…

    …back to the books…

  18. Sam:

    The links posted at :”By: Sam on 07/27/2010
    at 12:19″

    Do not support your statement that the power is generated by First Nations.

    I think you are quite confused on many of the issues. That is what is attracting many of the negative comments.

    I really don’t see how you can support many of your claims. It will be interesting to see how you do.

  19. Yes I know, that’s why I’m looking through my piles of magazines in my attic (hot attic) to find where I gained this knowledge.
    The links I gave were just to keep the dialogue going.
    What those links do show is that hydro power, while emmision free and dependable, also has its politcal problems and cost issues for future development.
    For example, no one is willing to build a hydro plant without a 20year contract and a low price/MW…just like wind, solar, nuclear, coal etc

  20. Sam:

    I don’t have any compelling need to keep any dialog going. 🙂

    Besides…. I believe in the philosophy that one should never ask a question, reveal a position, or start a discussion unless you already know the answer to any questions that might likely arise. 🙂

    Also, so what if there are problems? Engineering is about compromise… running costs vs build costs, power draw vs longevity etc. and so on — ad infinitum (or nearly). So, revealing to me that power choices are a set of compromises would hardly shock or concern me. The issue here is to be what set of comprises we wish to adhere.

    Having said that, to clutter the debate with ignorance of what came about and how so does make it harder to reach any consensus of opinion.

    I will give you a hint… There was a James Bay Land Treaty, Hydro Quebec and it’s derivatives and delegates did engage in building projects at the direction of the government of Quebec and a number of dams were constructed.

    ..and we are not going to shut down Manicouagan while we await your news…

    http://www.google.ca/images?hl=en&q=Manicouagan+dam&um=1&ie=UTF-8&source=univ&ei=EDNPTIjtF5P6swOkmZmbBw&sa=X&oi=image_result_group&ct=title&resnum=4&ved=0CDQQsAQwAw&biw=1200&bih=529

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