Does Ontario’s Green Energy Act pass the ‘net benefit’ test?

by  Jatin Nathwani    Globe and Mail
Ontario’s race to green energy – akin to a race run on steroids – has embedded in it a recipe for tears.

In the Green Energy Act, the feed-in-tariffs act as the primary mechanism to provide a turbocharged set of financial incentives for renewable energy resources such as solar, wind and bioenergy. One of the most egregious examples is an incentive for solar roofs that is 10 times higher than the current cost of electricity. If only diamonds would rain down on us!

But this is only part of the story. The incentives are further coupled with additional requirements on utilities to connect any and all distant, dispersed and distributed sources that can impose significant costs on the overall electricity system – ultimately, to be paid for by the consumer.

The worry is that the die may have already been cast for a consumer backlash. Such a scenario would be an unfortunate outcome because it would undermine the case for a more orderly and measured path to a “cleaner” energy future. What, then, are the options?

Let’s concede that speed at any price is not a prudent path. The policy goals and intent of the Green Energy Act may well come undone under the withering glare of disaffected and angry consumers. Thus, there’s an urgent need to begin the process of reducing the largesse provided to those who have become adept at securing private benefits –albeit under the convenient disguise of green – at the expense of the captive consumer.

Electricity sector policies must aim for a stable middle ground because the sector is far too important to be a testing ground for interest groups promoting fads imported from other jurisdictions. Provision of a robust, reliable and affordable electricity supply is crucial to Ontario’s economic prosperity. A policy objective that links economic development benefits – namely, clean high-tech jobs – as part of the investment in the electricity sector is a reasonable goal for government.

But in the search for the right mix of policies that would deliver on such a promise, the Green Energy Act – in its enthusiasm for “green” and assertions of “clean” – seems to have missed a few key gateposts: the test of reliability and economic prudence.

The act doesn’t give any serious consideration to economic prudence and compounds the error by not providing a clear path to support innovation that would help reduce costs, improve service and reliability and offer true value to the consumer. Instead, we have set up an incentive structure that promises to deliver a high cost of generation, permits “economic rent-seeking” with abandon and uploads a large part of the cost to unsuspecting consumers. The cruel irony is that the greater the success of the incentives through wider adoption, the greater the pain for the ratepayer.

Ostensibly in the name of job creation, if I partake in a publicly endorsed scheme that delivers a significant benefit at the expense of increasing the cost to my neighbours, does the question of equity and fairness not become relevant? We ignore this at our peril.

A solar roof may be “clothed” as a green solution, but will it deliver sustainable prosperity? Emerging evidence from the oft-cited jurisdictions such as Germany, Denmark and Spain is not compelling and casts doubt on the “job creation benefit.” Several studies even argue that, in the long run, “high real cost” destroys jobs and prosperity.

If we truly want to transform the electricity sector to make it an engine for economic growth, then increasing the role of renewable technologies along the principles of a “smart grid’ is a better approach. It paves the path for innovation to flourish and to help reduce costs and improve reliability of service over time. It may be a slower, less glamorous path, but it will deliver long-term value.

Ontario’s electricity infrastructure was built over a hundred years: Now that the infrastructure is old and parts need to be replaced, the transformation should be undertaken at a pace that allows some degree of trial and error and correction for improvements. The time has come to subject the Green Energy Act to one key test: Will it deliver “net benefit” to Ontario?

Jatin Nathwani is the Ontario Research Chair in Public Policy for Sustainable Energy at the University of Waterloo.

6 thoughts on “Does Ontario’s Green Energy Act pass the ‘net benefit’ test?

  1. “The worry is that the die may have already been cast for a consumer backlash. Such a scenario would be an unfortunate outcome because it would undermine the case for a more orderly and measured path to a “cleaner” energy future. What, then, are the options?”

    But what exactly was the problem with the old supply mix?

    What transition could we make that would have any measurable benefit?

    ..and so that argument falls apart. That is unfortunate — because it was otherwise thoughtful.

  2. The only thing “green” about the green energy act are taxpayer dollars being sent abroad in the hands of “developers”.
    I’ve just learned rural farm severances are no longer legal under the act taking about $90,000 out of my pocket.
    This damn the torpedoes full steam ahead philosophy adopted by the McGuinty Liberals will take this Province about 100 years to recover from. Just like the “robber barons” of the late 1800 early 1900’s he’s devastating Ontario.

  3. “increasing the role of renewable technologies along the principles of a “smart grid’ is a better approach”

    Other then “stored” hydro where massive dams are used, be it “smart” or otherwise, NO grid can be improved in any measurable way employing renewable generation technologies. Wind, solar and biofuels even combined and massively deployed , as is currently the case in Germany, contain insufficient energy density to be any use. These can never be more then “niche” sources of electricity.

    To quote physicist Dr. Charles Till when asked about wind and solar energy:
    “Small amounts. Small amounts only. The simplest form of pencil calculation will tell you that.”
    http://www.pbs.org/wgbh/pages/frontline/shows/reaction/interviews/till.html

    “Simple” is perhaps the most apt description of the intellect of all those who would force this foolishness upon us.

    Just out of curiosity; if we do not believe physicists when they tell us these things, to what more learned branch of science can we turn for guidance on things energy?

    B.W.

  4. Well, this story is small comfort. but we are not the only fools to have elected greater fools…

    ******************************

    Scotland ‘risking a blackout’ in a bid to go green

    Published Date: 13 November 2010
    By Nathalie Thomas
    Chief business correspondent

    THE “lights could go out” over Scotland unless new power stations are built in the next two years to ward off a looming electricity crisis, the head of one of Scotland’s most successful companies has warned Alex Salmond.

    Rupert Soames, chief executive of power supply firm Aggreko, told the First Minister that the National Grid will lose a third of its capacity by 2018 as a string of nuclear, gas and oil-fired power stations across the UK are retired – including several in Scotland.

    Mr Soames claimed that no other industrialised country in the world is at risk of losing so much of its energy supply at the same time – and without a realistic back-up plan.

    He urged both the Scottish and UK governments to postpone green energy targets by a decade. Unless “the concrete is poured” on a new fleet of power stations within the next two years, Mr Soames warned, “we will be in serious danger of the lights going out”.

    His warning came as British Gas announced it will increase bills by an average of 7 per cent from 10 December. British Gas blamed rising wholesale prices.

    “There is a danger in some quarters (in Scotland] of believing that if you wish things to be true, they will be true,” he told an audience of MSPs and business leaders at the annual Business in the Parliament conference in Edinburgh. He said: “Scotland might wish to be a major exporter of renewable energy to Europe, and might wish to see an interconnector built across the North Sea, but does anyone really believe that we can get one built in the next ten years?”

    **********************************

    http://thescotsman.scotsman.com/news/Scotland-39risking-a-blackout39-in.6624497.jp

  5. “clean high-tech jobs” Another piece of greenie propaganda. But nobody ever names these jobs or least not many.

    The new clean high-tech jobs will be in Asia not here beause this is where the manufacturing will be done.

  6. re: Scottsman srticle
    It amazes me how the likes of some of these NGO’s and gov’t officials can believe in a mid-term goal of 100% sustainable energy from renewable sources.

    And wind and solar are going to get us there?
    Reminds me of the scene in Solent Green where Charton Heston is peddling an exersise bike to power a lightbulb.

    I guess electricity will be a luxury for the few in the not so distant future :O

    Time to rig up my own DIY windmill and exercise turbine me thinks…lol

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