Ontario burns up more green cash

by Terence Corcoran, Financial Post

Ontario’s green jobs come at a cost of up to $207,000 each

North America’s only feed-in-tariff smokestack, a renewable energy program that burns money to generate electricity, announced fresh incinerations Thursday. The Ontario Power Authority (OPA), a euphemism for the Liberal Cabinet of Premier Dalton McGuinty, said it has signed contracts worth $3-billion with suppliers of wind and solar power.

Ontario Energy Minister Brad Duguid, who issues all the Cabinet directives telling the power authority what do to, said new contracts with a handful of subsidy-seeking corporations are inspired by a higher authority. “There’s no doubt Ontario has stepped up to Obama’s challenge, and together we’ve become a global clean-energy powerhouse,” Mr. Duguid said.

Exactly what U.S. President Barack Obama has to do with squandering billions of Ontario taxpayers’ dollars wasn’t clear. The intent, likely, is to take the spotlight off the McGuinty government. This is Ontario’s second major allocation of wind and solar power contracts under its feed-in-tariff scheme. As a growing number of Ontario voters have come to appreciate, wind and solar power don’t come cheap.

For $3-billion, the OPA said Ontario electricity consumers will get four wind farms with a capacity of 615 megawatts (MW) and 40 solar power projects with a capacity of 257 MW. Total official capacity: 872 MW, assuming the winds blow and the sun shines. They don’t, most of the time, which reduces the actual output from those cash-burning operations to about 200 MW.

The economics of wind and solar are so bad that the power authority’s news releases tend to avoid getting too deep into the numbers. Assuming the new facilities do consistently produce 200 MW, that would be enough electricity to power 200,000 homes in the province. At $3-billion, that works out to a capital investment of $15,000 per home — a lot of sunk capital per home for electricity.

For about a third of the cost, say $1-billion, local energy companies could build a gas-fired generating station that would actually produce 872 MW of electricity. Gas plants require inputs — gas and labour — when operating. But even after factoring in operating costs, the price of electricity from gas is currently around 7.5¢ a kilowatt hour, a bargain compared with the prices Dalton McGuinty’s Cabinet has guaranteed to pay wind and solar operators: 13.5¢ a kWh to wind farms and 44.5¢ to solar plants.

To draw attention away from these numbers and their billion-dollar subsidy implications, the OPA and the government — and the giant corporations who aim to make a killing off these deals — prefer to talk up job numbers. “These projects,” said the OPA news release, “represent an estimated 7,000 direct and indirect jobs.”

What do 7,000 direct and indirect jobs mean? More important, what are Ontario ratepayers/taxpayers getting for the massive cash infusion into renewable power? Bruce Sharp, a consultant at Aegent Energy Advisors, did some rough estimates. “If you take the 7,000 direct and indirect jobs at face value and assume they are manufacturing and construction jobs with a duration of two years, then we have 14,000 man-years of such jobs,” Mr. Sharp said.

Another assumption is that the wind and solar operations require some ongoing manpower over the next 20 years. “I made some wild guesses and came up with an estimate of 650 ongoing operating and maintenance jobs, for a 20-year total of 13,000 man-years.” The total number of jobs, therefore, is about 27,000 man-years over 20 years.

Over that 20-year period, Mr. Sharp estimates, electricity ratepayers will be paying higher costs — or subsidies — worth somewhere between $4.1-billion and $5.6-billion. Average subsidy for each of the 27,000 man-years of work: between $152,000 and $207,000.

No account is taken of the jobs lost in the vast transfer of money from the pockets of ratepayers to the solar and wind industries. Overall, there are no employment gains in any of these artificial industries.

Also lost in the verbal dance of government officials are the national and international corporate interests who are cashing in on the green-energy bubble and the climate-change crusade. Companies like SkyPower Ltd., self-described as Canada’s leading solar-energy company. It landed 13 of the newly awarded Ontario solar projects, totalling 148 MW or about half the 257 MW of new capacity. At $6-million per MW, SkyPower is looking at investing about $800-million in the project.

SkyPower has a history that includes being a unit of the now defunct Lehman Brothers, the New York financial crisis leader that had a disproportionate interest in riding the climate-change bandwagon. After surviving that debacle, SkyPower emerged to find new backers, including Deutsche Bank, the German financial powerhouse that recently released a distorted report that misrepresented climate science, as a vehicle to promote its green lending apparatus.

Renewable energy may seem like an energy play to some, but it often looks more like a real estate game. One of the other contract winners was Penn Energy Renewables Ltd., subsidiary of a real estate company based in Pennsylvania. Deals are constantly being announced among companies, with large firms buying small solar operators. One reason may be the rapid write-offs allowed under tax laws for large companies that have the ability to write off against other income. Such write-offs can apparently raise the annual return on investment to as much as 22%.

Whatever the numbers, Ontario’s renewable energy tariffs are creating a business sector built on subsidies and on the backs of taxpayers and ratepayers. No real net jobs are being created, the costs are high and the impact on climate is too small to measure — so small that the government has never produced a carbon accounting.

16 thoughts on “Ontario burns up more green cash

  1. Corcoran’s additional comment on the job losses bears further consideration. I sent my job-cost ideas off to an economics professor who I have a lot of respect for. Here’s his response …

    Interesting calculation. My approach is simpler and more stark. I assume that, absent special circumstances, if the government takes $1 million from consumers and spends it to create jobs, the consumers have $1 million less to spend elsewhere and their reduced spending will cause the loss of jobs equal to the jobs created by the government spending. If this is right, governments do not create jobs, they just move them around from one place to another or from one time to another. Create jobs now, destroy them over the next 10 years as we pay higher electricity prices to pay down the $1 million spent this year. So, your calculations may actually be generous!

  2. Wind and solar are NO Niagara Falls. They won’t even come close to the Falls for producing electricity.

    Sky Power has Wall Street roots and Wall Street is a big talker in Washington.

  3. SkyPower raises it’s “ugly head” again in the “Solar game” after it cleared out of the “Wind game” due to an untimely “Bankruptcy of it’s parent company Lehman Brothers which triggered the economic meltdown that has crippled the World!

    Nice “players” McGuinty, along with Deutsche Bank………….you should be “proud” to be inside with these guys!……………WE aren’t!

    You DO KNOW who’s money your “playing with” don’t you?………OURS!

  4. ” So small the government has never produced a carbon accounting. ” Lest we forget , that was the whole damn point!

    You know what? It just occurred to me that not only are Industrial wind turbines dangerous to your health but hanging around on these web sites everyday with these mentally ill politicos is not good for our mental health. We should probably admit that we can not out smart these wack jobs running the province. Just spike their coffee with some meds and maybe we can get some intelligent reason out of them. At least until October when they can retire and get some professional help . Hell, we will all gladly pay for that!

  5. Much of the financial information that has been uncovered in Ontario about wind and solar power is proprietary information in the States due to the private ownership of wind and solar companies and private electric companies.

    Just wait until the wind and solar opponents in the States get hold of this information on wind and solar costs. Also the costs per job and numbers of jobs produced by “green” energy projects.

  6. If I knew better, I would almost think this is Ontario’s exit out of wind. Offshore is frozen, and we can only find 4 other onshore projects to go forward with at this time? One of those is in the future premier’s riding, that makes it DOA, so now there be three. And Pickerel, good luck in finding wind up there, so what you got left is squat.

    No disrespect to the unfortunate residents of Squat or Stella.

    A rather low key announcement on a day where gasoline and Libya share the lede.

    And rural Liberal candidates get to crow about 34 shiny solar novelty parks and play nice with their green playmates without any nasty windies throwing sand.

    Why it is almost a win, win, win.

  7. I have a question?

    What is the Ontario Debt? Ar these numbers correct?
    Canada, Ontario and Debt

    * Jan 25, 2011 * Posted By: Livio Di Matteo

    An interesting comparison involves Ontario and the Federal government. Of course, one would expect the value of the Federal debt to be much larger than Ontario’s and indeed it is anticipated in 2011 that the Federal net debt will be about 594 billion dollars while that of Ontario will be about 245 billion dollars.

    Why are US states worried about a measly Billion Dollars or Two. Does our debt really exceed that of California?

    iCalifornia’s debt levels soar under Schwarzenegger
    October 6, 2010 | Louis Freedberg

    But the latest report [PDF] from current state Treasurer Bill Lockyer says the state now has $77.8 billion in outstanding general obligation bonds – nearly triple the amount of seven years ago – and an additional $42.8 in authorized but unissued bonds.

    From our ministry of finance…
    see –> fin.gov.on.ca/en/budget/fallstatement/2010/chapter4.html

    Chapter 4: Borrowing and Debt Management

    * The total funding requirement for 2010–11 has declined by $2 billion since the 2010 Ontario Budget, due to the $1 billion decline in the projected deficit and the $1 billion payment to the Province from the proposed Teranet agreement.
    * Interest on debt (IOD) expense, at $9,715 million, is $246 million less than forecast in the 2010 Budget. This reduction in IOD primarily reflects the impact of lower interest rates.
    * Total debt is projected to be $236.5 billion as at March 31, 2011.
    * Net debt is projected to be $219.5 billion as at March 31, 2011.

    And yet we can find another $3B? How so? Whst is the source of the money? Are we borrowing? (Rhetorical question)

    Yesterday, when I looked at the Globe Article many people (most recent comments) were acting as cheerleaders for this decision. “McGuinty is a genius” etc.

    It seems that many people believe that the price of oil affects our price of electricity. How can this be so?

    Is this really the most astute financial move of the century to piddlle away more money on Green Energy projects?

    I leave you with that thought.

  8. McGuinty’s legacy will be that he
    was the architect of Ontario’s
    economic meltdown. A genius
    he is not.

    California has a ‘hidden’ debt
    which is its unfunded pension
    liability, in the neighbourhood
    of $500 billion. Funding current
    payments on that is causing them
    budgetary problems.

  9. madasabat:

    I did not look at that issue for Ontario. Perhaps we have a similar additional issue. As far as I know our budget figures do not reflect any pension issues either — so for purposes of comparison it is a distraction.

  10. The GLOBE article “As Oil Prices Soar,Ontario responds with $3-billion green plan”

    The article title links OIL and GREEN PLAN together and plants this idea in people’s minds which this was meant to do. “Green” energy saves on oil.

    Now the eco-nuts are out in full force commenting on this article which just re-enforces the link OIL to “GREEN”

    Eco -nuts have no idea that oil and wind/solar have no connection to electricity production in Ontario. But -eco-nuts have difficulty relating cause and effect anyway.

  11. Here is something quite interesting…


    Look down the page for Table B7 —
    Ten-Year Review of Selected Financial and Economic Statistics

    Note that our Provincial debt in 94-95 was about $91B through 2002-2004 it looks like it remained at about $110B.

    You can draw some conclusions — none of them good.

    Clearly we need more of McGuinty and Crew — we need more special spending, we need bigger pensions we need more Green Energy and we need more spending on whatever strikes their fantasy, we need more HST…

    We also need to discourage small businesses — that way they won’t grow up into big businesses and we can invite in more large foreign firms… Like Walmart, Home Depot, Lowes, Target, Bank of Scotland, IPC energy… in the meantime do what you can to tax large Canadian Companies out of existence too! Good plan!

    If you are going to kill the province these seem like good tactics.

    More Wind Turbines. GO GREEN!

  12. There is no way that governments can continue to pay high subsidies to solar producers.

    If and when these subsidies are removed the solar industries will fail because they can’t make enough money on their own to stay in business.

    People talk about getting off the grid but generating enough electricity for a home is not an amateur occupation. In fact it can be a dangerous occupation when you generate enough voltage to supply a home.

    Solar panels are not like big screen TVs that you just plug in on your roof and you get electricity. No fuss & no trouble or so they think. They can be a fire hazard as well.

  13. “There’s no doubt Ontario has stepped up to Obama’s challenge, and together we’ve become a global clean-energy powerhouse,” Mr. Duguid said.
    So he’s in competition with Obama instead of working for the citizens of Ontario. Mr.Duguid is not working for our best interest.

  14. Togther means he is a partner with Obama or so he thinks. Ontario does not have the capital to pull off the “green” energy scam. It has to come from outside the province.

    Money dictates whatever activity it finances. So Ontario will find itself dictated to by outside financial sources. They are or will be pulling the political strings in Ontario if not stopped by the people.

  15. A green race to the bottom!

    Who’s gonna win?

    Hope it’s US!


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