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.