Possible “model failure” could cause ON to retract on wind/solar contracts

throw money ladder windBy James J. Shanks, Gowlings
When investments are made in the private sector sophisticated financial models are developed, complete with multiple inputs, all designed to predict a range of best and worst case scenarios. If a significant model input strays beyond its originally anticipated value range for example, if customer demand for a business’s products collapses then the financial model for the business may fail. If so, stakeholders in the business will likely face a restructuring of their investments.

The chances of a restructuring are far less likely when government is the main customer of the business, not only because governments are presumed to have deep pockets, but also because, in those businesses where government acts as an intermediary between the business and the ultimate consumers of the business’s products, the government’s intermediation tends to insulate the business from model failure and its usual consequences. Nevertheless, if model failure is severe and persistent enough, history in Canada suggests that governments may be tempted to impose a restructuring even on these sorts of businesses.

In the years leading up to Ontario’s Feed-in-Tariff (FIT) program, it was generally accepted that Ontario was approaching a near-term shortage of electricity as surging demand threatened massive brownouts. Government financial models, no doubt, assumed that the cost of developing renewable energy infrastructure involving long-term power purchases at prices significantly above market could be recouped by steadily increasing electricity rates over time, all without unduly reducing customer demand.1 However, subsequent experience seems to suggest that Ontario’s electricity demand may have been more elastic than anticipated, especially as many urban and rural electricity consumers have reacted to increasing prices by switching some of their electricity needs to lower-priced natural gas and propane. Moreover, as price increases in the Province have outpaced those in neighbouring jurisdictions (leaving Ontario’s electricity prices 30-60% higher than in those jurisdictions), some large commercial users have reacted by moving their operations out of Ontario, further depressing overall demand.2 In fact, far from remaining steady, electricity demand in the Province is now projected to decline until at least 2021. Read article

34 thoughts on “Possible “model failure” could cause ON to retract on wind/solar contracts

  1. Gowlings’ Article:

    See: Reference Footnote No.19

    Alliance For Renewable Energy, July 31, 2014

    Ontario election means:, ” that the province’s two current Feed-in Tariff Programs-Micro Fit for small projects 10kW and under and FIT for projects up to 500 kW-will be run for another four years, bringing much needed stability particularly to the solar PV energy market.”

    http://www.allianceforrenewableenergy.org/2008/05/who-are-we

    Co-Chairs are Lois Barder and Paul Gipe

    • If this Gowlings” opinion is correct then a new & separate province of Ontario would have jurisdiction over renewable energy and renewable energy projects?

      • Hey Barbara,
        What are you looking at – to think that?

      • Read the whole article.

        A government can cancel contracts and might have to pay sunk costs but not future lost profits. So a new province can cancel contracts.

        An article worth downloading and circulating.

      • Developers and investors have come to Ontario seeking 20 year guaranteed contracts for profits.

        Remove the guarantee part and they won’t come to Ontario.

      • Alliance for Renewable Energy to Promote Feed-in Tariffs, Oct.14,2008

        http://www.renewableenergyworld.com/news/article/2008/10/alliance-for-renewable-energy-to-promote-feed-in-tariffs-53838

        So Paul Gipe has surfaced again in (2014) the Gowlings’ reference foot note no.19
        “Possible ‘model failure’ could cause ON to retract on wind/solar contracts”

        Paul Gipe was one of the main proponents of the Green Energy Act.

        ————————————————————————–

        EarthAction Board includes:

        Lois Barber, Pres., Executive Director and Founder
        Tom Pelletier
        Jan Roberts

        http://www.earthaction.org/directors.html

        Interesting connection with Lois Barber & Paul Gipe.

      • KOSMOS

        Lois Jewell Barber

        “Lois Barber is co-founder and Executive Director of EarthAction, a global network of over 2,000 organizations in over 160 countries.”

        “She served as an advisor to President Clinton, …”

        http://www.kosmosjournal.org/contributor/lois-jewell-barber

        ————————————————————-

        Earth Action

        Advisors include:

        Nicholas Dunlop, Co-founder and Co-executive Director of Earth Action.

        http://www.earthaction.org/advisors.html

      • Pembina Institute

        Pembina Advisory Council includes:

        Preston Manning, Pres. & CEO, the Manning Centre for Building Democracy
        Karen Clarke-Wistler, Chief Environmental Office TD Bank Financial Group

        Board of Directors includes:

        David Runnals, known associate of Maurice Strong

        http://www.pembina.org/about/about-pembina

        Perhaps there is more that is unknown about the enactment of the Green Energy Act?

      • G&G Global Solutions, Toronto

        George Smitherman, Chair. and Principal

        Guna Deivendran, Principal. Worked as Director of Policy for Ontario’s Deputy Premier and Minister of Energy, Smitherman. In this role he oversaw the planning, policy development, decision making and rollout of the Green Energy and Green Economy Act which also included the feed-in-tariff program.

        Bill Choi, Principal & also Vice Chair. Canadian Chamber of Commerce in Korea.

        http://www.gandgglobal.com/index.php > Our Company > Biographies

      • Wikipedia, Nicholas Dunlop

        “Nicholas Dunlop is co-founder and Secretary-General of the Climate Parliament, a global network of Members of Parliament and Congress to prevent dangerous global warming and to promote renewable energy.”

        http://en.wikipedia.org/wiki/Nicholas_Dunlop

        Nicholas Dunlop is also a co-founder of and Director at EarthAction.

      • GRIST, Feb.26, 2009, by Paul Gipe

        “Green Energy Act introduced to Ontario’s provincial parliament; feed-in tariffs key mechanism”

        The proposed Green energy Act attracts industry-wide support. A who’s who of labour, agriculture, business and the environment.

        http://www.grist/article/green-energy-eh

        Short summary of the Green Energy Act as of Feb., 2009.

      • Pembina Institute, Aug.27, 2013

        Clean Energy Champions: John Ruffolo ,CEO of OMERS Ventures, the investing arm of the Ontario Municipal Employees Retirement System.

        Article includes photo of John Ruffolo and David Suzuki during a visit to Bhutan.

        http://www.pembina.org/blog/737

    • A ‘reason why’ –
      Ontario Municipal Employees – enable
      Industrial Wind Energy Perpetrators

      • How about this Pembina Institute Article?

        Pembina Institute , Oct.24, 2012

        “Clean Energy Champions: Joe Gunn Collaborates with Pembina Institute to mobilize the faith community on ecologial justice issues”

        Joe Gunn is Executive Director of Citizens for Public Justice/CPJ a non-partisan ecumenical organization based in Ottawa.

        CPJ helped coordinate and write the “Canada Interfaith” call for leadership and action on climate change, a letter with more than 50 different Christian and non-Christian faith organizations.

        http://www.pembina.org/blog/657

      • Citizens for Public Justice/CPJ, Oct.31, 2011, Forum

        “Faith’s Role in Addressing Climate Change”

        Canada’s faith Leaders, Members of Parliament and environment experts participated in Climate Change panels.

        Senator Grant Mitchell
        Laurin Liu, NDP
        Kristy Duncan, Liberal
        Elizabeth May Green party

        Graham Saul, Climate Action Network Canada
        Lauryn Drpinie, Climate Action Network Canada

        Too many clergy to list them all.

        http://www.cpj.ca/content/faith‘s-role-addressing-climate-change
        http://www.cpj.ca and use search for this article.

        Panelists and participants drew upon the “Canada-Interfaith Call for Leadership and Action on climate Change”

        Get the religious groups on board!

    • Renewable Energy World

      Paul Gipe

      “In 2004 Gipe served as the acting executive director of the Ontario Sustainable Energy Association where he created, managed, and implemented a provincial campaign for Advanced Renewable Tariffs.”

      http://www.renewableenergyworld.com/rea/u/paulgipe

      Ontario Sustainable Energy Association also known as OSEA in many OWR articles and posts.

      Posted again for those new to OWR.

  2. Honking about all the possibilities –
    of paying all the consequences
    because the conservatives lost the election –
    and, a liberal majority
    adds certainty to multinationals with 40 years contacts.

    The whole world is looking @ this!

    ‘[excerpt] Besides NAFTA, and as indicated above, several bilateral trade arrangements exist which contain similar foreign investor protection.18 Importantly, the proposed multilateral Trans-Pacific Partnership currently being negotiated with several Asia-Pacific countries and the proposed Canada-European Union Comprehensive Economic and Trade Agreement (not yet in force) will also contain similar investor protection. Once implemented, these new trade arrangements will significantly expand the list of treaty-protected countries and the range of foreign stakeholders that will be able to benefit from investor protection. Notably however Canada’s trade agreements cannot be used by Canadian nationals to protect themselves against negative governmental action occurring within Canada in relation to their domestic investments.

    With the recent re-election of Ontario’s Liberal government, stakeholders in Ontario’s energy sector are, no doubt, breathing a little easier, as putative threats to tear up the Province’s FIT contracts are now much more clearly off the table.19 Most assuredly, the restructuring risk has subsided. Still, the issues here are as much financial as they are political, and history in Canada suggests that negative governmental action can never truly be ruled out. If financial model failure occurs and is considered severe and persistent enough, then negative governmental action will remain a distinct (even if remote) possibility.’

    Stick it on the fridge!
    What’s the fundamental question?

    • “If financial model failure occurs”

      Then negative governmental action will remain a DISTINCT POSSIBILITY Just remove the REMOTE part if a new province is created.

      • The fundamental question or issue?

        The question of what can happen to these contracts has been answered by the author of the article. Up til now people had no way of knowing what can happen with these contracts.

        Now at least they have some legal information about this situation.

        The issue now is how best to address these legal contract issues. Unless some action/actions are taken the present situation will remain the same for the next four years and by then the iWTs will have been installed.

    • ‘[excerpt] […] Gowlings professionals will be pleased to discuss resolutions to specific legal concerns you may have.’

  3. ERCA/Essex Regional Conservation Authority, Aug 19, 2014

    ERCA has joined with Environmental Defense & Freshwater Future in the release of a report on water quality issues in Lake Erie & all of the Great Lakes.

    Water is the next issue and Essex Co. residents should be aware of the organizations involved in water issues.

      • Essex Region Conservation Authority/ERCA joins
        environmental radical group – under investigation.

        Are they going to have a banquet –
        to raise money for a cause – I can’t imagine?

      • ‘[excerpt] Our mission:
        To create awareness and raise funds to enhance our natural environment for healthy living and economic vibrancy in the Essex Region.

        It’s so sophisticated – it’s suffocating

        p.s. follow from a safe distance!

    • United States Climate Action Partnership, http://www.us-cap.org includes:
      Chrysler
      Chrysler Canada union > BlueGreen Alliance > Environmental Defence & USW
      ERCA, Essex Co.,ON

      Just something to think about?

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