Tuesday, November 25, 2014

New Study reveals Ontario's wind subsidies benefit a select few

A joint study by "Toronto-based think tanks Energy Probe and Consumer Policy Institute" was released today; Corporate Welfare Goes Green in Ontario

The study is written by economist Brady Yauch, and I think it's excellent.  There's an introduction to the study on the Energy Probe site, and an equally strong Background to Corporate Welfare Goes Green in Ontario. I can pick out some quotes and graphics, but both papers are more accessible than I usually make the topic. If you're interested in the topic, read Brady Yauch's work.

What I will do is prove I read it by picking up on the section that most angered me, which is a footnote ending page 10 of the background report:
17 The government on September 30, 2014 raised the FIT rate to 12.8 cents per KWh. 
Let me explain why this set me off, and perhaps that will emphasize the work's claim that, "the benefits from [the province's renewable energy policy] have accrued to a small group of companies."

September 30th struck me as about the time a deal was done between the Korean Consortium and the Ontario government for a 100MW wind project in Ontario - and it was, in fact, exactly the day. I checked today because of what I'd found when checking into Ontario's contract with the Koreans on, or shortly after, September 30th, 2014.

A very quick review of the "Green Energy Investment Agreement" (GEIA) which is more generally known as "the Samsung deal" - ignoring that Korea Electric Power corporation (KEPCO) is also named in it. The original deal was announced January, 2010, with the expectation 2500MW of renewable energy would be built quickly from Ontario sourced materials. Numerate people objected. In 2013, after 3 years had passed I noted the failure of the agreement to accomplish anything of substance, or meet its time lines, in March, April and May.

In June, the deal was, miraculously, reduced.

I mistakenly thought the reduced deal meant no more wind, and 300MW more solar, so when the September 30th wind project contract announcement came this year, I read through the revised GEIA, and found I was wrong. Here's what it says about pricing for the relevant, new, wind project in Article 9:
for wind, the price as specified in the then current Price Schedule; provided that for Phase 3 wind, the price will be the greater of: (i) 10.5 cents per kWh; and (ii) the price as specified in the then current Price Schedule...
I am certain I checked the Ontario Power Authority Site shortly after September 30th, partly to confirm there was no "current Price Schedule" for projects greater than 0.5 megawatts capacity [1]. There was not - and if for no honest reason the price for projects under 0.5 megawatts was to be applied to projects 200 times the size, that price was 11.5 cents/kWh until the day the new project was contracted with the Korean Consortium - when it went up.

Now, what price do you think that September 30th contract is at?

Read Brady Yauch's Corporate Welfare Goes Green in Ontario study, and the background. It's a good piece on the commodity cost impacts of, particularly, wind energy contracted in Ontario, and it should dispel rumblings that feed-in tariffs were somehow about energy democracy.

If you want more on the costing of Ontario's wind experiment:
Finally, I happened to be pulling some figures on Ontario's wind capacity growth and the growth in the U.S. as indicated in FERC documents for 2013 (1,559 MW) and up until the end of October 2014 (2,189MW).
  • in 2013 Ontario first received output from East Lake, Erieau, Summerhaven and the Port Dover and Nanticoke wind projects, totalling about 420 MW capacity, or 27% of all turbines indicated as entering service in the entire United States.
  • in 2014 Ontario first received output from McLean's Mountain, Bluewater, Bornish, Adelaide, Gosfield, Dufferin and Jericho projects, totalling about 815 megawatts of eventual capacity, but as of the end of October only ~570 MW were in service, which is 26% of the capacity FERC shows added in the US.
  • recent power purchase agreements in the United States have been cited to be as low as $25/MWh, or about 1/5th the likely price awarded the GEIA recipients on September 30th, 2014.


Energy Probe's Lawrence Solomon has an article in The Financial Post on another impact of industrial wind turbines, Ill winds blow from wind turbines.  Again, I feel an article is more accessible than what I've written in the past (most recently here), and therefore simply encourage you to read Solomon's work.

End Note

1. There hadn't been a contract awarded in over 3 years, and September 30th, 2014 was exactly 16 months after the government claimed feed-in tariffs dead for large procurements

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