Dalton McGuinty’s “Grand Green Gesture” Comes With a Hefty Price Tag For Ontario

The Government of Ontario recently signed a $7 billion no-bid contract with two Korean companies to supply wind and solar power to the province. Officials claim the backroom deal will boost green industry and job creation. But it's hard to fathom how the additional employment can possibly be beneficial when each new manufacturing job will cost taxpayers a whopping $303,472. Nor do dramatic increases in electricity rates constitute much of a bargain.

Having failed on his pledge to shutter all coal-fired plants in the province by 2007, Ontario Premier Dalton McGuinty evidently has sought a grand green gesture that would appease the global warming alarmists. Executives of Samsung C&T Corp., in concert with the Korean Electric Power Corporation, were understandably eager to cooperate.

The agreement commits the province to buy wind and solar energy from the two companies at artificially high rates. It also extends to Samsung and Korean Power preferential access to the transmission network at the expense of independent wind power producers. As if either provision won't adequately punish Ontarians, McGuinty also has pledged to override local zoning laws in locating new wind farms and transmission corridors.

The contract calls for Samsung and Korea Power to supply 2,000MW of wind power and 500MW of solar power. In return, the Ontario Power Authority will purchase the electricity at a rate of 13.5¢/kWh for power generated onshore and 19¢/kWh for electricity generated from off-shore turbines. The rates for solar power range from 44.2¢/kWh to 80¢/kWh. In comparison, the current average price for residential electricity is about 7¢/kWh.

Samsung will also be paid an additional $437 million (in net present value) to build four factories in Ontario to manufacture components for wind turbines and solar power stations. According to the government, 1,440 manufacturing jobs will be created as a result, which equates to $303,472 per job.

The rates to be paid to Samsung and Korean Power are largely the result of Ontario's 2009 Green Energy Act, which created a feed-in tariff to promote new generating capacity for renewable power. A feed-in tariff is the mandatory rate utilities must pay for electricity fed into the power grid from independent sources of renewable energy.

The government claims the higher rates will be offset by the cheaper electricity from conventional sources. But the cheapest energy fuel source is coal, which the province is planning to eliminate by 2014. Nuclear power is relatively inexpensive to generate, but constructing and maintaining a nuclear power plant is enormously costly. Those currently operating in Ontario require major refurbishments to continue operations. According to the Ontario Ministry of Energy and Infrastructure, many existing facilities are near the end of their operating lives and as many as 80 per cent will need to be refurbished or replaced over the next 20 years.

Nor will the Samsung-Korean Power project come close to replacing the 6,000 MW of generating capacity the province will lose by shuttering all coal plants by 2014. Thus, the province faces a potential shortage of power despite billions of dollars in subsidies for renewable energy.

Wind and solar power constitute only a small proportion of the overall electricity generation in Ontario. Currently, according to the Ontario Ministry of Energy and Infrastructure, 22 per cent of Ontario's generating mix comes from hydropower, four per cent from wind, solar, and biomass generation, with the rest coming from nuclear energy (51 per cent), coal (16 per cent), and natural gas (six per cent).

There are also no plans for back-up power in the event the wind doesn't blow and the sun doesn't shine.

Incumbent wind firms are particularly concerned about the transmission preferences bestowed on Samsung and Korean Electric Power by the province. Absent a major expansion of the network, some independent wind power producers will be shut out of the grid. Moreover, the generous subsidies for the manufacture of project components will put competing firms at a serious disadvantage.

It is also imprudent for the government to enter such a long-term contract when uncertainty envelops the entire energy industry.

Despite the magnitude of the project, details are surprisingly vague-or the government is simply staying mum. For example, the first cluster of wind turbines is planned for the Chatham-Kent and Haldimand County regions and is scheduled to begin operating in 2015. But the locations and projected operating schedules for the other clusters have not been made public.

Renewable power certainly is in vogue among government these days. But beyond scoring green points with a slice of the electorate, McGuinty's costly revamping of Ontario's electricity supplies is wholly unwarranted.

The recent revelations of fraud and deceit relating to global warming research should elicit caution among government officials; there is no proven link between man-made emissions of carbon dioxide and global warming. For Ontario officials to act with such imprudence on the basis of a purely hypothetical threat, should arouse citizen opposition across the province.