Queen’s Park has downsized its supersized Samsung renewable energy deal.
Once hailed as the miracle cure for Ontario’s ailing industrial sector, it has been cut down to size — by a hefty $2 billion.
Is green energy fading to black?
The outlook has certainly dimmed since Dalton McGuinty placed a big bet on a high-cost, high-risk, hybrid strategy that blended energy diversification with industrial incubation in 2010. Our then-premier promised to revive Ontario’s hollowed-out heartland with high-tech wind turbines and solar panels that captured the wind and the sun’s rays — riding the wave of green energy.
Three years later, McGuinty is gone. So too is George Smitherman, the ambitious energy minister who steered the strategy through a skeptical cabinet — and then bailed out.
Now, Kathleen Wynne’s government wants to “bend the cost curve.” And cut its losses with damage control.
The world has changed since 2010.
Industrial demand for power is down, while electricity prices have soared — stoking ratepayer resistance to expensive energy experiments. Low-cost competition from Chinese solar panels is also undercutting the green energy industry here and abroad.
Yet some things remain the same: There was always a mismatch between Ontario’s wind (which blows mostly at night and in winter) and peak electricity demand (daytime and summertime). When the wind blows at the wrong time — off-peak — it’s not replacing high-carbon coal or high-cost natural gas, but displacing low-cost hydro and low-carbon nuclear power.
Another constant is the chasm between commercial ambitions and community apprehensions over wind turbines. Also, the ongoing gap between scarce transmission capacity and new electricity generation has gummed up the system.
Against that backdrop, the opposition is portraying the Samsung dial-down as a climb-down — the end of the road for renewables. But the real green energy story has infinite shades of grey.
While the signature Samsung project has been scaled back from a promised $7-billion investment, it’s still a very big $5-billion deal: The province will buy $3.7 billion less in electricity (down from $9.7 billion) but is still taking a substantial $6 billion. Samsung is still promising 900 jobs in its four Southern Ontario plants through 2016.
This isn’t so much a U-turn as a long overdue course correction in a rough economic climate, a tough power market and a hostile political environment. Samsung was missing its deadlines, allowing the government to invoke escape clauses.
This isn’t the first time the government tried to rewrite the contract. On the eve of the 2011 election, McGuinty renegotiated incentive payments to Samsung from a potential $437 million to a reduced cap of $110 million. It sounded impressive at the time, but my sources tell me the Ontario government missed an opportunity back then to reduce its exposure to what was already shaping up as an expensive deal.
There have been other recalibrations: Last year, the Liberals scaled back their controversial F.I.T. program that provides a guaranteed, subsidized tariff to smaller suppliers of wind and solar power. This year, the Wynne government reached out to rural communities that felt steamrollered and alienated, giving them more of a say in where wind turbines will be sited.
Going forward, renewables may be revived by a new ally: A little-noticed shift in government policy this month gave the green light to crown-owned Ontario Power Generation to enter the green energy sector.
Previous Liberal policy pointedly froze out OPG, leaving the field clear for private operators. The same misguided thinking kept OPG away from gas-fired power plants — magnifying the McGuinty government’s exposure when it opted to cancel two controversial sites in the western GTA.
The result of that stealth privatization strategy? In 2005, OPG was producing 77 per cent of Ontario’s power at relatively low cost; by 2012, a hamstrung OPG was generating only 55 per cent, while the private sector moved in on its territory (and then cashed in when moving out of the Mississauga and Oakville plants at McGuinty’s request).
The NDP has long called for OPG to be unshackled. In retrospect, many believe the old electricity utility (carved out of Ontario Hydro) could have used its experience and expertise to play a more collaborative role in the renewable sector.
OPG has a relatively good track record in dealing with local communities after years of consultations and co-existence beside nuclear and hydro plants. Now that our big government-owned company is getting into green energy, most of the low-hanging wind has been harvested — but better late than never.
Given its belated entry, and Samsung’s ongoing consolidation, green energy isn’t fading away — either as a source of power or political controversy.
Original Article
Source: thestar.com
Author: Martin Regg Cohn
Once hailed as the miracle cure for Ontario’s ailing industrial sector, it has been cut down to size — by a hefty $2 billion.
Is green energy fading to black?
The outlook has certainly dimmed since Dalton McGuinty placed a big bet on a high-cost, high-risk, hybrid strategy that blended energy diversification with industrial incubation in 2010. Our then-premier promised to revive Ontario’s hollowed-out heartland with high-tech wind turbines and solar panels that captured the wind and the sun’s rays — riding the wave of green energy.
Three years later, McGuinty is gone. So too is George Smitherman, the ambitious energy minister who steered the strategy through a skeptical cabinet — and then bailed out.
Now, Kathleen Wynne’s government wants to “bend the cost curve.” And cut its losses with damage control.
The world has changed since 2010.
Industrial demand for power is down, while electricity prices have soared — stoking ratepayer resistance to expensive energy experiments. Low-cost competition from Chinese solar panels is also undercutting the green energy industry here and abroad.
Yet some things remain the same: There was always a mismatch between Ontario’s wind (which blows mostly at night and in winter) and peak electricity demand (daytime and summertime). When the wind blows at the wrong time — off-peak — it’s not replacing high-carbon coal or high-cost natural gas, but displacing low-cost hydro and low-carbon nuclear power.
Another constant is the chasm between commercial ambitions and community apprehensions over wind turbines. Also, the ongoing gap between scarce transmission capacity and new electricity generation has gummed up the system.
Against that backdrop, the opposition is portraying the Samsung dial-down as a climb-down — the end of the road for renewables. But the real green energy story has infinite shades of grey.
While the signature Samsung project has been scaled back from a promised $7-billion investment, it’s still a very big $5-billion deal: The province will buy $3.7 billion less in electricity (down from $9.7 billion) but is still taking a substantial $6 billion. Samsung is still promising 900 jobs in its four Southern Ontario plants through 2016.
This isn’t so much a U-turn as a long overdue course correction in a rough economic climate, a tough power market and a hostile political environment. Samsung was missing its deadlines, allowing the government to invoke escape clauses.
This isn’t the first time the government tried to rewrite the contract. On the eve of the 2011 election, McGuinty renegotiated incentive payments to Samsung from a potential $437 million to a reduced cap of $110 million. It sounded impressive at the time, but my sources tell me the Ontario government missed an opportunity back then to reduce its exposure to what was already shaping up as an expensive deal.
There have been other recalibrations: Last year, the Liberals scaled back their controversial F.I.T. program that provides a guaranteed, subsidized tariff to smaller suppliers of wind and solar power. This year, the Wynne government reached out to rural communities that felt steamrollered and alienated, giving them more of a say in where wind turbines will be sited.
Going forward, renewables may be revived by a new ally: A little-noticed shift in government policy this month gave the green light to crown-owned Ontario Power Generation to enter the green energy sector.
Previous Liberal policy pointedly froze out OPG, leaving the field clear for private operators. The same misguided thinking kept OPG away from gas-fired power plants — magnifying the McGuinty government’s exposure when it opted to cancel two controversial sites in the western GTA.
The result of that stealth privatization strategy? In 2005, OPG was producing 77 per cent of Ontario’s power at relatively low cost; by 2012, a hamstrung OPG was generating only 55 per cent, while the private sector moved in on its territory (and then cashed in when moving out of the Mississauga and Oakville plants at McGuinty’s request).
The NDP has long called for OPG to be unshackled. In retrospect, many believe the old electricity utility (carved out of Ontario Hydro) could have used its experience and expertise to play a more collaborative role in the renewable sector.
OPG has a relatively good track record in dealing with local communities after years of consultations and co-existence beside nuclear and hydro plants. Now that our big government-owned company is getting into green energy, most of the low-hanging wind has been harvested — but better late than never.
Given its belated entry, and Samsung’s ongoing consolidation, green energy isn’t fading away — either as a source of power or political controversy.
Original Article
Source: thestar.com
Author: Martin Regg Cohn
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