Category Archives: Cost Benefit

Understanding the Changes in Ontario’s Electricity Markets and Their Effects

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Source: Fraser Institute|Published: April 12, 2018

Energy consumption is a driver of economic growth. Policymakers in Ontario have made poor policy decisions, resulting in rising electricity costs, lower employment, and lower competitiveness, while achieving minimal environmental benefits. This publication presents a series of collected essays that critique the reasoning behind Ontario’s electricity policy changes and spell out the long term consequences.

Ontario’s main policy shift began around 2005 when the government made a decision to begin phasing out coal. The next major step occurred in 2009 when the government launched its Green Energy Act (GEA). The centerpiece of the GEA was a Feed-In-Tariff program, which provides long-term guaranteed contracts to generators with renewable sources (wind, solar, etc.) at a fixed price above market rates. In order to fund these commitments, as well as the cost of conservation programs, Ontario levied a non-market surcharge on electricity called the Global Adjustment (GA). Between 2008 and 2016, the GA grew more than 70 percent, causing a drastic increase in electricity prices. The high cost associated with aggressively promoting renewable sources is particularly troubling given the relatively small amount of electricity generated by these sources. In 2016, renewable sources generated less than 7 percent of electricity in Ontario while accounting for almost 30 percent of the GA.

Ontario’s decision to phase out coal contributed to rising electricity costs in the province, a decision justified at the time with claims that it would yield large environmental and health benefits. The subsequent research showed that shuttering these power plants had very little effect on air pollution. Had the province simply continued with retrofits to the coal plants then underway, the environmental benefits of the shift to renewables could have been achieved at one-tenth the cost.

The issue of rising electricity costs in Ontario can be partly attributed to the imbalances between supply and demand of electricity. Between 2005 and 2015, the province decided to increase its renewable capacity to facilitate the coal phase-out. However, since renewable sources are not as reliable as traditional sources, the government contracted for more natural gas capacity as a back-up. Meanwhile, the demand for electricity declined, partly due to rising electricity costs. The increase in the total installed capacity, coupled with lower electricity demand, has resulted in excess production being exported to other jurisdiction at a significant loss.

As a result of these structural shifts and poor governance, electricity costs have risen substantially in Ontario. Ontario now has the fastest growing electricity costs in the country and among the highest in North America. Between 2008 and 2016, Ontario’s residential electricity costs increased by 71 percent, far outpacing the 34 percent average growth in electricity prices across Canada. In 2016, Toronto residents paid $60 more per month than the average Canadian for electricity.

Ontario’s skyrocketing electricity rates also apply to the province’s industrial sector. Between 2010 and 2016, large industrial users in Toronto and Ottawa experienced cost spikes of 53 percent and 46 percent, respectively, while the average increase in electric costs for the rest of Canada was only 14 percent. In 2016, large industrial users paid almost three times more than consumers in Montreal and Calgary and almost twice the prices paid by large consumers in Vancouver. Some select large industrial consumers were granted rate reductions but still paid higher rates compared to large electricity users in Quebec, Alberta, and British Columbia.

Soaring electricity costs in Ontario have placed a significant financial burden on the manufacturing sector and hampered its competitiveness. Compared to multiple comparable American and Canadian jurisdictions, Ontario has exhibited the most substantial decline in its manufacturing sector over the past decade. Overall, Ontario’s high electricity prices are responsible for approximately 75,000 job losses in the manufacturing sector from 2008 to 2015.

Given the critically important role that affordable energy plays in economic growth and prosperity, the authors urge the Ontario government to pursue meaningful policy reforms aimed at lowering electricity costs for all Ontarians.

Authors:
Elmira Aliakbari;Kenneth P. Green;Ross McKitrick;Ashley Stedman

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Council needs to protect Residents

a - WindFarm_6Letter to Editor published April 6, 2018| Opinion: North Country Now

To the Editor:

My wife and I live south of 72, in Hopkinton. We are totally against the North Ridge Wind Project and the expansion south of 72.

Do I feel the wind law is strict enough? No, but there has already been enough compromises on our part.
Time after time the majority of residents have voiced they are against this project.

And, yes, we all know what we signed and do know what a PILOT is, so please stop insulting our intelligence and insinuating that these signatures are not legal residents.

I commend the three women on Hopkinton town board for wisely listening to the majority of your constituents and the Wind Advisory Boards recommendations.

Unfortunately, I question if the two men on the board have drank the Kool-Aid.

One’s dad is a lease holder so ethically must recuse himself and the other being Hopkinton’s fire chief and Avangrid publically stating thousands of dollars ear marked for the fire district, appears he may have some ethically questionable motives and perhaps he should also recuse himself.

A no brainer: Guaranteed 100 percent assessment. If you own a shack or a mansion — we each pay the same assessment. This company has a lot more money than any of us and if this is such a good financial deal for our town, lets guarantee that by making them be fair to each of us.

Pay your full 100% assessment like we all do!

When all is said and done and Avangrid has packed their bags and “gone with the wind,” we will still be here. We have thrived for over 200 years and will continue to thrive.

As our elected town representatives: Will you be able to hold your head high knowing you took your position to represent and protect the majority of the towns people in the highest regards?

Robert Blum

Hopkinton, New York

More about: North Ridge Wind Farm

NextEra renewables sale to CPP speaks volumes

Parker Gallant Energy Perspectives

April 5, 2018

Canada Pension Plan’s investment in part of a wind-solar power portfolio seems to ignore a lot of negatives, including the energy poverty rising in Ontario due to electricity bills

Canada Pension Plan contribution rates are rising again, as reported by the Financial Post December 14, 2017: “the contribution rate (i.e., the CPP tax) has increased from 3.6 per cent when the CPP was launched in 1966 to its current rate of 9.9 per cent. It will increase further to 11.9 per cent beginning in 2019.”

The Canada Pension Plan Investment Board (CPPIB) is an active investor, looking for good rates of return without taking “excessive risk.” So they either searched for assets that pay guaranteed above market rates, or were approached by U.S. Power giant NextEra who sold them their Ontario portfolio of 396 MW of wind and solar contracts. CPPIB paid $1.871 million per MW for a total of $741 million CAD and also assumed the debt (US$689 million) attached to the NextEra portfolio. The press release associated with the acquisition had this quote from Bruce Hogg, Managing Director, Head of Power and Renewables: “As power demand grows worldwide and with a focus on accelerating the energy transition, we will continue to seek opportunities to expand our power and renewables portfolio globally.”

Perhaps Mr. Hogg was unaware “power demand” in Ontario has actually fallen from 153.4 TWh in 2004 to 132.1 TWh in 2017 despite an increase in our population of approximately 450,000. He may also be unaware industrial wind turbines create health problems, cause property values to drop and kill birds and bats including those on the endangered species list.

What the CPP acquisition means is Ontario ratepayers will be indirectly contributing additional funds to the CPP without the benefit of reducing either their annual tax burden or increasing their future pension benefits. A “win, win” for CPP and a “lose, lose” for Ontario’s taxpayers. The sole redeeming feature is that the money will stay in Canada instead of flowing elsewhere.

Ironically, the CPP by acquiring and holding those assets will also be showing their support for energy poverty. The Ontario Energy Board (OEB) in their December 2014 report noted: “Using LIM* as a measuring tool, and relying on Statistics Canada household data, Ontario has 713,300 low-income households.” At that point in time the 713,300 households represented almost 16% of residential ratepayers in the province and one should suspect that number has increased over the past three years.

So, one should also wonder why NextEra, headquartered in Florida, sold those assets and their above market returns? The press related to their announcement of the sale speaks volumes: “As discussed during our earnings call in January, we expect the sale of the Canadian portfolio to enable us to recycle capital back into U.S. assets, which benefit from a longer federal income tax shield and a lower effective corporate tax rate, allowing NextEra Energy Partners to retain more CAFD** in the future for every $1 invested.”

No doubt the NextEra sale may be a sign of the future as the Canadian economy has shown serious signs of slowing as taxes rise and foreign investment falls. The bulk of the investment in the renewable energy sector in Ontario came from offshore companies who rushed to take advantage of the above market rates and guaranteed prices offered under the Feed-in-Tariff (FIT) program available under the Green Energy Act.

Those investors will look to cash in on the sale of those assets, so we should expect to see more public and private Canadian pension funds stepping up to purchase them.

Parker Gallant

*Statistics Canada’s Low-Income Measure is simply defined as half of the median adjusted economic family income.

**Cash Available for Distribution

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pggy bank

Could Ontario cancel the wind contracts?

 

Cancelling Contracts: The Power of Governments to Unilaterally Alter Agreements

By: Bruce Pardy| Fraser Institute| Published on October 22, 2014

Government contracts are indeed contracts. In the normal course of events, their terms may be enforced and the Crown held liable for a breach. However, government contracts are not the ironclad agreements they appear to be because governments may change or cancel them by enacting legislation. This paper discusses the means by which governments can make unilateral changes to contracts by statutory enactment.

Legislative supremacy is a central feature of the Canadian system of government. The federal Parliament and provincial legislatures may pass laws of any kind, including laws that change or cancel legally binding agreements, and even if the enactment has the effect of expropriating property or causing hardship to innocent parties who negotiated with government in good faith in entering into the contract in the first place. The powers of legislatures are limited only by the bounds of their constitutional jurisdiction and the existence of constitutional rights. In Canada, there is no constitutional right to compensation for expropriated property.

Just because legislatures can enact an end to a contract does not mean that they should. Using that power erodes confidence in doing business with government, and thus impairs the credit of the Crown and economic conditions in the jurisdiction. On the other hand, if democratically elected governments are to establish their own policies, they require the ability to make unilateral changes to agreements made by previous governments. If they cannot legitimately do so, then their predecessors can control policy decisions beyond the terms of their democratic mandates….

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Cancelling Contracts: The Power of Governments to Unilaterally Alter Agreements:
(full report)

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Another Failed Wind Turbine Plant

“Starting in 2010, Nova Scotia taxpayers pumped $56 million into the operation via provincial loans and grants before the government called a $32-million loan in February 2016, pushing the manufacturing plant into receivership.”

Time and money running out on sale of idle wind turbine plant

DSME Trenton plant placed into receivership in 2016 after the province called a $32M loan

By Paul Withers, CBC News Posted: Feb 15, 2018

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The Nova Scotia government gave DSME Trenton $19.6 million for a 49 per cent stake in the company in 2010. (CBC)

After two years and no takers, Nova Scotia is poised to end its efforts to sell an idle wind turbine manufacturing plant in Pictou County, bringing to a close another failed government-backed industrial enterprise.

“At $150,000 per month to keep the operation at status quo, we want this to happen, we want to find a viable operator. But the clock is ticking,” Business Minister Geoff MacLellan said Thursday, after touring the mothballed DSME Trenton plant.

That money goes toward keeping the facility in a sellable state.

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What is wrong with our system?

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Mayor Randy Hope poster boy for CANWEA

Letter to Editor|The Chatham Voice| Published February 12, 2018

Sir: Our illustrious mayor spoke on a local radio station recently responding to the opinion poll, in which the number one local concern was wind turbines and water wells concerns. His conclusion, in essence, was that they were not involved except for taking $1,575,000 in taxes from the 450 turbines with an average tax rate of about $3500 each per year.

I wonder how much taxes would be for an industrial plant that would have been built and cost approximately $2 million to build. Did the mayor, council and administration ever think that there might be a cost to this extra income? Did they ever consider using this money to do a thorough investigation of the effect on the aquifer? Did they ever go to see the difficulties experienced by those families living off water tanks, especially in the recent freezing weather?

Apparently, mayor, council and administration for Chatham-Kent are willing to trade rural water wells for that price. The people losing their wells must prove that there is a problem and then the municipality may look at a solution.

The mayor says that they take concerns seriously. That is the exact same B.S. statement made by Premier Wynne when she was in Chatham a couple of months ago and the mayor was looking over her shoulder. No one in government, provincially or municipally, has done anything constructive for years; when the first complaints were lodged in Dover Township in about 2009 and again in 2012.

What is wrong with this story?
If a bank is robbed, does the bank have to find the criminal and prove his guilt? Isn’t that what police do? If you are in a car accident caused by another person, do you have to pursue and prove the guilt of the offender? Isn’t that what police do? For every injustice, there is a third party whose duty it is to find the perpetrator and proof for the case against them. Since these third parties are no longer doing their jobs, are we reverting to the law of the old west?

In the case of the harm done to water wells and the standard of living for those with now contaminated wells, these agencies are not acting in the offended parties’ interests. There are many directions that fingers can point.

The provincial government, with its Green Energy Act, which is being used as an excuse by everyone as a document that overrules every other law in the land. This is not true as the health and safety of the citizens of this province still rule supreme, if our Ministry of Health, and local public health unit would get off their backsides and study health effects of the Kettle Point Black Shale that infiltrated our water wells.

I believe that somewhere in their health education process they were made aware that lead, mercury, arsenic and uranium are not to be used as vitamins. Why have they never run any comprehensive tests to find out what is in the water now and what are the health effects of those contaminants?

The Ministry of Environment and Climate Change is certainly the ministry that is supposed to protect the citizens of this province from anything that environmentally has a negative effect on the enjoyment and use of property, be that by health effects or any other source of irritation. The trouble with the MOECC is that it is the same ministry that issued the permits to build wind farms and are certainly not going to admit that they did not do “due diligence” before issuing these permits. Were there any studies done on possible problems with the style of foundations used in an aquifer sensitive area?

Then we get to our local mayor, council and administration. What have they done other than become shareholders in wind farms? Do they value the rural wells of Chatham-Kent at $1.5 million per year? Are they going to use this money to replace the water supply that has been lost by several known residents in the former Dover and Chatham Townships?

Are there other townships that lost their wells as well, even before the wind companies went to the pile driving method from spread foot of securing foundations? Was our local government blinded by the visions of a cash windfall without any expense?

I still have three questions that I would like to have answered:

~How much money was paid by the wind industry to individuals, political parties and the Ontario government for the privilege of building turbines in Ontario without interference?
~How much money was paid by the wind industry to individuals, and the municipality to become friendly hosts for turbine construction?
~How much money would it take to stop construction and operation of turbines until their negative impact on environment issues, especially water, are properly assessed by an independent party, since our politicians, local and provincial, obviously have not done “due diligence” prior to signing agreements?
Where can these questions be answered? Are elected representatives not supposed to answer to their constituents?

Peter Hensel

Dover Centre

White Pines ERT & The People vs IESO & WPD

A call to action!

Your presence is requested in the seats at the upcoming Environmental Review Tribunal hearing against White Pines Wind and circumstances surrounding the IESO contract for the renewable energy approval.

Upcoming Court and ERT dates/times/locations:

APPEC legal action against the Independent Electricity System Operator (IESO) and WPD White Pines Wind Inc. will be heard on January 29, 2018 at the Belleville Court House starting at 2:00 pm.

Additionally, the hearing dates for the APPEC appeal to the Environmental Review Tribunal (ERT) have been confirmed as follows:

Pre-hearing Conference
January 24, 2018 at 10:30 a.m. at the Sophiasburgh Town Hall, 2771 County Road 5, Demorestville.

The purpose of the Pre-hearing Conference is for interested persons who would like speak at the hearing to apply for status either as a Party, a Participant or a Presenter. Please click here if you are interested in finding out more about seeking status at the hearing and click here to view the ERT Notice of Pre-Hearing Conference.

ERT Main Hearing
February 12, 2018 at 10:30 a.m. at the Sophiasburgh Town Hall.

The most effective way of showing the Superior Court and the Tribunal of the level of community concern with the White Pines wind project is with your presence.

Source: Alliance to Protect Prince Edward County

*To confirm dates and venue locations for any changes please contact the Environmental Review Tribunal *

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Zoo Poo & other important connections

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Zoo poo and food waste to fuel 500-kilowatt plant

Important connections in the world of energy in Ontario

Credit: Parker Gallant Energy Perspectives

Reading an article recently about Greenpeace trying (apparently unsuccessfully) to create a solar-powered town in India several years ago reminded me of a project in the GTA proposing to use “zoo poo” to create a 500-kW biogas plant.

The project is a co-op known as Zoo Share Biogas Co-operative and plans to use methane from animal waste to produce electricity in a biogas plant. The chatter about this project goes back to June 3, 2011 and those behind the project applied for a contract with the OPA (since merged with IESO).

So where is it now? A visit to the website shows the OPA advised them early July 2013 they were granted the contract. A PDF file titled “Construction Plan Report” on the site reveals “Construction of the facility is scheduled for summer 2014 with completion and grid connection expected in the fall of 2014.”

Needless to say, the plant is still not functioning but nevertheless has taxpayer support and some $4 million raised from individuals and others who purchased bonds that carry a 7% coupon on a project estimated originally to cost $4.8 million.

Curiosity further led me to look at the members of the Co-op’s Board of Directors and I noted Chris Benedetti was a Board member.  Benedetti is a principal with the Sussex Strategy Group and the head of its Energy and Environment Practice.  Some will recall Mr. Benedetti was involved in a major fundraising event for the Ontario Liberal Party as reported in an article in the Globe and Mail in March 2016 headlined:  “For $6,000, donors get face time with Kathleen Wynne and Bob Chiarelli”.

That article contained the following attributed to Mr Benedetti: “The evening is being promoted by Sussex Strategy Group, one of the country’s top lobbying firms. In an e-mail encouraging energy industry insiders to attend, Sussex principal Chris Benedetti wrote that the soirée will be a ‘small event with a limited number of tickets,’ giving all attendees face time with Ms. Wynne and Mr. Chiarelli.”

Previously, the Sussex Strategy Group’s name was connected with what the Toronto Star noted in a November 2010 headline as:  “Group plans to ‘dupe’ public about green energy costs: Tories”.  The article also noted: “The Oct. 18 document, drafted by consulting firm Sussex Strategy Group, lays out a plan — complete with a $300,000 initial budget — to change the channel on the current green energy debate, which is largely focused on cost.”

The Benedetti/Sussex connection led me to visit the Sussex website; the page titled “Our People” shows Kim Warren’s name and picture of Kim Warren under Sussex’s “Affiliates.”. Mr. Warren was, until January 1, 2017, the COO of IESO; if you check the “Sunshine List” for the 2015 year you will note he was paid $577,000.04 — not too shabby for a public servant!  When he was employed at IESO he spoke about integrating renewable energy. Due to his positive tone the short video of his speech was posted on the CanWEA website; he was clearly supportive and claimed wind energy “was a big part” of shutting down coal.  (Many grid operators around the world would dispute his claim.)

Searching on Google again using Mr. Warren’s name and his IESO affiliation turns up other relationships.  One that pops up is NRStor:  a press release dated June 20, 2017 announces he is the newest addition to NRStor’s Board as a Director and states:  “The insights and experience Kim Warren brings to our board as previous COO of the IESO is significant,” said Annette Verschuren, NRStor’s Chair and CEO. “He is a world expert on power systems and his extensive understanding of the electricity market will help NRStor grow and develop our energy storage business.”

Coincidentially, NRStor has been awarded contracts by IESO with the first one on July 22, 2014 announced by then Energy Minister, Bob Chiarelli: “Today, the Minister of Energy, the Honourable Bob Chiarelli, announced the commencement of commercial operations for NRStor Incorporated’s (NRStor) 2 megawatt (MW) Temporal Power Limited (Temporal Power) flywheel energy storage facility in Harriston, Ontario.”   Now assuming the 2MW of storage was called on to replace Ontario’s generated power it would be capable of supplying demand for half a second, or less.

The second contract awarded to NRStor by IESO noted:  “NRStor will build a fuel-free compressed air energy storage facility that will provide 7 MWh of storage capacity to the IESO.”

For those who wonder who is NRStor, the following comes from their website: “NRStor is a market leader in understanding energy storage technologies, their costs, and the benefits they can provide customers across the energy supply chain. As a project developer, we develop, own and operate industry-leading energy storage projects in partnership with progressive stakeholders and leading technology providers.”

NRStor was founded by Ms. Annette Verschuren, former CEO of Home Depot. Ms. Verschuren spoke to the Standing Committee on Finance and Economic Affairs May 19, 2015 in respect to Bill 91, Building Ontario Up Act. One of the notable comments she made was,  We are a developer of energy storage technology, so we build projects. We are working on about 20 projects at the moment and we see the introduction of energy storage really making a big difference in terms of how we get electricity to market in a cheaper way. NRStor recently announced a partnership with the Tesla Powerwall, which is very exciting, to be introduced. We want to start in Ontario. We see that movement towards, again, using excess energy to improve costs and make it easier for customers.”

Ms. Verschuren also offered her “Congratulations to the Ontario government for its announcement on cap-and-trade policy.” and: “The privatization of Hydro One is also something that I’m very supportive of.”

While Ms. Verchuren is very accomplished and informed, from my perspective, she has missed the effects on hundreds of thousands of Ontario ratepayers/taxpayers from the Green Energy Act, and the “cap and trade” tax.    Ontario’s “excess energy,” as she puts it, represent a huge cost to ratepayers, which seems to have escaped her thinking.

The conflict in Ms Verchuren’s testimony is exacerbated by adding Kim Warren as a Director of NRStor.   The fact that NRStor has benefited from IESO’s contract awards should have triggered the question of how the media and public would view his appointment.   As a director he would be required to be a shareholder in NRStor which seems to fly in the face of IESO’s “Post-Service Restrictions” contained in their Code of Conductwhich states: “It is expected that the restriction against purchasing or holding any Prohibited Financial Interests continues until 6 months following the end of your employment or association with the IESO.”

Worth noting is Ms. Verchuren is registered as a lobbyist with the Office of the Integrity Commissioner as is Chris Benedetti (lobbyist for NRStor and 55 other companies), but Kim Warren is not.

The Ontario Ministry of Energy seems to have created a tangled web that benefits select companies and individuals.

Parker Gallant,

January 7, 2018

 

Cherish Your Suffering

Rex Murphy: Cherish your suffering, Ontario; Premier Wynne’s green gods know of your sacrifice

Those outside the faith, and mere loitering agnostics, see nothing here but a catalogue of burdens. Shackles of an alien god. But to those within the covenant, they are the way stations on the hard and stony path to delicious rewards reserved for the elect.

National Post| January 6th, 2018|Rex Murphy

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Premier Kathleen Wynne

It cannot have escaped the attention of many that Ontario is most unsettled these days. That its industries are anxious, its debt colossal, its citizens not in a pleasant mood. Ontario is in a lot of pain. But let me assure readers outside Ontario that it has not all been for nothing. There are rewards. They are subtle, intangible, but they are real. Let me explain.

Those who share the faith and endorse the morality of global warming derive very much the same satisfactions that attended fidelity to the less demanding dogmas of earlier and less ambitious creeds. The carbon regime, tax hikes on gasoline, failed or failing long-term contracts, fear and trembling in the manufacturing sector, the gnashing of teeth in poorer (and now colder) households, Ontario Hydro’s ever-swelling levies, the despoliation of rural vistas by towers of whirling, bird-bashing windmills: These, each in itself, and all in combination are the acknowledged costs of the Great Greening.

Those outside the faith, and mere loitering agnostics, see nothing here but a catalogue of burdens. Shackles of an alien god. But to those within the covenant, they are the way stations on the hard and stony path to delicious rewards reserved for the elect. This is the true chemistry of belief. What appear as obstacles to heretics, appear to believers as smooth escalators to a higher state. Accepting, embracing what must be done supplies them with a sense of inner sanction, endows them with that peace of mind which a lesser scripture records, rather churlishly, as passing all understanding……

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