Ontario Conservatives to Scrap Green Energy
Tim Hudak, leader of Ontario’s Conservatives, announced this week that if they are elected, they will scrap the Green Energy Act. Make no mistake – such a move would result in the loss of thousands of jobs, would stop the deployment of renewable energy, and ensure that we continue to burn coal with a cost in human health, climate gases, and lives from smog related illnesses. The Conservative claim as a pro business party is in shambles.
The Green Energy Act includes several important elements.
At it’s core, is the Feed in Tariff’s, that allow differentiated pricing by technology. Prices are set to allow a return plus a reasonable profit (about 9%) on solar, wind, and water projects. As the cost of the technology goes down, prices also drop. Worldwide, the actions by governments to deploy increasing amounts of solar, for example, has doubled the market every 2 years, which builds volume and decreases costs. The cost of solar is dropping about 20% every 2 years. Feed in Tariff’s are working.
Around the world, it has been demonstrated clearly that Feed in Tariffs result in the largest deployment of renewable energy. Leading renewables countries like Germany, Denmark, and Spain all use Feed in Tariffs. Why do Feed in Tariffs work? They attract capital. Developers, which include homeowners and farmers, can invest to develop their project, knowing they will have a contract to buy the power they produce. Uncertainty is removed. So more capital is deployed, and more projects are built. A developer just needs to determine if their cost is low enough to allow the project to go ahead at the price offered.
Hudak’s reliance on “market based mechanism’s”, by contrast, increases uncertainty for developers, homeowners and farmers. If you have to bid, with no certainty of a positive outcome, the risk is higher. You therefore need to pay higher rates to your capital providers, and less capital will be available. In Europe, studies have consistently shown that jurisdictions with Feed in Tariff’s not only have much more deployment of renewable energy, but also have lower cost for their rate payers. Lower risk results in lower costs for developers.
The other BIG problem with reliance on market mechanisms, is that the electricity market is riddled with subsidies and externalities for other sources of generation. Coal causes smog, which kills people. Coal contributes to climate change. The people living on the Mississippi, Richelieu, or Assiniboine Rivers, who are in worst recorded flood conditions, would be well advised to note that increased weather events are exactly what climate scientists predicted. Japan’s government is giving a $40 billion bailout to Tepco, the owners of the Japan’s failed nuclear reactors – taxpayer insurance. The Canadian government gave over $500 million to Atomic Energy of Canada Limited last year – the subsidies just keep rolling along. So to ask renewables to play in a market that doesn’t recognize externalities, and where incumbent sources receive vast subsidies is simply unfair.
Part of the purpose of the Green Energy Act was to stimulate jobs in the green energy sector. And this has been happening and in a big way. Almost every week there is news of a new manufacturing plant opening. Construction workers are busy. Fabrication companies are hiring new people. Ontario, with its skilled work force, and industrial base, is becoming the place for companies to open factories. Ontario is at the forefront of the green collar revolution in North America. It is good policy to hitch your fortunes to a rising star, rather than remain dependent on sunset industries.
The Green Energy Act is responsible for only a very small part of the increase in electrical rates. Electricity rates have been rising because of a need to re-invest in the system. There was large electrical infrastructure built around North America in the 1970’s. This infrastructure is reaching the end of its life, and needs to be replaced. Replacing it costs money. And that has driven up rates. Rates will go up with or without the Green Energy Act.
And herein lies the problem. Rates are going up to replace old infrastructure, and keep the lights on. This will occur under both the Liberals and the Conservatives. But with the Liberal plan, you get the elimination of coal, less climate emissions, and lots of jobs, and an industry with a future.
The Conservative plan is anti business, anti employment, and pro climate change. Surprising. The party should change their name.