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The Madness of Minister George November 9, 2009

Posted by Maury Markowitz in FIT program.
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If you’ve been reading Energy Matters, like the world’s most exciting supermodels, then you’d know that I think the simplest solution to Ontario’s power needs is to buy hydro power from Manitoba and Québec.

You know, hydro… that highly developed, carbon neutral, low cost technology that’s been working great for over a century and made Ontario an industrial powerhouse in the first place? The one that Manitoba, Labrador and Québec have sitting around to the tune of 20 GWp, more than all the nukes in Ontario put together?

Yeah, that hydro.

Now honestly, I never thought that Minister Smitherman would have the balls to cancel Darlington B, and when I got the news I nearly choked on my donut . But then there was basically no news at all about what they were going to do about it. So, I wrote the Minister a letter, asking him if he felt that buying it from Québec was a good option…

And he actually wrote back. And what the letter said nearly knocked my socks off – not the good way, sadly. Basically after agreeing that there was power in Québec, and mentioning that they were upgrading one of the interchanges to get another 500 MW, the letter went on to state

“However, unlike the potential line to Québec that you inquire about, the new transmission infrastructure built in Ontario will enable us to maximize the economic potential of our own province by modernizing our electricity networks, creating green jobs, and reducing our reliance on carbon-based fuels”

So no more power from Québec, instead we’re paying feed-in tariffs for projects in Ontario so we can build up a new Green Economy! Yeah! Ontario FTW!

Oh god, not again

I’ve done a lot of writing about Canadian technology projects over the years. Many of these were funded by the government, at various levels, in order to chase the “next big thing”. And if there’s one thing I’ve learned about these projects, it’s that they’re all doomed. Dooooooooomed!

The reasons are pretty simple. For one thing, the government doesn’t have a clue what the next big thing is. Case in point: Telidon. For another, since they demand that their solution be used for any local deployments, the companies involved have a captive market and there’s zero incentive to lower prices. Case in point: UTDC. And finally, since the product is overpriced and often under-delivers, the small numbers that we are forced to buy end up practically bankrupting us. Case in point: AECL.

I know, I know, it all sounds great on paper – we’ll use the feed-in tariffs to get people to buy green power systems, make sure they’re built here in Ontario, and that way use tax payer dollars to produce a new industrial base that will sell solar panels all over the world! Who couldn’t want that?

Let me assure you, the arguments sounded exactly the same for every one of those failed projects of the past. Yes, everyone really thought that nuclear power was the next big thing and we needed to get in on it. Yes, everyone really thought that urban transit was then next big thing and we needed to get in on it. Yes, everyone really thought that videotext was then next big thing and we needed to get in on it.

And what we have to show for this is what you’d expect from a captive market: underperforming, overpriced failures. Industrial welfare doesn’t work. Never has, never will.

Baby, meet bathwater

Hey, I’m all for jobs, I have one myself. But the only reason Ontario is an industrial powerhouse is because we used to have some of the cheapest power in North America thanks to (sigh) hydro power. Hey look, I’m no economist, but I’m pretty sure economies generally die when the price of power goes up, so if this green plan is going to work, it’s going to need to create a whole lot of jobs.

Will it? Come on, we’re competing with China here. If you’re even going to be in the same ballpark you’re going to have to automate the hell out of everything. And if that’s the way you’re going, how are we going to compete with Germany’s enormous head start? What about keeping it all running? Well it’s not like a windmill is particularly labor intensive. Let’s just say I’m a bit skeptical about all this job creation they’re promising.

So we get to pay a lot of money to we get expensive power that we have to subsidize back to grid parity so we can keep the jobs we would have had if we just had cheaper power in the first place? Great.

Madness!

And that’s ignoring the fact that all of this is basically illegal. This sort of “buy local” requirement is precisely the sort of thing that NAFTA and the WTO were set up to eliminate. Sure, the Ontario government might not be held to the exact same legal requirements as the feds, but that doesn’t hide the fact that this is an anti-competitive protectionist bill.

If we go ahead with this plan, what’s to stop Michigan to pass a similar law stating that all GM cars have to be built in the US only? If this turns into a local trade war, we lose. Even if the worrying possibility of a trade war doesn’t come to pass, then what’s to stop every other state passing a similar policy? Then we have protectionist barriers that ensure the only people that ever buy our product is us. Like what happened every time in the past when the government got into industry.

What surprises the hell out of me are the people who are coming out to support this bill. The Ontario Clean Air Alliance is one group that’s asking people to write to the new minister to continue support for this disaster. This strikes me as particularly laughable, considering their home page complains about the “nuclear bailouts”, missing the obvious irony of the “green bailouts” they’re supporting. This is especially baffling if you consider that pretty much every single dollar spent so far has been used to build gas-fired plants in urban areas – Clean Air indeed!

Good luck with the run for mayor there George. With eHealth on one side and all the new gas-fired plants of your “green energy” plan on the other, I’m not sure which leg your hoping to stand on.

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