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Tim Hudak wants to buy you a coffee May 10, 2011

Posted by Maury Markowitz in FIT program, power grid.
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When the Green Energy Act first came out I wasn’t exactly a big fan. But once I had smarter people educate me (the world’s most beautiful supermodels, naturally), the brilliance of the plan became more obvious. If, and I’ll admit it’s a big if, the plan creates even a few thousand jobs, then it’s pretty much revenue neutral. And if we get any export business out of it? Ontario for the win!

But in spite of these potential benefits, one has to admit that it’s a hard sell – not hard so much as confusing. In this era of the twitterverse, that’s pretty much death. What will happen is that your enemies will latch onto the shortest, easiest to spit out “problem” and harp endlessly on that point.

So, consider the latest elections. As the Globe and Mail notes, “Tim Hudak vows to scrap lucrative green-energy deals in Ontario

Why, you ask? Because “The Tories would end the McGuinty government’s “expensive and unsustainable” so-called Feed-In Tariff or FIT programs and its “sweetheart” Samsung deal if they win the election next October, Mr. Hudak pledged.”

Ahh, the sweetheart deal… the one in which “Samsung will receive $437-million in incentive payments over the 25-year life of the deal if it fulfills its obligation to create 16,000 jobs.”

Wait, wait wait… let’s do the math. 16,000 jobs, at say $50,000 average salary, and maybe 15% tax rate that goes to Ontario coffers is $120 million  year. And how much will this cost the Ontario taxpayer, directly? $21 million a year. Oh boy, better kill that program, quick!

How much is that $21 million? $1.60 on your hydro bill. A YEAR. $1.60 a year. Hudak wants to cancel the program to make Ontario the greenest province in Canada to save you one medium double double. Go team Hudack!

There’s more.

“Mr. Duguid told reporters he does not know how much in penalties the province would have to pay the consortium if it were to walk away from the deal.”

I know it’s ancient history, 15 years ago or so, but does anyone remember the EH-101 helicopter deal? You know, that one where we scrapped the sweetheart deal we signed to get a bunch of helicopters to replace the ones that were falling out of the sky? The one where we waited another decade, only to end up having to buy a different model of the same helicopter? Sound familiar?

I’ll take my coffee coal-fired, thanks!

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Comments»

1. Tom Andersen - May 20, 2011

Maury,

The green energy act will cost $100 Billion over 20 years. This money will be spent to double the capital invested in making electricity in this province, and pay the people who do it very well. When it is ‘done’ the 50% of capital spent on green energy will produce about 5% of our power. The other 95% will come from Nuclear, Hydro and Nat Gas.

Basically the Green Energy Act will allow big business to triple the rate we pay for electricity, without an increase in demand. The only way to do this is to overcapitalize, or capitalize in in less efficient ways.

The price of a ‘samsung job’ that you calculate does not include the raised electricity rates that we will have to pay. Your calculation only concerns that narrow sliver of people in Ontario that pay taxes yet for some reason do not pay for electricity. With electricity costs added, the per job cost goes to a million or more. Actually the ‘per job’ cost goes negative. Studies from bankrupt Spain and California show that these unsustainable jobs actually drive employment to other places.

When electric rates double again, the home generation of power and heat from nat gas will become hugely popular. This will reduce power consumption, (as will the higher rates) and we will not need any more power. In fact Ontario even now uses almost no coal power, and electrical demand is down 10% or more over the past three years.

The net greenhouse gas reduction from the Green Energy act will be negative, as people will resort to cheaper alternatives, which mostly involves gas and wood.

Another direct example is the just announced Toronto Schools Solar project.
http://www.nationalpost.com/opinion/columnists/Solar+powered+miseducation/4813827/story.html

Sorry but the truth is that there is no way that power at $1/kwh (when you include all the gov overhead to handle the plan) can make any sense. There must be more emissions from the lawyers than we will every recover from the panels!

The only way forward is to charge a heavy penalty for carbon emissions, a carbon tax. Let the playing field be level, instead of a Soviet style planned economy.

2. Maury Markowitz - May 21, 2011

Now Tom, you should know I could back all of this up…

There are four million family homes in all of Ontario.
In my experience, about 1 in 15 has a useful place for panels.
On average, those houses have room for an average of 10 panels.

So that means that if we *fully expanded* the system would have just over 2.5 million panels.

On average, panels produce 1100 kWh/kW/year. The average panel is 235 watts. So that means the fully expanded system would generate about 750 megawatt hours a year +/- 10%.

The *current* rate (soon to change) for microFIT system is 80.2 cents. So that would be about 600 million a year in payments. The value of that electricity at residential rates, 13.5 cents, would be 100 million dollars. So the subsidy is $500 million a year. So over the 20 year program (if it fully built out today that is) it will cost about $10 billion.

How much is that? There’s 13 million people in Ontario, so that’s less than $40 a year. If we divide it into houses instead, that’s $125 a household, or $10 a month. That’s less than the $15 a month people pay to Bullfrog Power, which doesn’t actually buy any power generation.

To install those panels at an average of $8 a watt would cost 5.5 billion dollars. Ontario’s share of the HST on that would be $440 million. Labour is about 25% of the overall cost, or $1,375 billion. At an average marginal tax rate of 20%, of which Ontario gets a little more than half, that’s another 750 million. So 3 years of the 20 are paid off directly *just from the installations*.

In addition, the program has already generated thousands of jobs outside the direct installation business. This includes the dozen or so panel manufacturers that have moved in and the contract manufacturing sites. These are jobs that would have been lost otherwise — for instance, Celestica was in the process of mothballing the Eglington plant, which is now slowly re-opening to full operation. Likewise, Siemens was closing down its entire Ontario operations, but is now moving all their north american inverter operations back here.

Ok, so let’s build nukes. We’ve paid over $20 billion in directly subsidies over 40 years. So in other words, we’ve already been paying a power development company $500 million a year. So any argument that this is going to bankrupt the province is utter BS.

The only question that remains is which technology to bet on. No one’s buying CANDU and no one will. In the meantime, panels are the fastest growing energy source in the world. Every year we install 4 darlington’s worth of power, whereas darlington 2 would take 12 years.

This has nothing to do with energy, really. All the power we need is idled in James Bay right now. All we have to do is run a wire.

3. Tom Andersen - May 23, 2011

750 GWh from solar per year is about $12 billion we will pay over 20 years as you point out. For that we get the power output of Bruce over 4 days each year, which we pay them about $800 million over 20 years.

So its $11.2 (or 8 according to you) Billion of government busy work. You can’t create something out of thin air. Yes you can claw back some percentage as taxes, but its a losing battle. Why not just dig holes and fill them in? That would be better for the province as virtually all the money would stay here and it would all be labour.

You are right though – the real money is in wind.

Hydro 1 increased rates 25% already due to it. Thats about 20 or more billion over 20 years right there. Then there is 5000 planned turbines at a yearly subsidization of $500k each – thats $50 billion. Then you have cost overruns, and the race for something that actually works to replace all the wind. Add in biogas and hamsters in cages and you get the $100 billion windfall winnings to the Florida Light and Powers of the world.

With wind and biogas, the $10 a month for nothing per household goes to $100 per month. That is NOT an insignificant amount of money. Health care will be affected. We can easily go bankrupt. If those are the contracts we KNOW about – what about the secret deals? I would place a bet that we will spend over 14 billion on the Samsung deal alone. So if Hudak can can it for a direct payment of $500 million we will be smiling all the way to the bank.

4. Maury Markowitz - May 23, 2011

> which we pay them about $800 million over 20 years.

Only because we sold it off at something like $0.08 on the dollar to Bruce Power, and you’re not including the $150 billion in AECL opportunity costs. If you’re going to complain about busywork, there’s the best example ever.

Again, this has nothing to do with power. There’s 9 GWp idling in James Bay this moment, which we can get for 6 to 9 cents a kWh. There’s another 3 to 5 in Manitoba, and about the same in Labrador. All of them are trying to find markets to sell to. We could even make it a busywork project if we wanted, I’m sure there’s at least one company left in Ontario able to build HDVC punchdown gear.


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