Dear Investors,
I was recently forwarded an article that looked at the apparent ‘dark side of green energy’. Even though the author’s questionable comments are incorrect, I thought it would be an opportunity to examine the stereotypical outlooks that anti-green commentators tend to share and explain, point by point, why they are inaccurate.
Here is the link to the forwarded article found in the Financial Post and below are my comments: http://www.financialpost.com/related/topics/renege+egregious+green+contracts/3962294/story.html#ixzz18KRaY4JX
1) “the Ontario government has been signing contracts that force consumers to pay developers absurdly high prices -- as much as 20 times the market value of electricity -- making electricity far less affordable.” -- Lawrence Solomon, Financial Post
a. According to Hydro Manitoba (which has an excellent breakdown of electricity rates across Canada), the full cost of electricity in Ontario varies:
i. 12.9 cents per kWh in Kenora;
ii. 14.9 cents per kWh in Toronto;
iii. 17.9 cents per kWh in Englehart.
b. These rates include: commodity prices plus transmission charges, distribution charges and other regulatory charges.
c. What are the Ontario Feed-in Tariff rates?
i. Wind: 13.5 cents per kWh;
ii. Biogas: 10.4 to 16 cents per kWh (depends on size);
iii. Biomass: 13.0 to 13.8 cents per kWh (depends on size);
iv. Landfill gas: 10.3 to 11.1 cents per kWh (depends on size);
v. Small hydro: 12.2 to 13.1 cents per kWh (depends on size);
vi. Solar PV: 44.3 to 80 cents per kWh (depends on installation and size).
d. Except for Solar PV, every other renewable energy tariff is at or below the electricity rates that Ontario residents pay. By the way, the current electricity rates are themselves heavily subsidized (i.e. artificially low) thanks to the large subsidies that the Ontario nuclear program has received over the past several decades.
e. It is unclear where Mr. Solomon gets his “20 times” figure from. The most expensive solar rate is 6.1 times the lowest residential rate in Ontario. Plus, residential solar will make up a very small portion of the overall renewable energy mix. Wind is forecast to make up over 80% of the total new renewable energy portfolio in Ontario, at tariffs that are at or below current electricity rates.
f. The feed-in tariffs for renewable energy reflect the actual costs of those sources of energy. Trying to find out the real cost of nuclear and fossil fuel generation in North America is very difficult, due to the various tax breaks and other hidden subsidies that they have enjoyed for many decades and continue to enjoy today. These rates also ignore the full environmental, social and health care costs of fossil fuel extraction and electricity generation.
2) “In fact, to deal with the growing amount of surplus wind and solar power that the developers are producing for non-existent Ontario customers, the province is giving away the power to the Americans or actually forcing Ontarians to pay Americans to take the power off our hands.” -- Lawrence Solomon, Financial Post
a. Actually, Ontario has experienced negative electricity rates on the spot market for the past 7 years, ever since Ontario opened up its electricity market to competitive spot trading. The same situation exists in any openly competitive electricity market, such as the one in Texas (a state not known for heavy regulatory burdens in its energy and electricity markets).
b. Mr. Solomon is taking a known fact of spot electricity markets, one that existed before wind or solar were ever added to the Ontario grid, and trying to spin it as a negative. He is neglecting to take the time to explain the realities of today’s electricity markets to his readers.
c. Just as there are hours during the day when electricity rates on the spot market are low or negative, there are other times when rates spike, during which time Ontario power producers more than make up for any potential losses. Peak rates during hot summer days have been known to exceed $2.00-$3.00 per kWh.
3) “because the wind doesn't always blow and the sun doesn't always shine, the government must build and man expensive backup generating plants to have at the ready at all times.” -- Lawrence Solomon, Financial Post
a. Every single grid in the developed world has to have enough spare capacity to be able to replace the largest single power plant in its grid. This is a regulatory necessity. So, in the case of Ontario, this means that the Ontario Power Authority has to be able to replace the power generation of its 1,500 megawatt nuclear power plants, should they be forced to shut down at short notice (which has happened numerous times over the past couple of decades).
b. There isn’t a single power plant on the planet that runs 100% of the time over the course of a year. France’s nuclear power plants (generally considered to be the best maintained in the world) have a capacity factor of 70%, thanks to scheduled maintenance that takes up to two months of work, and unscheduled outages (such as during hot periods in the summer, when the temperature of its rivers rises too much to allow for the cooling of the plants).
c. Most coal power plants have a capacity factor of around 60%. Natural gas power plants, usually built for purposes of covering peak demand, have real-world capacity factors of 5-10%. In fact, over half of all U.S. power plants are natural gas plants that are only used for these rare periods of peak demand (usually a few weeks over the course of a year).
d. Ontario actually has the perfect mix, with so much hydro power in its grid. Hydro power plants are ideal for being able to handle the fluctuations in supply from wind and solar plants, since they are able to power up and down at short notice. Nuclear power is actually a large part of the reason for negative electricity rates in Ontario, since these plants require much longer lead times to power up and down.
e. Utility operators have been dealing with fluctuating supply and demand for decades. The integration of new wind, solar and other renewable energy sources is simply a new variation on an old theme. Germany, Spain and Denmark have dealt with large expansions of wind and solar power over the past two decades, with no ill effects. Electricity grids in Spain and Germany have been able to deal with very windy periods where wind power provides 50% of the power at certain times of the day.
4) “The massive new transmission corridors required to bring power from industrial wind and solar farms to market” -- Lawrence Solomon, Financial Post
a. Ontario’s power transmission grid is outdated, and requires updating regardless of whether wind and solar farms are added or not.
5) “the industrial wind farms themselves, with their towering presence and relentless enervating noise, generally make for poor neighbours, leading to public protests by those who fear for their property values or for their health… wind turbines could be shut down until the low-frequency sound they emit can be proven safe for humans.” -- Lawrence Solomon, Financial Post
a. Regarding the health effects: Germany has over 22,000 turbines, covering 7 per cent of its total electricity needs. Being far more densely populated than Canada, one would think that any adverse health effects of wind turbines would have shown up by now in health reports. Spain has over 16,000 turbines, also in a country more densely populated than Canada. Again, I’m not aware of any health reports from Spain about the detrimental impact of wind turbines.
b. I don’t know about Mr. Solomon, but I have actually had the experience of climbing up a modern 100 metre tall 1.5 MW wind turbine in Germany (I interned for a wind farm developer one summer). Once we reached the top of the tower, we entered the nacelle, where the actual turbine is located. With the generator whirring not 1 metre away, I was perfectly capable of carrying on a conversation with my work colleague without raising my voice. I did not require ear protection. The same occurred when we popped our heads up and out of the top hatch, with the three massive 37 metre blades rotating a couple of metres in front of our faces. Normal conversation was not a problem. The noise from modern wind turbines is a non-issue.
c. That said, minimum construction standards must be followed, with turbines sited a minimum distance from buildings in order to avoid shadow and flickering problems.
6) “To pay for the province's many mistakes, past and present -- these include an earlier round of reckless contracts from the 1980s and cost overruns on nuclear reactors, as well as the failed conservation programs and renewables contracts of today that are coming on stream -- the government levies a hidden charge that it embeds in power bills.” -- Lawrence Solomon, Financial Post
a. Ontario’s nuclear power program has indeed been a very costly exercise for the province. To lump in this failure with Ontario’s conservation program and renewable energy legislation is egregious on the part of Mr. Solomon.
b. Ontario’s conservation program has reduced peak demand by over 1,000 MW since the start of the program, equal to taking a full nuclear power plant off the grid.
c. The renewable energy legislation is too new to assess, but if we can look to Germany and Spain as examples, then the chances for success are high.
7) “The court-set Syncrude standard, if applied to wind turbines -- a.k.a. Bird Cuisinarts -- would threaten many wind farms.” – Lawrence Solomon, Financial Post
a. Yet another fallacy on the part of Mr. Solomon. Yes, the wind turbines of 30 years ago, largely built in California (where they number around 5,000), are indeed killers of birds. These are terrible designs whose blades spin several times faster than modern turbines. These turbines will also be replaced in the coming years, with a recent agreement to take down the first 2,000 by 2013.
b. According to the U.S. Fish & Wildlife Service, wind turbines kill 33,000 birds each year (with the vast majority in California). They also estimate that cars and trucks kill 60 million birds each year, communication towers kill at least 5 million birds per year (new studies point to figures that might be around 40 million), transmission lines kill 150 million per year, and building window strikes are estimated to kill up to 950 million per year.
c. The U.S. Audubon society, the largest bird conservation society in the world, has released an official statement largely in favour of wind energy.
8) “because the terms of the contracts are kept secretive from the Canadian public…” -- Lawrence Solomon, Financial Post
a. Yet again, these claims are unsupported. The contract details are available for viewing by any member of the public at the Ontario Power Authority website.
In summary, Mr. Solomon’s article is full of mistakes and damaging misinformation, as I have made clear above. It is disappointing to read such a poorly researched opinion piece in one of Canada’s two national newspapers, and a piece such as this does a huge disservice to the Canadian public.
Regards,
Peter Cox
Research Analyst
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