Revenues no more than “Chump Change” for municipalities

Wind power developers bringing projects to Ontario’s municipalities offer various inducements to persuade politicians they will benefit from millions of dollars.  Like the landowners signing leases for turbines, money is frequently the reason municipal politicians support wind power development and locating projects locally.

In Ontario, local politicians have no real power to support or deny those projects, and also, little ability to generate a real community benefit due to the Green Energy and Green Economy Act (GEA).  It doesn’t matter what the capital value of an industrial wind turbine (IWT) is, or what they levy in local realty taxes as the provincial government has set the taxable value!   Former Minister of Finance, Dwight Duncan decreed (one year before resigning) IWTs would be assessed by the Municipal Property Assessment Corporation (MPAC) at a maximum of $40,000 per megawatt (MW). That translates to tax revenue averaging $1,000/2,000 per MW, based on local industrial mill rates.

My research indicates Ontario has the lowest assessed value per/MW capacity of all provinces.

Ontario:

The 2014 3^rd Quarter update from the OPA claimed they had contracted for 5,697 MW of wind capacity.  Payment per MW hour for wind generated power averages $123.50/MWh.

Using an average of $1,500 per MW for the OPA-contracted 5,697 MW of wind means Ontario host municipalities will generate about $8.5 million annual realty taxes. (5,697 X $1,500 = $8.5 million)

Those 5,697 MW will produce energy at 30% of their capacity producing cash for the developers of $1.8 billion (5,697 X 30% X 8760 [hours per annum] X $123.50 = $1.8 billion)  Eighty percent (80%) of the time the power will be surplus to Ontario’s demand.^1.   Tax revenues represent less than 1% of developers’ revenue.

Nova Scotia:

Nova Scotia’s legislature set the annual price for their realty taxes at $5,500 per MW “plus a percentage of $5,500.00 equal to the percentage increase in the Consumer Price Index for Canada at the end of the calendar year ending in the immediately preceding municipal taxation year relative to the Consumer Price Index for Canada at the end of the 2005 calendar year”.

If Nova Scotia had contracted for the 5,697 MW the OPA has in Ontario, realty tax revenues would be in excess of $31 million. (5,697 X $5,500 = $31.3 million)

In Nova Scotia those 5,697 MW of wind turbines operating at 30% of capacity would be paid an an average of $100 MWh and generate $1.5 billion.  Tax revenues would represent slightly more than 2% of revenue for the developers.

British Columbia:

For British Columbia realty taxes applicable to farms are applied to wind developments which presumably means assessment of the capital cost (depreciating) of about $1.5 million per MW.  Specific information was difficult to locate; however, what I found indicates realty taxes appear to be approximately $14K/MW and the price paid for generation is $105 per/MWh.

Using the limited amount of information available and applying it to the Ontario contracted 5,697 MW of capacity; in BC the tax revenue would be $80 million annually (5,697 X $14K = $80 million) and at $105 per MWh would generate $1.6 billion annually for the developers.  Taxes would represent 5% of the revenue generated for the developers.

Alberta:

It was almost impossible to locate assessment values for wind turbines in Alberta except for one reference in a report from the Greengate Power Corporation posted on the University of Calgary site.  That report claimed a 300 MW wind development would pay municipal taxes of $5 million annually which indicates a realty tax of about $16K per MW.

Using that information and applying it to Ontario’s 5,697MW of contracted capacity, suggests annual tax revenue for municipalities would be $91 million.  In Alberta the wind developers must sell their production via the spot market and in 2013 a BNN article suggested they earned an average of $54.97 per MWh which translates to annual revenue of $820 million for the developers.  In Alberta realty taxes would therefore represent 11% of the revenue generated by the developers.

Summary:

With Ontario municipalities receiving so little for hosting industrial wind turbines it is surprising the Canadian Wind Energy Association (CanWEA) when faced with any kind of opposition would issue a press release that claims:  “Right now there are literally thousands of Ontarians participating in the province’s ground-breaking clean energy economy. Communities across this province — from Chatham-Kent to Frontenac Island, Tillsonburg to Niagara — stand to receive hundreds of millions of dollars in direct benefits from wind energy projects.”

MPAC’s 2014 annual report claims they assess and classify “more than five million properties with an estimated total value of $2.2 trillion.”  The assessed value of the contracted 5,697 industrial wind turbines at $40K per MW gives them a total value of $228 million or .0001% of total assessed values versus a likely capital cost approaching $8.5 billion, or 4% of MPAC’s total value!

So, Ontario’s wind developers walk away with an estimated $1.8 billion annually and $36 billion over the 20-year term of the contracts, while Ontario’s hosting municipalities have to make do with chump change of $8.5 million annually, and only $170 million over the full terms of those contracts.

Far from enjoying millions in cash windfall, Ontario’s municipalities got stuck with the worst possible deal.

©Parker Gallant,

May 19, 2015

1.  Professor Ross McKitrick: http://www.rossmckitrick.com/uploads/4/8/0/8/4808045/oebletter_feb2013.pdf