Energy economist Robert Lyman has provided us a copy of his letter to MPP Lisa MacLeod in support of Bill 39 for the Affordable Energy Act, which will be read today. The wind power corporate lobby group has been working hard to oppose this bill, which would see cancellation of the Feed In Tariff subsidy which is bankrupting Ontario and providing huge subsidies to wind power developers, return of local land use planning control for renewable energy projects, and the requirement that wind power projects provide power at competitive prices.
His rationale is worth reading.
Ms Macleod,
I am writing with respect to Huron-Bruce MPP’s proposed Bill 39, the Affordable Energy Act, which I understand will receive second reading in the Ontario legislature today. As you know, the bill would authorize the return to municipalities of local land use planning control for renewable energy projects. It would also require that that proposed wind power projects supply power at a price competitive with other sources of power. I appreciate that is is very difficult to obtain legislative approval for Private Members’ Bills, but I think the committee meeting on this subject is an appropriate time to raise the awareness of the legislature and perhaps the media concerning the major problems associated with the Green Energy Act.
Here are a few points you may wish to bear in mind.
The current FIT subsidy for on-shore wind turbines of 13.5 cents per kWh. One should note the comments and findings in Chapter 3 of the Auditor General of Ontario’s 2011 Annual Report ( My personal comments are in brackets):
– “Many other jurisdictions set lower FIT prices than Ontario and have the mechanisms to limit the total costs arising from FIT programs”.
– “Ontario’s FIT prices were originally designed with the intention of allowing a reasonable rate of return, defined as 11% after-tax return on equity.” (In today’s market, even the riskiest of investments don’t get an 11 % rate of return; the FIT prices, in contrast, are guaranteed for the twenty-year life of the contract. There is no risk at all.)
– “There was minimal documentation to support how FIT prices were calculated to achieve the targeted return on equity, because of the numerous changes in the financial model and assumptions made by the Ontario Power Authority”. (The method of determining the FIT prices was, and remains, obscure.)
– “There has been a lack of independent oversight on the reasonableness of FIT prices. Although the OEB has historically been mandated to oversee and approve electricity prices, it has no role or legislative responsibility to review or approve FIT prices.”
– “”The internal rates of return offered to the developers in Germany and Spain varied depending on market risks and ranged from just 5% to 7% in Germany to between 7% and 10% in Spain. When Ontario’s FIT prices were first developed in spring 2009, they were already higher than those in Germany and Spain, which have both significantly dropped their FOIT prices since then due to lower component costs arising from technological advances”
– (Ontario’s FIT price for onshore wind installations is higher that that in Michigan, Wisconsin, Denmark, Germany, Spain and South Korea. Only in Vermont and Washington are FIT prices higher.)
I would add that, of all the various elements of the Green Energy Act, the withdrawal of authority from municipalities to exercise land use planning control over the construction of renewable energy installations is probably the most egregious. It is an affront to democracy that the governments most closely associated with the affects these installations have lost their ability to protect the public.
Bob Lyman
Nepean
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