Tag Archives: Robert Lyman

Wind and solar power: the hidden costs

20 Tuesday May 2014

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Wind power: not free

Wind power: not free

Here, from Ottawa-based energy-specialist economist Robert Lyman, a quick look at what many people don’t know (and aren’t getting told by the government or the wind power lobby) about the costs of generating power from wind and solar.

A must-read.

THE HIDDEN COSTS OF ONTARIO RENEWABLE ELECTRICITY GENERATION 

Ontario residents can be forgiven if they fail to understand the public debate during the current (2014) provincial election about the costs of different types of electricity generation and why these have caused electricity rates for consumers to rise so much over the past ten years. The complexity of the system makes it difficult to explain the costs associated with one source of supply, namely the renewable energy generation  (industrial wind turbines and solar power generators). In this note, I will nonetheless try to explain in layperson’s terms why these costs are significant.

Electricity supply in Ontario takes place within the framework of the policy and legislative framework established by the Ontario government, an important part of which is the Green Energy and Economy Act of 2009 (GEA). Historically, the goal of Ontario electricity policy was to keep electricity rates for consumers as low as possible consistent with the goal of maintaining adequate and reliable supply. Within the current framework, however, that is no longer the goal. The GEA seeks to stimulate investment in renewable energy projects (such as wind, solar, hydro, biomass and biogas) and to increase energy conservation.  To do this, it:

  • Changed the review process for renewable energy projects to reduce environmental assessment and hasten approvals
  • Created a Feed-in-Tariff that the Independent Electricity Systems Operator (IESO) must pay, guaranteeing the specific rates for energy generated from renewable sources (typically, the rates are fixed for the full term of the twenty year contracts, with inflation escalators)
  • Established the right to connect to the electricity grid for renewable energy projects and gave renewable energy source preferential access over other sources of generation
  • Implemented a “smart” grid to support the development of renewable energy projects
  • Eliminated local approval requirements that local governments previously could impose on renewable energy projects

The guaranteed rates paid under the FIT system are not negotiated based upon the actual costs of production. In fact, the actual costs of production are largely unknown. …

Read the full analysis here: THE HIDDEN COSTS OF ONTARIO RENEWABLE ELECTRICITY GENERATION

Global “warmists”: how far do they want us to go?

29 Tuesday Apr 2014

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In Canada we hear about global warming and climate change but the rhetoric seldom goes to the extremes seen in other areas. Economist Robert Lyman, who advised the federal government on issues pertaining to energy, transportation and the environment for 37 years, reviews the situation in this paper.

An excerpt:

In April 2014, the Intergovernmental Panel on Climate Change (IPCC), the U.N. body well known for its faulty projections of global temperatures rising, issued yet another report claiming that the science of climate change is “settled” and irrefutable. It also issued a report on the mitigation measures that countries should take. The IPCC’s goal, as approved by governments in 2010, is to avoid a rise in global temperature to no more than two degrees Celsius by the end of the century. To achieve this, they estimate that greenhouse gas (GHG) concentrations in the atmosphere must be kept below 450 parts per million (ppm) and the world must stay within a carbon “budget” of about 1000 billion tons of CO2 to 2010.

The IPCC report followed, but was closely related to, the 2013 report of Carbon Tracker, a U.K.-based organization allied with a number of “ethical” investment funds. Carbon Tracker’s report, entitled Unburnable Carbon 2013, compared the carbon budget to the amount of carbon present in the world already proven reserves of coal, oil and natural gas. Its conclusion was that those current reserves totaled almost 3000 billion tons, three times the allegedly available budget.

The recommendations coming out of these two organizations today don’t even make it to the back pages of the financial sections of the newspapers, but they are making their insidious ways through the governments of western countries as they prepare for the next Climate Change “Meeting of the Parties” in 2015. We ignore this at our risk.

Read the full paper here: WHERE THE CLIMATE WARMISTS WANT TO TAKE US NEXT

Economist: Ontario’s actions on electricity bills possibly illegal

12 Saturday Apr 2014

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From Ottawa energy economist Robert Lyman:

THE $6.2 BILLION SLEIGHT-OF-HAND

 Parker Gallant is a retired banker who has done tremendous service to the people of Ontario by reporting publicly on the Ontario government’s mismanagement of the province’s electrical energy system. In an analysis he posted on April 11, 2014, Mr. Gallant applied his knowledge of financial management and accounting to reveal the damaging and possibly illegal actions of the Liberal government with respect to the Debt Retirement Charge included in the monthly electricity bills of Ontario residents. The analysis can be found online here:

http://ep.probeinternational.org/2014/04/11/parker-gallant-the-debt-retirement-charge-premier-wynnes-6-2-billion-revenue-tool-5/#more-12245

This note offers my explanation, in layperson’s terms, of what Mr. Gallant revealed.

Background

In 1998 the Ontario government launched a major restructuring of the province’s publicly-owned electricity industry. One aspect of this restructuring was the breakup of Ontario Hydro into five successor companies on April 1, 1999.

The Ontario Ministry of Finance determined that, on April 1, 1999, Ontario Hydro’s total debt and other liabilities stood at $38.1 billion, which greatly exceeded the estimated $17.2 billion market value of the assets being transferred to the new entities. The resulting shortfall of $20.9 billion was determined to be “stranded debt”, representing the total debt and other liabilities of Ontario Hydro that the Ministry judged could not be serviced in “a competitive electricity environment”. This total was subsequently reduced to $19.4 billion when it was adjusted for $1.5 billion of additional assets transferred to OEFC. Responsibility for servicing and managing the “legacy” debt of Ontario Hydro, which includes the stranded debt, was given to the Ontario Electricity Financial Corporation (OEFC), whose opening balance sheet reflected a stranded debt, or unfunded liability, of $19.4 billion. This was the difference between the $18.7 billion value of assets assumed by the OEFC and the $38.1 billion of Ontario Hydro legacy debt.

To retire the debt, the government established a long-term plan wherein the burden of debt repayment would be borne partly through dedicated revenues from the electricity sector companies – Ontario Power Generation (OPG), Hydro One, and Municipal Electrical Utilities – and partly by electricity consumers directly. (Bear in mind that all the revenues from the electricity sector companies come from electricity consumers, so electricity consumers pay all the costs, one way or the other.). The electricity companies would make “payments in lieu of taxes” to the OEFC (this is, in theory, the equivalent of corporate income taxes). It was projected that future revenues from OPG and Hydro One and municipal electricity distributors would generate $11.6 billion over the next eight to nine years.

To read the full article click here.THE $6.2 Billion Sleight-of-Hand

Email us at ottawawindconcerns@gmail.com

Ottawa economist on the Fraser Institute report: Ontario in bad shape

18 Tuesday Mar 2014

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HIGHLIGHTS OF THE FRASER INSTITUTE REPORT

Comparing the Debt Burdens of Ontario and California

On March 8, 2014, the Vancouver-based Fraser Institute published a research study comparing the debt burdens of the state of California and the province of Ontario. Within the United States, many people consider California to represent a prime example of irresponsible government spending coupled with poor cash management. However, the Fraser Institute report uses a number of measures to compare Ontario’s situation to that of California. In almost all cases, Ontario is much worse.

Here are the highlights of the report:

  • California’s current debt in the form of government-issued bonds is US $144.8 billion, while Ontario carries CDN $267.5 billion, almost double the amount of California.
  • This figure actually understates the disparity between the two regions, as California has a much larger economy. The gross debt in the form of bonds is 7.6% of California’s economy, while it is a “whopping” 40.9% of Ontario’s economy, more than five times as large as California.
  • Per capita, each Ontarian’s share of provincial government debt is CDN $20,166 (i.e. $80,664 for a family of four), compared to US$ 3,844 in state government debt for each resident of California.
  • Servicing this debt through interest payments is more costly in Ontario. 9.2% of budget revenues in Ontario are devoted to interest payments, compared to 2.8% in California.
  • Ontario’s expenditures as a share of the economy grew from 15.5% in 2001-2002 to 19% in 2011-2012.
  • Over this period, total government spending in Ontario has been steadily increasing from one year to the next. Thus, unlike California, Ontario has not managed to stabilize the growth of the debt in terms of GDP.
  • Ontario’s net debt for 2012-2013 is the second highest as a percentage of GDP of any Canadian province, trailing only Quebec. However, Quebec’s annual budget deficit was only half as large – 0.7 % compared to Ontario’s 1.4 %.
  • Ontario’s budget analysts project that from 2012-2013 to 2015-2016 net interest payments will represent the fastest growing expense for the provincial government, growing at 5.5 % annually – more than twice the projected rate of health care expenditures.

Robert Lyman

Ottawa, March 18, 2014

Editor: It’s worth noting that Energy Minister Bob Chiarelli admits Ontario is spending $1B a year on power generated from wind energy; he also admits we don’t need it. Sound financial planning!

The Fraser Institute report is available here.

Will Ontario’s Green Power plan save the planet?

16 Sunday Mar 2014

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Here, from energy economist Robert Lyman, an excellent view of the situation we are in because of the Ontario government’s “green energy” tactic. never mind that has failed as an economic driver and job creation mechanism, did it ever have a hope of what it was supposed to do? “Save” the environment?

Will Ontario’s Green Power plan save the planet?

The Ontario government has to date committed almost $60 billion over the next 20 years to building industrial wind turbines and solar power generators. In the case of wind turbines, the construction of hundreds of plants across the province has given rise to major conflicts between those who stand to benefit from the huge electricity ratepayer subsidies and those whose health and property values are threatened. Ontario’s electricity generation capacity is already 40% above the peak requirements, and yet the provincial government continues to contract for more power. When those concerned about the economic, social and health impacts of adding so much “green” energy complain, they are often confronted with an argument expressed with almost religious conviction. Supporters of green energy insist we need it to “save the planet” from the threat of climate change.

There are many reasons to question the scientific arguments behind the thesis that human beings are responsible for what may be “catastrophic” climate change 100 years hence. The arguments about this are highly technical. Instead, let us examine two things:

  • The contrast between various experts’ estimates of the reductions needed in world greenhouse gas (GHG) emissions and the estimates of actual and projected emissions
  • The magnitude of the emissions reductions that can be achieved in Ontario in the global context

The primary source of expert advice to governments concerning climate change is the United Nations Intergovernmental Panel on Climate Change (IPCC). It advises the governments that are party to the 1992 Framework Convention on Climate Change and subsequent related agreements. In the 2009 Copenhagen Accord, these parties agreed that, to avoid what they considered a dangerous level of “global warming”, it would be necessary to limit increases in the average global temperature to no more than two degrees Celsius relative to pre-industrial times. To accomplish this, atmospheric concentrations of carbon dioxide, now about 395 parts per million (ppm), would have to be reduced to at least 350 ppm. As stated by the United States Presidential Climate Change Action Project and other sources, this means that global emissions would have to decline by 60% by 2050 and that emissions in the industrialized countries of the Organization for Economic Cooperation and Development (OECD) would have to decline by 80%. These reductions are from current levels. In the case of industrialized countries, an 80% reduction from current levels by 2050 means the virtual elimination of fossil fuel use, except in certain areas where this is technically impossible. The advocates insist that nothing less than this reduction is enough.

The best current estimates of present and future global energy supply and demand and related emissions are those produced by the United States Energy Information Administration (EIA) and the OECD International Energy Agency (IEA). Both organizations issued updated projections in 2013. The EIA analysis uses a “reference case” that includes assumptions concerning economic growth but not changes in current policies and laws; its projection period runs to 2040. The IEA analysis uses a reference case that assumes significant changes in policies and laws, especially in the OECD, to reduce GHG emissions; its projection period runs to 2035.

The results of the two studies are similar in several respects. Notably:

  • Both reports project that world consumption of energy and the related GHG emissions will grow significantly. The EIA projects world carbon dioxide emissions to rise from 31.2 billion metric tons in 2010 to 45.5 billion metric tons in 2049, an increase of 46%. The IEA projects that carbon dioxide emissions will grow by 20% to 37.2 billion metric tons by 2035.
  • Both reports project that most of the energy demand and emissions growth will occur in the non-OECD countries. According to the EIA, energy use in non-OECD countries grows by 90%, in OECD countries by 17%. According to the IEA, 96% of the growth in world energy demand and emissions occurs in non-OECD countries; the OECD accounts for only 4%.
  • Coal is the most GHG-intensive fuel. However, both studies foresee significant increases in coal consumption, especially in China and India.
  • Fossil fuels represent 82% of the global energy mix, the same as they did 25 years ago. This share reduces to 75% in 2035, but fossil fuels remain the dominant source of the world’s energy.

In short, the best available expert projections of global energy use and GHG emissions shows that these are moving significantly counter to the direction that the IPCC regards as essential. This growth is driven by the desire of people in the developing countries to attain higher levels of income, economic development and wellbeing, much of which is directly tied to increased energy use.

Radical solutions

Those who are persuaded that climate change mitigation must be pursued at all costs to “save the planet” are left with radical solutions. James Hansen, the former head of the U.S. National Aeronautics and Space administration who is now perhaps the most prominent advocate for dramatic action, has recommended immediately taking steps to “leave all fossil fuels in the ground” which presumably means banning all future exploration, production, distribution and consumption of coal, oil and natural gas either through regulation or taxation (Hansen recommends a tax of up to $1000 per tonne of carbon dioxide, but is willing to contemplate a beginning tax of $15 per tonne, rising $10 per year indefinitely.). Unfortunately for Dr. Hansen, the world is not listening.

In these circumstances, people in Canada and the rest of the OECD have to question the rationale for costly emission-reduction measures that have relatively modest effects. To illustrate this point, if one takes as accurate the EIA estimate of 31.2 billion metric tons of annual global GHG emissions in 2010, and accepts the need for a 60% reduction in that level by 2050, this would mean that the world would have to achieve an 18.7 billion metric ton reduction in 36 years. If one further assumes that the non-OECD countries will continue their present path of emissions growth related to their desire for economic development and improvement in standards of living, then all OECD countries could suddenly disappear from the planet, thereby emitting not one whiff of CO2, and the target still would not be attained!

Those who believe the science may perhaps be persuaded that it makes far more sense to give up on mitigation approaches and concentrate instead on investing in adapting to what they view as inevitable climate change impacts. The investments may be large, but they could be tailored to the specific effects that occur and they would be within each country’s control. Those of us who fundamentally question the science and economic projections of the IPCC have less cause for concern.

There are those who argue that, even if the emissions reductions that are likely to occur are nowhere close to enough to affect the (alleged) path of global warming, the people of Ontario have a “moral obligation” to incur those costs anyway. The author admits to being completely baffled by this logic, but it may be useful to examine just how much, in fact, Ontario’s $40 billion in renewable wind and solar generation is likely to affect global emissions.

Canada’s share

According to the United Nations Statistics Division, Canada’s share of greenhouse gas emissions represents 1.8 % of global emissions.  Environment Canada’s National Emissions Inventory shows that electricity and heat generation from all provinces totals 98 megatonnes (Mt) of GHGs, or 14% of Canada’s total emissions of 690 Mt. Emissions from Ontario’s electricity production and consumption represent about 15 % of those from all electricity in Canada. Therefore, all of Ontario’s electricity-related emissions represent 0.039% of global emissions. If Ontario ceased to produce and consume all electricity overnight, it would reduce global emissions by less than one twenty-fifth of one per cent.

In fact, all of the renewable energy associated with Ontario’s Green Energy Plan would only decrease Ontario’s electricity emissions by 20% in the most optimistic scenario. In other words, this would reduce global emissions by 0.008%.

However, there are reasons to question whether the massive investment in renewable generation sources would have been needed to achieve even this small effect. The Fraser Institute published a report in 2013 entitled, “Environmental and Economic Consequences of Ontario’s Green Energy Act”. Here is an excerpt from that report:

“Electricity supply is divided into base-load capacity, which comes from sources like hydroelectric and nuclear that deliver a fixed amount of power that cannot easily be adjusted up or down on short notice, and peak capacity, which can be scaled up and down as system demand changes through the day. Ontario power demand currently averages about 18,000 MW and reaches a maximum annual peak of about 26,000 MW. Using figures from the Ontario Power Authority and the Independent Electricity System Operator, the Provincial Auditor General projects average demand to decline to about 16,000 MW and peak demand to fall to about 24,000 MW. Nuclear and hydroelectric facilities alone currently provide 18,000 MW of base-load capacity. In addition, Ontario has 9,500 MW of gas capacity as well as 4,500 MW of the coal-fired power plants much of which is unused. The AGO estimates Ontario will have at least 10,000 MW of surplus generating capacity through 2025.”

In other words, Ontario’s electrical generating capacity already so far exceeds needs that the coal-burning power plants (the principal sources of GHG emissions) could have been shut down without adding a single new wind or solar plant.

The net effect of these plants on reducing Ontario GHG emissions was zero.

Robert Lyman

Ottawa, March 2014

The Auditor General’s report on gas plants: a summary

09 Wednesday Oct 2013

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Here from Ottawa economist Bob Lyman, who specializes in energy issues, is what you need to know about the Auditor General’s report, and why the losses mounted up to over $1 billion for both the Oakville and Mississauga gas plants.

ONTARIO AUDITOR GENERAL’S REPORT  ON OAKVILLE POWER PLANT CANCELLATION COSTS:  SUMMARY AND BRIEF COMMENTARY

Introduction

On October 8, 2013, Bonnie Lysyk, Auditor General of Ontario, released a Special Report on the costs that have been incurred and are likely to be incurred by the public as a result of the cancellation of a natural gas-fired electricity generation plant in Oakville Ontario. In the period leading up to a provincial election, the Liberal government announced the cancellation of this plant on October 7, 2010. As a result of the cancellation, the Ontario Power Authority (OPA) was required to negotiate arrangements for the construction of alternative power generation facilities in Napanee, Ontario. Thus, the objective of the Auditor General Office’s review was to determine the costs of both the cancellation of the Oakville plant and the relocation of the power generation facilities to Napanee.

Background

The need for a natural gas electricity generation plant in the Southwest Greater Toronto Area was first identified by the OPA in its 2007 Integrated Power System Plan. In response to the plan, the Minister of Energy and Infrastructure directed the OPA in 2008 to procure a combined–cycle natural gas generation facility in the area with a capacity of up to 850 megawatts (MWs), to begin operating no later than December 31, 2013.

In September, 2009, the OPA awarded a contract to TransCanada Energy Ltd. (TCE) to build the facility in Oakville. There followed significant local opposition from groups in the Oakville area, including the Town of Oakville. The government cancelled the project. Soon after, OPA and TCE began to negotiate a settlement on a replacement project. TCE had already incurred significant costs and was facing the loss of revenues it would have received if the original contract had been honoured. The negotiations were difficult. The Premier’s Office intervened, without consulting OPA, to assure TCE that it would be compensated for the financial value of its contract for the Oakville plant. The Minister of Energy instructed OPA to contract with TCE to build a new plant in Napanee. Finally, the Province and OPA agreed to an arbitration framework (for determining damages to be paid to TCE if no settlement was reached) that favoured TCE and waived the protections that OPA had under the original Oakville contract. In December, a deal was reached to relocate the plant to Napanee.

Cancellation Costs

 The Special Report lists two types of costs that resulted from the plant cancellation -the costs already incurred and the estimated future costs.

The costs already incurred include reimbursing TCE for its initial purchases of gas turbines for the Oakville plant and the modifications made to them ($210 million), sunk operating costs relating to the Oakville plant ($40 million) and legal fees ($3 million).

The estimated future costs essentially relate to the cost of constructing the Napanee plant, of increased gas connections to get natural gas to the Napanee plant, the costs of new gas pipelines to move gas to Napanee and new electricity lines to move electricity from Napanee to the GTA, the penalty associated with the use of less efficient gas turbines, and the cost of replacement power to make up for the non-availability of the Oakville plant’s power for some time. The Auditor General’s Office estimates these costs to be $859 million.

The total costs incurred plus estimated future costs are thus $1,112 million (i.e. $1.1 billion).

Estimated Future Savings

 In return for taking on a portion of the costs that TCE would have incurred, OPA was able to negotiate a lower price for the power from the Napanee plant than it would have had to pay for the power from the Oakville plant. This results in an expected savings of $275 million. There is also a delay in the commencement of payments to TCE compared to what would have occurred under the Oakville contract because the Napanee plant will come into operation later. The OPA and Auditor General disagree on both the dates when the Oakville plant would have come into operation and when the Napanee plant will come into production. As a result of these disagreements, the Auditor General estimates the present value of the savings to be $162 million, and OPA estimates it to be $539 million.

Using the Auditor General’s figures, the net cost to the public will be $675 million.

Impact of Potential Toll Increase

 TCE’s parent company will also benefit from the fact that under the Napanee agreement a section of the pipeline route owned by TransCanada Pipelines Limited (TCPL) effectively must be used to transport gas to Napanee. This section does not now have the capacity to transport the amount of gas that will be needed by the Napanee plant. Accordingly, TCPL will need to make additional capital investments and recover these costs through increased toll charges, which will get passed on to electricity ratepayers. Tolls could increase by up to 50% in the first three years; if so, over the 20-year term of the contract for the Napanee plant, the cost of gas delivery would increase by $140 million.

Special Observations

The Special Report makes some observations that raise concerns about the way the Ontario government managed this issue.

  • Throughout the initial procurement process for the Oakville plant, including prior to the awarding the contract to TCE in September 2009, OPA provided the government with “off ramps” not to proceed. Despite the public controversy and the firm opposition of the Town of Oakville, the government declined to take any of these off ramps.
  • The contract for the Oakville plant contained protection to relieve both TCE and OPA of any financial obligation if events beyond their control (force majeure events) caused the plant’s commercial operation date to be delayed by more than 24 months. Given Oakville’s strong opposition to the plant, including Oakville’s stated intention to fight the matter all the way to the Supreme Court of necessary, it may well have been possible for the OPA to wait it out, with no penalty and at no cost. In other words, if the Premier’s Office had not intervened to guarantee TCE compensation, there might have been no cost to the Crown.
  • The Minister of Energy agreed to locate the new plant in Napanee, hundreds of miles from the market for the power, and with no consideration of the potential opposition of people in Napanee.

I would also observe that the need for additional natural gas generating plants is closely linked with the Ontario government’s commitment to add significant additional generating capacity from “green” energy sources, mainly wind turbines and solar power equipment. These intermittent sources of power require much more conventional energy sources to back them up for periods when they produce little or no electricity.

In reality, Ontario already has significant surplus electrical generating capacity, a situation that seems likely to continue until 2018 at the earliest. The problem seems to be one that is entirely of the government’s own making.

Robert Lyman

Ottawa

Paying for greenhouse gas emissions: what’s right for Canada?

20 Friday Sep 2013

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WHAT SHOULD WE PAY TO REDUCE GREENHOUSE GAS EMISSIONS?               Environmental organizations frequently call for Canadians to take expensive measures to reduce greenhouse gas (GHG) emissions that may accumulate in the atmosphere and eventually result in unwanted climate change. Economists have long studied the question of what premium citizens should be asked to pay in order to avoid the adverse environmental effects of climate change. This premium, often referred to as the “social cost of carbon” (SCC) has been variously estimated to fall somewhere between $20 and $85 per tonne, depending upon the inputs and assumptions used in the analysis. The primary tools upon which this analysis is based, however, are sophisticated computer models that attempt to integrate scientific assessments of the atmospheric effects of increasing GHG concentrations on temperature and other aspects of climate and economic assessments of the effects of these climactic changes on people’s incomes and wellbeing.

There are several problems with the analytical approaches that have been taken to date. Collectively, these problems suggest that the estimated values of the SCC are exaggerated. The modelers are free to use arbitrary inputs or ones that are largely unknown concerning climate sensitivity to GHG concentrations, social welfare and the economic effects of rising temperatures. The rate of time preference (i.e., discount rates) is a policy parameter, which reflects the choices of policy makers, not the objective assessment of analysts.

The Intergovernmental Panel on Climate Change (IPCC) considers that the atmospheric concentration of carbon dioxide, now 382 parts per million (ppm), should not be allowed to peak above 450 ppm and should stabilize in the long term at around 380 ppm. However, to achieve this, global emissions would have to decline by 60% by 2050 and emissions from industrialized countries like Canada would have to decline by over 80%. In fact, global emissions are rising, driven by economic development in developing countries and especially in Asia. According to the most recent authoritative forecasts, world energy consumption and related emissions will grow by 56% from 2010 to 2040.

There is no chance of a new climate change agreement before 2016 at the earliest, and that would not come into force before 2020. No progress seems likely on the core issues dividing developed and developing countries.

Canada represents only 1.9 % of global GHG emissions, and global emissions are growing at 1.2% per year. Even if Canada disappeared from the earth, global emissions growth would make up for the loss in 18 months.

Based on this, one should question whether any social premium should be paid for emissions reductions in Canada at all.  To make major costly emissions reductions in the absence of international agreement is to accept major economic harm with no compensating environmental benefits.

Robert Lyman, September, 2013

Robert Lyman is an economist specializing in energy issues; he lives in Ottawa.

Readers may also wish to read Ross McKitrick’s latest article on climate change statistics and forecasts here.

Ottawa economist on 10 years of power mismanagement in Ontario

23 Tuesday Jul 2013

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You’ve read Bob Lyman, an economist specializing in energy issues, on these pages before.

In his latest work, he has written an overview of the last 10 years of energy policy as it relates to electricity in Ontario, and come up with the very worrying conclusion: the whole thing has been grossly mismanaged.

The question now is, can Ontario ever get out of this hole? That’s tough when Ontario keeps approving big, expensive wind power projects on the order of one a week this summer, despite not having a current long-term energy plan.

Here is Bob Lyman’s latest:

Ten Years of Liberal Mismanagement of Ontario’s Electricity System

A Layperson’s Summary

On July 16, 2013, Parker Gallant, a retired banker who for about six years has written about Ontario electricity policies, wrote an article to mark the forthcoming tenth anniversary of the Liberal Party’s tenure as government of Ontario. Mr. Gallant’s article can be found at the following link:

http://www.freewco.blogspot.ca/2013/07/ontario-liberals-10-years-of.html

This article is of great importance for Ontario residents who want to understand what has been happening to electricity supply, demand and prices over the past decade and, perhaps more importantly, how they should weigh these developments as they contemplate forthcoming elections in the province. Shortly, there will be five by-elections in different parts of Ontario that may swing the balance of power in the legislature. It is also likely that there will be a general election in Ontario within the next two years.

Voters need to understand what the fuss is all about and how it affects them. Unfortunately, Mr. Gallant’s article, as wonderfully insightful as it is, might be difficult to understand for the average citizen who does not follow electricity matters on a regular basis. The objective of this note is to offer a somewhat simplified version of the story people should know. …

Read the whole document here: Ten Years of Liberal Mismanagement of Ontario’s Electricity System

Upcoming topics: what does the situation at Chatham-Kent airport (where 8 turbines have been order removed) really mean?

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Support for Bill 39 Affordable Energy Act

18 Thursday Apr 2013

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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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Environmental and Economic Consequences of Ontario’s Green Energy Act

13 Saturday Apr 2013

Posted by in Health, Renewable energy, Wind power

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It’s not pretty.

It’s actually endangering the economic health of this province.

What is it? Ontario’s poorly thought out Green Energy and Green Economy Act.

Here is a summary of the report released by the Fraser Institute, written by University of Guelph ENVIRONMENTAL AND ECONOMIC CONSEQUENCES economics prof Ross McKitrick, prepared by Ottawa energy economist Robert Lyman.

This a short summary worthy of forwarding to your friends and family who may be unaware the high costs of Ontario’s renewable power plan.

Email us at ottawawindconcerns@gmail.com

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