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Questions arising from the Auditor General’s 2011 Report on Renewable Energy Initiatives  

Author:  | General, Impacts, Ontario

Summary:

With comprehensive and detailed evidence gathered independently from inside the Ministry of Energy– much of it previously unavailable to the public– the Auditor General’s Report unambiguously challenges both the rationale and implementation of the Green Energy Act.

The Act has been promoted as a mechanism for cutting greenhouse gas emissions, increasing job opportunities, and creating a competitive business environment. However the Auditor General’s investigators found little evidence that these objectives have been or would be realized. Instead it suggests that the escalating electricity costs resulting from the addition of solar and wind power to the grid with their extravagant feed-in-tariffs are having the opposite effect.

The report emphasizes “that wind and solar renewable power will add significant additional costs to ratepayers’ electricity bills”. (p.89) However there will be additional costs because “wind and solar are not as reliable and require backup from alternative energy-supply methods such as gas-fired generation”. (p.89) Nevertheless, the public was led to believe increased costs would be minimal (1%). Surveys indicated that people were willing to pay only up to 5% more for renewable electricity.

The report indicates that the escalating increase of electricity prices will continue to gain momentum as rising costs for backup, connection of renewable energy projects, spilling hydro and nuclear, and payments to renewable energy producers not to produce electricity increase. The negative implications of increased electricity costs on employment and the economy in general further challenge the practicality of the Green Energy Act. The Auditor questions whether the estimate of the number of jobs that the government claims have been created by the Act is accurate and asks why those that are being lost are not being accounted for.

However the report goes beyond assessing the financial liability of imprudent expenses and overly generous feed-in-tariffs offered to energy producers. “No comprehensive business- case evaluation was done to objectively evaluate the impacts of the billion-dollar commitment. Such an evaluation would typically include assessing the prospective economic and environmental effects of such a massive investment in renewable energy on future electricity prices, direct and indirect job creation or losses, greenhouse gas emissions, and other variables”. (p.89) Alarmingly, decisions continue to be made piecemeal without overall cost and effectiveness evaluation. The investigators found that “the ministry’s internal audit service team … had not recently conducted any audit work on renewable energy initiatives”. (p.88)

The government’s adamant contention that there are no adverse health effects from industrial wind turbines is also questioned by the Auditor General who notes that the report by Ontario’s Chief Medical Officer of Health “was questioned by environmental groups, physicians, engineers, and other professionals, who noted that it was merely a literature review that presented no original research and did not reflect the situation in Ontario”. (p.119-120)

Even more worrying, is the lack of appropriate oversight and transparency. Decisions have been made by ministerial directive and directions, relying largely on the opinion of a single inexperienced minister, while circumventing both the recommendations regarding feasibility by expert energy professionals in the Ontario Power Authority (OPA) and frustrating the responsibility for oversight by the Ontario Energy Board (OEB) to ensure that renewable energy resources are obtained in a cost-effective manner.

Detailed findings of the Auditor General’s investigations
1 Wind and solar will add significant additional costs to electricity bills
2 The government claim of 1% rise in electricity costs for renewable energy was inaccurate
3 $169 million in 2010 and $296 million in 2011 would need to be recovered from electricity ratepayers for the cost of connecting renewable energy
4 Ontario consumers were not informed of true costs of green energy
5 The government was warned in 2007 that new wind power would create higher Green House Gas (GHG) emissions
6 Minister added $44 billion to FIT contract payments against OPA advice
7 Was the Samsung agreement made without economic or business case analysis and neither OEB nor OPA was consulted?
8 Normal due diligence process not followed; no formal Cabinet approval
9 Electricity ratepayers may have to pay $150 to $225 million a year to renewable energy generators not to produce electricity
10 Backup: Consumers have to pay twice for intermittent renewable energy
11 Cost and environmental impact of backup not analyzed
12 The extent of the backup requirement has been underestimated
13 Closing coal plants will require an increase of 5,000 MW of gas-fired generation
14 Minister suspended independent assessment that would ensure decisions were economically prudent and cost-effective
15 Billions committed to renewable energy without evaluating impact
16 Despite anticipated surpluses, renewable energy generators will get paid even though Ontario does not need their electricity

Loss of oversight and transparency in decision making
17 Ministerial directives bypassing OPA and OEB lead to loss of transparency, economic prudence and cost effectiveness
18 Many directions related to the procurement and pricing of renewable energy have been issued since 2008 in the absence of an approved IPSP, and the OEB has had no oversight role
19 There has been a lack of independent oversight on the reasonableness of FIT prices
20 If the IESO instructs wind generators to shut down under a surplus-power situation, the generators still get paid
21 There has been inadequate assessment of the potential costs of curtailing renewable energy
22 Adding more renewable energy would result in curtailment cost of paying renewable generators for not producing electricity from $150 million to $225 million a year
23 The lack of correlation between electricity demand and intermittent renewable energy has created operational challenges, including power surpluses and the need for backup power
24 Surplus base load generation caused by renewable energy will add more costs for electricity ratepayers
25 In 2010, 86% of wind power was produced on days when Ontario was already in a net export position
26 Export customers paid only about 3¢/kWh to 4¢/kWh for Ontario power; electricity ratepayers of Ontario paid more than 8¢/kWh for this power to be generated
27 From 2005 to the end of our audit in 2011, Ontario received $18 billion less for its electricity exports than what it actually cost electricity ratepayers of Ontario
28 The IESO requested that nuclear generators shut down or reduce electricity supply 205 times in 2009 and 13 times in 2010
29 Recommendation 5: Assess the operational challenges and the feasibility of adding more intermittent renewable energy into the system

Socio-economic Impacts
30 Promised “green” jobs have not been produced and existing jobs may be lost because of higher electricity prices
31 A majority of the jobs will be temporary
32 Analysis should consider both job-creation and job-loss impacts, and experiences of other jurisdictions with similar renewable energy initiatives

Environmental Concerns
33 Estimated reduction in greenhouse gases did not take into account the continuing need to run fossil-fuel backup

Health Concerns
34 CMOH report questioned
35 Academic research chair has produced no report
36 Ministry of Energy should measure impact of backup facilities and provide objective research on potential health effects of wind power

Download original document: “Questions arising from the Auditor General’s 2011 Report on Renewable Energy Initiatives

This article is the work of the author(s) indicated. Any opinions expressed in it are not necessarily those of National Wind Watch.

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