July 14, 2018
Ontario

Ontario cancels wind, solar contracts as Ford moves on energy overhaul

Shawn McCarthy, Global Energy Reporter | The Globe and Mail | July 13, 2018 | www.theglobeandmail.com

Ontario’s new Progressive Conservative government is cancelling 758 contracts with renewable power developers, as Premier Doug Ford moves quickly to reshape the province’s energy markets and fulfill a promise to reduce electricity rates.

In announcing the cancellations, Energy Minister Greg Rickford said Ontario ratepayers would benefit from $780-million in savings. Those savings are over the life of the 20-year contracts or roughly $40-million a year, equal to 0.2 per cent of the $20-billion electricity market.

“We clearly promised we would cancel these unnecessary and wasteful energy projects as part of our plan to cut hydro rates by 12 per cent for families, farmers and small businesses,” Mr. Rickford said in a release. “In the past few weeks, we have taken significant steps toward keeping that promise.”

The solar and wind projects – which are still being developed – would add 443 megawatts of capacity to the system, which has a current maximum output of 26,231 megawatts.

Earlier in the week, the government announced it is killing the 18.5-megawatt White Pines wind energy project, located on the shores of Lake Ontario in Prince Edward County, which received its final regulatory approval after the election campaign began in May and is nearing completion.

The project’s German owner, wpd AG, has indicated it will seek $100-million in damages to compensate for its losses.

Mr. Ford campaigned on a pledge to reduce energy costs in the province, including a 12-per-cent reduction in hydro prices and a 10-cent-a-litre decrease in gasoline taxes.

He has quickly moved on that commitment, eliminating a raft of programs that were put in place by the former Liberal government to encourage renewable energy development and reduce greenhouse gas emissions.

One of the new government’s first acts was to kill the cap-and-trade climate plan that imposed a carbon price on fossil-fuel use and added roughly 4.5 cents a litre to the pump prices.

Mr. Ford has given no indication what, if anything, will replace cap and trade or what compensation will be provided, if any, to firms that have spent $2.8-billion in the past two years on emissions allowances.

Soaring hydro prices became a political millstone for former Liberal premier Kathleen Wynne, who last year rolled back residential rates by an average of 25 per cent by spreading planned rate increases over 30 years.

The Progressive Conservatives say they will achieve 12 per cent in additional savings, though the government has provided few details on how that will be achieved.

The Liberal plan – which the Progressive Conservatives will build on – will cost $21-billion in interest, according to Ontario’s Financial Accountability Office. And rates will begin to rise dramatically after four years, said Tom Adams, an industry consultant who has appeared before regulators and legislative committees.

The cancellation of the 758 solar and wind projects represents a “piddling amount,” Mr. Adams said.

All but 10 of the cancelled projects were small-scale renewable developments, mainly solar. And 80 per cent of those are owned by schools, farmers, municipalities and First Nations, said John Gorman, president of the Canadian Solar Industries Association.

“This is not big industry; it’s the little guys who are going to get hurt the most,” Mr. Gorman said.

While there often is a surplus of electricity generation in the province, cancelling the wind project will eventually force the province to rely more heavily on natural gas plants, as nuclear reactors at Darlington and Bruce power stations in Southern Ontario are taken offline for lengthy refurbishing, Mr. Adams said.

Despite the renewable energy cancellations, it remains unclear how the Ford government will achieve the deep savings it has promised.

During the campaign, the Progressive Conservatives said they would be able to redirect the $1-billion in dividends and taxes paid by Hydro One from the government to ratepayers in order to reduce their hydro bills. However, that money currently goes to general revenues as well as to the Ontario Electricity Financial Corp., which finances the province’s long-term power-related debt.

Redirecting it to ratepayers will leave a gaping hole in Ontario’s deficit-ridden books, or in the ability of Ontario Electricity Financial to cover the long-term debt, Mr. Adams said. The outgoing Liberal government projected Ontario’s deficit to be $6.6-billion for 2019-20.

NDP energy critic Peter Tabuns said the Conservatives are taking the wrong approach to saving money but tearing up contracts and killing “21st-century energy projects.”

“People don’t want to see our beautiful lakes get dirtier and our air get smoggier, and they absolutely do not want to pay extra to watch that happen,” he said. “We’re calling on Mr. Ford to put a pause on cancelling these contracts until we know just how much it’ll hurt.”

Mr. Rickford said the government will pass legislation so that taxpayers, not electricity customers, will cover any costs related to the cancellations.