Ontario's green deal raises ire of energy developers

Source: Globe and mail

KAREN HOWLETT

TORONTO — From Friday's Globe and Mail
Published on Friday, Jan. 22, 2010 12:00AM EST
Last updated on Friday, Jan. 22, 2010 3:12AM EST


Ontario Premier Dalton McGuinty is reaching half way around the globe to fast track the creation of North America's first green-energy manufacturing sector, in a bid to make the province the go-to place for parts suppliers, equipment designers and operators.

His government signed a $7-billion deal yesterday with a consortium led by South Korean industrial giant Samsung Group that will cost every electricity customer in the province an extra $1.60 a year on their bill for 25 years.

The centrepiece of the project is an investment in enough wind and solar electricity to light up more than 580,000 homes in the province.

But the plan also calls for reaching beyond Ontario by having Samsung anchor a cluster of companies that will export clean electricity to the burgeoning green-energy market in North America.

It's the biggest bet on green energy ever made in Canada, Mr. McGuinty said yesterday.

"[Samsung] can do something rather extraordinary here, which is put in place almost immediately critical mass of manufacturing capacity."

The deal is the modern day version of an earlier, $500-million fund the government used to attract $7-billion in auto investments to Ontario. But with the auto sector hit hard by the global economic recession, Mr. McGuinty is now counting on green energy to create jobs in the province's battered manufacturing heartland.

"We're trying to lay the foundation here for new economic growth in Ontario," he said.

However, the move raised the ire of energy developers and opposition members, who argued that Samsung is getting a sweetheart deal. Mr. McGuinty is luring the company to the province with financial incentives over and above the generous guaranteed revenue stream his government pays green-energy companies.

Samsung will receive $437-million in incentive payments over the 25-year life of the deal if it fulfills its obligation to create 16,000 jobs. This will be done, in part, by having Samsung woo green energy companies to the province. This is the incentive that will add the $1.60 to consumers' electricity bills.

Progressive Conservative Leader Tim Hudak said the deal contains no job guarantees, so all Ontarians have to go on is Mr. McGuinty's word.

"Ontario families have no reason to trust Dalton McGuinty's latest job promise surrounding his sweetheart Samsung deal," he said.

Energy developers said the government is circumventing the province's program for attracting green-energy investment. Under Ontario's recently launched feed-in-tariff program, which pays premium prices for renewable power, a government agency is inking deals with companies.

But the Samsung deal could make it difficult for other companies to enter the market, because the province has limited capacity to transmit electricity to consumers' homes. Transmission power will be held in reserve to support Samsung's projects.

"They're threatening to kill the feed-in-tariff program before it's even learned to walk," said Dave Butters, president of the Association of Power Producers of Ontario.

Samsung also will be paid the feed-in rate of 13.5 cents a kilowatt hour for the wind power it produces and 44.3 cents for its solar power. Electricity bills are climbing in Ontario, because these generous contracts with green power producers are well above the market price of 3.31 cents for electricity.

New Democratic MPP Peter Tabuns questioned why Mr. McGuinty is relinquishing sovereignty over a portion of the province's electricity generation to a foreign government. The South Korean government owns 54 per cent of Korea Electric Power Corp., Samsung's partner in the deal.

Ontario Power Generation, the Crown owned electricity utility, would have been capable of taking on similar, large scale projects, Mr. Tabuns said.