What $7B Will Get You: 4% of Ontario’s Electricity Market

The Ontario government just signed a massive deal (billed as possibly the world’s largest) with Samsung and a South Korean consortium  that includes a heavy stake from the South Korean government to construct a whackload (that’s the technical term) of green energy manufacturing and generation in Ontario. The consortium has promised to invest between $6B and $7B in the province to build four manufacturing plants for green energy parts such as wind rotors and turbines, and to construct wind and solar energy generating capacity to supply around 4% of Ontario’s electricity needs, by 2016. In return they will get a higher rate for that electricity under Ontario’s FIT program, so long as the plants and the capacity are up and running on time.

Predictably, the opposition parties have gone nuts. It’s too much money and not enough jobs! There wasn’t enough transparency and they weren’t involved! Before I go any further, the Liberals are the only party I have never voted for; I have no personal or political stake in the governing party and, one might think, quite a bit invested in the other three. Yet I can’t help but think that they are complaining because that’s what opposition parties are supposed to do, rather than because there is anything substantive to complain about. Ontario is spending under $500M to get a $6.7B investment.

The Green Energy Act* was meant not only to stimulate the development and construction of renewable energy supplies for the province, but to help replace Ontario’s obsolete automobile manufacturing capacity (sorry, folks–I know this is an unpopular stand with the labour crowd but the car is dying, and rightfully so. The faster we move to the new reality the better for us in the long run) with green manufacturing capacity. Right now the vast majority of green energy manufacutring is in Europe, and so whenever anyone in North America wants to put up a wind turbine they end up ordering parts from halfway around the planet. This is Not Good. It’s not good for the environment and it costs a lot of money.

Encouraging manufacturers of renewable energy products to locate in Ontario is better than continuing to bail out auto manufacturing in the misguided belief that their union jobs can be propped along with public money forever.

The Samsung Deal is apparently meant to be part of that: get Samsung to manufacture here, get them to promise to bring another four manufacturers along, and build a “critical mass” of local green manufacturing capacity, which should then become an attractor for other manufacturers, and then Ontario’s environment gets cleaner, our electricity supply gets greener, and displaced workers from traditional manufacturing sectors have somewhere to go.

What’s not to like?

Oh, right: the capacity deal. As part of the overall package, the Ontario Liberals promised 500MW of transmission capacity to the consortium, bumping them ahead of local manufacturers and projects who have patiently waited their turn to access the grid. Yep, I’d be steamed too. But if the Samsung deal works to attract manufacturing to the province, it could end up being a boon to the very parties who are now so disgruntled. (I am willing to be corrected if anyone would like to.) Parts should be easier and cheaper to source, purchase and replace. It should stimulate local R&D.

In the meantime, they’ll have to wait longer for access to Ontario’s overworked grid–so let’s hope the Powers that Be recognize this as a significant weak spot and make a nice big announcement of a significant upgrade in grid capacity. We need it.

~~~~~

* I see someone forgot to replace Smitherman’s photo on the GEA website, now that he’s retired from provincial politics to run for Toronto’s mayor. Oops!

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