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Hard lessons from Ontario’s green shift

Jocelyn Bamford, vice-president Automatic Coating Ltd., and founder of Coalition of Concerned Manufacturers and Businesses of Canada, is photographed in Toronto, Ontario on Friday, June 12, 2020. Photograph for Canadian Energy Centre

Jocelyn Bamford is worried the “horrifying” experience of Ontario’s costly renewable energy stimulus programs will soon be felt across Canada as the federal government considers making a “green shift” as part of the country’s economic recovery from COVID-19.

The vice-president of Automatic Coating Limited, a small family-owned Toronto manufacturing company, watched jobs losses mount and businesses close as a result of provincial incentives for wind and solar energy.

Those programs, including the Green Energy Act (GEA) in 2009, sent electricity prices skyrocketing up to 75 per cent higher than competing jurisdictions in North America, according to the Canadian Manufacturers and Exporters.

“Green energy policy in Ontario has been a disaster for manufacturing, specifically small to mid-sized manufacturing. People left, people went bankrupt, [and] people moved growth. People just decided that they were done and closed up. The loss of jobs was staggering,” says Bamford, who founded the Coalition of Concerned Manufacturers and Businesses of Canada.

The GEA also hurt residential consumers, causing costs to rise from 5.2 cents per kilowatt hour in 2008 to 11.55 cents at the end of 2017, an increase of 122 per cent in nine years, according to a 2019 report by the Fraser Institute.

Electricity in Canada

Like oil and gas, Canada is one of the world’s largest producers of electricity, ranked number six after Japan in 2017, according to Natural Resources Canada.

Approximately 80 per cent of Canada’s electricity production comes from non-GHG emitting sources, largely thanks to hydroelectricity as the dominating source in many regions including Manitoba, Quebec, Newfoundland and Labrador, Yukon and British Columbia.

Power generation from wind and solar accounted for approximately 5 per cent of Canada’s electricity production in 2018, according to the Canada Energy Regulator (CER). That’s up from essentially zero in 2005.

Alberta now has the third-highest wind generation in Canada after Quebec and Ontario, the CER says.

Like the rest of the world, the role of natural gas is also growing in Canada’s electricity mix. In addition to replacing coal to reduce GHG emissions, natural gas is an important back-up for electricity systems that incorporate variable renewables like wind and solar.

“New renewables, such as power from solar and wind, are not as easily or economically stored [as hydro] and are not as reliable. Wind speeds often do not match demand periods, and solar only generates when the sun is shining,” the CER says.

Based on higher availability and lower costs for natural gas, the CER revised its forecast in 2018 to reflect higher long-term natural gas demand for electricity in Canada.

When forcing it doesn’t work

In 2019, the Fraser Institute found that the economics for wind and solar can work, but it is far from guaranteed. Among other effective programs, researchers cited Alberta’s regulations pre-2015 that “demonstrated how a competitive wholesale market for electricity determined the extent to which wind and solar energy is economically feasible.”

What happened in Ontario “is Canada’s worst example of the unintended consequences that result from a strong political commitment to variable renewable energy when its system-wide impact is examined,” wrote authors Pierre Desrochers and Andrew Reed.

Ontario’s GEA was intended to help kickstart the provincial economy following the global financial crisis in 2008. Instead, in 2015 Ontario’s Auditor General found that the GEA program resulted in Ontarians paying $37 billion in extra fees for electricity and projected they could pay another $133 billion extra because of the program by 2032. The GEA has since been repealed, but its impacts are still being felt.

Repeating a catastrophe?

As the federal government prepares stimulus packages to help the Canadian economy recover from the pandemic lockdown, Ontario manufacturing leader Bamford is concerned about repeating the mistakes on a much larger scale.

Prime Minister Justin Trudeau has reportedly appointed cabinet ministers Catherine McKenna, Steven Guilbeault and Jonathan Wilkinson to put together a recovery plan that aims to accelerate a “green shift” for the economy. Advising the government is the new Task Force for a Resilient Recovery, which has already indicated what direction its guidance for Ottawa will take.

“Canada’s investments to recover from COVID-19 will either lock us into a vulnerable future or put us on a resilient path towards net-zero emissions, good jobs and a strong economy. This is an important opportunity for Canadians everywhere [and] we’re determined to help Canada’s governments seize it,” the group said in a statement.

Bamford worries that political leaders might think they just didn’t do it right in Ontario, but that the premise of widespread government-funded renewables investment is still worth chasing.

It could be “the exact same thing, except instead of just torturing Ontario it’s going to torture the entire country,” she says.

University of Guelph environmental economist Ross McKitrick shares her concern.

“The idea that the recovery from a recession is an ideal time to make a transition to green energy is really contradicted by the history of renewables and green energy, which is that they are very expensive, they’re technically unreliable, they drive up electricity prices, and they dampen growth and investment,” he says.

“When you’re trying to recover from a recession and you’ve got 15 per cent unemployment, that’s the worst imaginable time to opt for power systems that you know are going to be more expensive and wasteful.”

A conclusion without a premise

A 2017 report by McKitrick and Elmira Aliakbari found that Ontario’s manufacturing industry lost 75,000 jobs between 2008 and 2015 as a result of the province’s high electricity prices. While they have not updated the analysis to 2020, McKitrick says it is safe to assume the job losses have continued to rise along with power rates.

“With so many people out of work and so many businesses struggling, we have to invest in things that we know have a positive rate of return, that lead to growth,” he says. Canadian fossil fuels now are not only plentiful but cheaper and cleaner than in the past.

“When fossil fuel prices go way up, and in the past when there’s been concerns about shortages, greens jump on that and say we’ve got to make a transition away from fossil fuels to renewables. Now we’re in the opposite situation. The prices are really low, and they’re jumping in and saying the same thing. It seems like a conclusion in search of a premise.”

More than Canada’s electricity

Recovery stimulus that prioritizes renewable energy development for electricity over assisting struggling oil and gas producers and suppliers would be short-sighted and not consider Canada’s economy as a whole, Bamford says.

“There are just as many businesses in Ontario that produce parts and pieces for the resource sector as they do for automotives, but we just don’t get our story out,” she says. “I’m a corrosion coater. I could paint this spool for pipe or I could paint a wind turbine; it makes no difference to me, but it does make a difference to our economy.”

In addition to fuelling everyday demand needs for Canadians, oil and gas is the country’s largest export sector, in sum accounting for $108 billion in gross domestic product in 2018, and $359 billion in contributions to provincial and federal revenues between 2000 and 2018.

Exporting Canada’s low GHGs

Canada’s has the opportunity to expand its exports of low-GHG sourced electricity to new markets by sending natural gas to the world as LNG. Multiple LNG projects have been proposed in Canada, but just one is under construction: LNG Canada, at Kitimat, B.C.

LNG Canada’s owners estimate that, if used to displace coal power in China, the B.C. natural gas delivered by the project could ultimately reduce GHG emissions by the equivalent of shutting down 20 to 40 coal-fired plants. Lead owner Royal Dutch Shell views LNG “as a partner for renewable sources” into the future.

“If you truly care about greenhouse gases, then you’ll get our liquefied natural gas to China but quick and help them come off coal,” Bamford says.