Absolute power?

NATHAN DENETTE / CP

In Ontario, the frenzied rush to “green” the province’s power grid has reached a new level. It’s now possible for farmers to erect a brand new barn without paying a dime. The barns are being offered by a company called Hay Solar and come equipped with a sloping rooftop covered with solar panels. By selling the power generated by the solar panels to the grid, Hay Solar figures each barn is capable of generating enough revenue to let the company pay off the pricey $750,000 buildings (solar panels are expensive) in 20 years, plus taking a cut for its services. After that, the barns and the solar arrays belong to the farmers.

James Mann, the president of Hay Solar and Mann Engineering, one of the country’s largest solar companies, says it’s an opportunity to kill two birds with one stone by satisfying farmers’ immediate demand for more storage space while finding a new market for the company’s cumbersome solar arrays, which offer a potentially attractive revenue stream but require a daunting up-front investment. While he’s convinced his business model will fly (350 barns have already been promised, but none have yet been built), even he admits the pitch sounds a little out there. “When you give a free barn away, people think you’re from Mars.”

The truth is that companies like Hay Solar would never see the light of day if Ontario hadn’t decided it was prepared to pump billions into green energy. The province has so far approved thousands of green energy contracts, ranging in size from a few solar panels on the roof of a family home to industrial-scale projects, in which they agree to pay several times the going electricity rate for periods of up to 40 years. It has also signed a controversial $7-billion deal with a consortium led by South Korean giant Samsung that includes a massive investment in wind and solar electricity. The hope is that all the spending will seed a new green energy industry in Ontario (all projects must source a percentage of materials locally), creating some 50,000 new jobs in the process.

But so far, the rush to a so-called green economy seems fraught with risk. While the thought of powering homes and businesses with power harnessed from the sun and wind is appealing, it’s currently far more expensive and less reliable than conventional sources, which means consumers and taxpayers will be the ones left on the hook—for decades—if the experiment doesn’t work out. Even a former head of the Ontario Power Authority (OPA), Jan Carr, has said the ongoing green rush has led to “a largely ad hoc approach to the selection and investment in power generation technologies that will unnecessarily increase the cost of electricity with far-reaching economic and social effects.”

To date, the OPA has granted conditional approval for more than 694 long-term renewable energy contracts under its Feed-In-Tariff, or FIT, program (another 3,360 conditional offers have been made to homeowners under the government’s MicroFIT program). The FIT contracts include 184 large-scale projects capable of producing 2,500 megawatts of renewable energy, enough to power an estimated 600,000 homes. Most of the contracts are for solar, on-shore wind or waterpower projects and, in most cases, offer guaranteed rates—ranging from 13.5 cents a kilowatt hour for wind to 44.3 cents a kilowatt hour for large ground-based solar arrays—over a 20-year period. By contrast, the market price of a kilowatt hour rarely tops 4.5 cents.

It’s an incredible deal for green power companies, but not necessarily for consumers. By some calculations, the average residential power bill is already set to climb as much as 25 per cent, or $330, annually over the next few years and, once new green energy projects come online, prices could rise even further. Why is Ontario willing to pay such a steep price to go green? For starters, Premier Dalton McGuinty has pledged to eliminate dirty coal-fired power plants by 2014 and alternative energy sources are needed to fill the gap. Coal-fired plants now produce about 15 per cent of the province’s electricity. The rest comes from nuclear (40 per cent), natural gas (25 per cent) and hydro (18 per cent). At the same time, the government is hoping that its requirement for “made in Ontario” technologies will help make the province North America’s leader in green jobs and manufacturing.

But critics say it’s a mistake to link policy goals like emissions reduction and job creation directly to the province’s electricity system, which has historically—and sensibly—been charged with providing power to consumers as cheaply and reliably as possible. “Now, under the Green Energy Act, none of that matters,” says Tom Adams, a Toronto-based energy consultant, adding that renewable energy sources need to be able to compete economically if they are going to have a meaningful impact. “The customer just doesn’t exist on the green energy landscape.”