Classic Government Intervention Failure - Green Energy Act in Ontario - Comments?

Miscellaneous Current Events
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From the Financial Post

CLIMATE OF CONFUSION

Here are some key points

The Government wants to appear as if it is “Doing something” to bring jobs to Ontario

Shortly after Atlantic Wind & Solar Inc. heard about Ontario’s lucrative incentives for green energy projects, the company did an about-face.

The publicly traded alternative energy developer had largely ignored its home market for years, opting instead to focus on expansion abroad. Then Ontario’s Liberal government passed the Green Energy and Green Economy Act in May 2009 and the feed-in-tariff [FIT] program was born.

“It was a 90% focus shift, it was an instantaneous ‘lets go there right now, drop what you’re doing and run’,” said Martin Baldwin, chief financial officer for the Toronto-based company.

Looks like it worked! Of course how did they do it? Bribing private companies with Taxpayer Dollars

Considering the FIT program offers companies who build alternative power plants in Ontario up to 64.2¢ for each kilowatt hour of electricity they produce – nearly 10 times the current market value of power in Ontario – for a guaranteed period of up to 20 years, it was a pretty smart move. There was one catch. To qualify for such profit-driving prices, wind, solar, hydro and biogas companies had to ensure a certain percentage of each project used Ontariomade components.

Hmm - Maybe they should have listened to this man

Andrew Leach, a professor of environmental and energy economics at the University of Alberta’s School of Business, said the kind of ongoing uncertainty experienced in Ontario could be spotted a mile away.

“If you have a plan that is only viable under that very restrictive government program, then if anything happens to that program, even if it is a one or two per cent chance that program goes away, then there is a one or two per cent chance your plant never makes money,” Mr. Leach said.

“Suppose we wanted an automobile industry in Alberta and we said the government will hire auto workers at $44 per hour and sub them out to industry at $6, we would have an auto industry in Alberta tomorrow.”

And so we see a classic malinvestment

To meet the expected flood of demand for Ontario-produced components created by FIT, Mr. Webb’s Woodbridge, Ont.-based company spent more than $10-million to undergo an immediate and massive expansion.

“We went from roughly a 10,000-square-foot facility into a 30,000-square-foot location and increased our staff from 13 total … to now over 70 all in the last year because of [FIT] domestic content requirements,” Mr. Webb said.

At least some in Canada and around the world are opposing it.

Then May became June and anti-FIT voices began to speak.

Japan announced it was considering a formal legal challenge of the program through the World Trade Organization. It filed its official challenge in September, arguing the program’s domestic-content requirements were protectionist and a violation of international trade agreements.

“Investors no longer find Ontario a safe and stable environment in which to invest in energy projects,” Mr. Hudak said in a speech to the Ontario Energy Association (OEA) in October.

the current government feels that they are creating a “stable environment” for investment, by ripping off taxpayers and increasing the price of electricity.

Mr. Duguid argues, however, that a safe and stable environment is exactly what the Green Energy and Green Economy Act was designed to create.

Mr. Duguid steadfastly believes FIT will draw 50,000 new manufacturing jobs to the province.

This is Stunning - they use Quebec, a Social Welfare State basket case, and California with it’s 12.4% official unemployment rate as models for Ontario to imitate.

Still, many in the industry say the program will ultimately survive, in some form or another.

Though it has flown under the radar, Quebec has had similar legislation on the books since 2006, while California’s policy appears even more protectionist.

“The U.S. is now localized to the point where if you want to do work in California you must be a Californian business, absolutely everything must be from California and many federal projects are that way as well,” said Mr. Webb of Sentinel.

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Protectionism and environmentalism join forces to create destruction the likes of which have never been seen. I’m an electrical engineer and environmentalist drive me batty. Their understanding of energy is small. Their understanding of Thermodynamics is smaller, and their understanding of economics is nil.

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Protectionism and environmentalism join forces to create destruction the likes of which have never been seen.

Yeah tell me about it - Have you read this?

http://www.juandemariana.org/pdf/090327-employment-public-aid-renewable.pdf

  1. The study calculates that since 2000 Spain spent €571,138 to create each
    “green job”, including subsidies of more than €1 million per wind industry job.
  2. The study calculates that the programs creating those jobs also resulted in the
    destruction of nearly 110,500 jobs elsewhere in the economy, or 2.2 jobs
    destroyed for every “green job” created.
  3. Principally, the high cost of electricity affects costs of production and
    employment levels in metallurgy, non-metallic mining and food processing,
    beverage and tobacco industries.
  4. Each “green” megawatt installed destroys 5.28 jobs on average elsewhere in the
    economy: 8.99 by photovoltaics, 4.27 by wind energy, 5.05 by mini-hydro.

And don’t forget the corporate welfare to Multinational Corporations.

The Swedish retail giant IKEA announced Thursday it will invest $4.6‐million to install
3,790 solar panels on three Toronto area stores, giving IKEA the electric‐powerproducing
capacity of 960,000 kilowatt hours (kWh) per year. According to IKEA, that’s
enough electricity to power 100 homes. Amazing development. Even more amazing is
the economics of this project. Under the Ontario government’s feed‐intariff solar power
scheme, IKEA will receive 71.3¢ for each kilowatt of power produced, which works out
to about $6,800 a year for each of the 100 hypothetical homes. Since the average
Toronto home currently pays about $1,200 for the same quantity of electricity, that
implies that IKEA is being overpaid by $5,400 per home equivalent.

Welcome to the wonderful world of green economics and the magical business of
carbon emission reduction. Each year, IKEA will receive $684,408 under Premier Dalton
McGuinty’s green energy monster‐‐for power that today retails for about $115,000. At
that rate, IKEA will recoup $4.6‐million in less than seven years‐‐not bad for an
investment that can be amortized over 20.

“Ontario, yours to discover!”

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Hah! Small world! I know someone who works for them…

The critique of such programs is correct. The problem is, even this program is just a drop in the bucket. It is just about impossible to run a profitable business in Ontario today, unless you have government grants or contracts or kickbacks. A friend in government is worth 10,000x more than a million sales.

The Liberal government has been fucking the province outright. We have a debt problem that is soon going to blow up in our faces, among other compounding problems.

The Progressive Conservative party is going to win the next election here. They might even pull the plug on the program. It wouldn’t suprise me. They pull this sort of thing all the time.

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The critique of such programs is correct. The problem is, even this program is just a drop in the bucket. It is just about impossible to run a profitable business in Ontario today, unless you have government grants or contracts or kickbacks. A friend in government is worth 10,000x more than a million sales.

From Rothbard

But if taxation is robbery, then it follows as the night the day that those people who engage in, and live off, robbery are a
gang of thieves. Hence the government is a group of thieves, and deserves, morally, aesthetically, and philosophically, to
be treated exactly as a group of less socially respectable ruffians would be treated. “To force a man to pay for
the violation of his own liberty is indeed an addition of insult to injury. But that is exactly what the State is doing.”
Benjamin R. Tucker, 1893

You Continue

The Liberal government has been fucking the province outright. We have a debt problem that is soon going to blow up in our faces, among other compounding problems.

Yeah we are following Spains lead. And Possibly Quebec’s.

The Progressive Conservative party is going to win the next election here. They might even pull the plug on the program. It wouldn’t suprise me. They pull this sort of thing all the time.

They should pull the plug on this program - it is a crazy boondoggle - thank god Smitherman was not elected Mayor of Toronto.

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I’ve been told that instead of trying to follow Spain’s lead, they are trying to follow the German model.

Essentially, what happened in Spain is that foreign firms came in, benefitted from government programs, and once those programs were done, the companies pulled most of their investments. Essentially, Spanish taxpayer money went to foreign companies. Not a smart move.

In Germany, they made restrictions as to try to keep investment within the country. Many people will say that this policy move has lead Germany to be successful in being a provider in green energy. Anyone who knows anything about epistemology would know that you can’t prove such a principle because of a single occurence. It’s a little easier with the natural sciences, but not the economy. Of course, we can rely on politicians who have the epistemological arrogance to think that they can derive such principles. Heck, most people do this.

Anyways, Germany does have an “advanced” green energy sector. But of course, we’ll never know what it cost, as all the alternative ways this could have played out are now “unseen”.