August 8, 2011

Ontario green energy plan a ‘recipe for bankruptcy:’ Progressive Conservative candidate

GREG MECKBACH

digital media editor

The Ontario government recently announced it is changing its green energy agreement with Samsung C&T Corp. and Korea Electric Power Corp., which Premier Dalton McGuinty initially estimated would create 7,800 construction jobs in the province. However, a candidate for the opposition Progressive Conservative party says it’s still a bad deal for taxpayers.

In January, 2010, the Government of Ontario announced the agreement, which at the time was expected to bring about 16,000 jobs to the province during the construction, installation and operation of solar and wind energy projects.

“There may be some initial construction jobs,” said Rocco Rossi, who is running as a Progressive Conservative candidate for the Ontario Legislature in the Toronto riding of Eglinton Lawrence, but he added the deal really only commits Samsung to creating 900 jobs.

In recent months, firms such as Pattern Energy Group LP, Solar & Alternative Technology (S.A.T.) Corp. and Cleanfield Alternative Energy Inc. have made announcements on wind and solar generating stations in Ontario, which are expected to create opportunities for construction contractors.

For example, Pattern is in a partnership with Samsung and Capital Power to develop a 270 megawatt wind power project near Goderich.

When the Liberal provincial government initially signed the Samsung agreement in January, 2010, the province had intended to pay the Korean consortium an “economic development adder” of up to $437 million over a 25-year contract. That payment would be contingent upon partners of Samsung having manufacturing plants for solar inverters, solar module assemblies, wind blades and wind towers operating by a certain time.

However, on August 3, Energy Minister Brad Duguid announced the partners would get a one-year extension to the deadline for commercial operation, and the maximum payments available to Samsung would be $110 million.

Because Samsung was “not on track” to meet the conditions of the original deal, the provincial government would have been in a position, as of January, 2012, to cancel the deal with no penalty, said Rossi.

“(Premier) Dalton McGuinty, with one month to go to an election call, redid the Samsung deal to give them an additional year,” Rossi said in an interview with The Daily Commercial News.

Rossi, who unsuccessfully ran for Mayor of Toronto last year, is a former chief executive officer of the Heart and Stroke Foundation. He was also the national director for the Liberal Party.

He had a different take on some of the figures cited by the Ontario Ministry of Energy.

Although the Liberal government of Ontario describes the Samsung deal as “an agreement to create 16,000 direct and indirect jobs in Ontario,” Rossi said Section 8.5 of the agreement only commits Samsung to creating 900 jobs. Energy Minister Brad Duguid stated in a press release that the amendment to the deal will save taxpayers $327 million, because the maximum economic development adder would be $110 million.

But Rossi pointed out that Samsung stands to get $1 billion a year in annual revenues from power generation projects through the Feed-in-Tariff (FIT) program, under which the Ontario Power Authority guarantees fixed rates for companies generating electricity using solar, wind, biomass and other renewable sources. “We are subsidizing each one of those jobs to the tune of over $1 million,” he said. “That’s a recipe for bankruptcy.”

Of the $110 million economic development adder, Rossi said, “That incentive piece is a cherry on the top of a very big sundae.”

A Daily Commercial News reporter asked the Ontario Ministry of Energy Wednesday what the total anticipated expenditure attributable to the agreement with Samsung and its partners. As of Friday night, the department had not replied.

Progressive Conservative Leader Tim Hudak has promised to scrap the Samsung agreement and to not offer any new FIT contracts if his party forms the government after this October’s Ontario election, but Rossi said the PC party is not against green energy in general.

“We are against stupid deals,” he said. “The Samsung deal was a bad deal from the get go.”

Energy rates should be based on competitive bidding, Rossi added.

The provincial government has argued it needs to offer higher rates to green energy producers as an incentive to encourage companies to invest in projects.

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