Commentary on Ontario’s FIT Contracts Announced Feb. 24/2010

The Ontario government announced here that it has entered into 40 new Feed-In Tariff contracts to procure another 872 MW of renewable power, primarily from wind and solar generators. ´╗┐

The generators know that McGuinty’s green energy days are numbered. The generators are racing to get their contracts in place before the government changes its mind again.

A couple of aspects of the announcement are significant — the claim that these renewable investments are helping to phase out coal, the jobs estimates, and the heavily solar component.

The government can fairly claim that the new gas-fired generators it has under contract are cutting coal usage but there is no evidence indicating that the solar and wind projects are actually cutting coal usage significantly. The solar and wind projects are not reliable enough to replace the predictable, controllable output that coal was historically used for in Ontario.

The claim of 7,000 jobs appears to be wildly inflated. A crude rule of thumb for wind power construction and operations is in the order of 80 worker-years of direct workers for construction and in the order of 9 operators per 100 MW. For 615 MW, the direct employment expectation would be approximately 490 construction jobs of one year duration and 55 continuing operating jobs. For solar, the temporary construction jobs are similar but the operating jobs are fewer. Indirect employment is harder to estimate but is often thought to be about equal to direct employment. There is no credible way to ramp the numbers up to 7,000.

Solar makes up a third of the announced capacity but because solar’s price is more than 3 times that of already costly wind power, solar will be responsible for roughly two thirds of the bill impact. The announcement today will add about $16 million per year (*see below for correction) for 20 years to Ontario’s overall power bill as compared to generating the same amount of power with gas. This estimate assumes gas power costs 10 cents/kWh, which is much higher than today’s cost. The estimate also ignores the transmission costs borne by consumers of connecting the new wind and solar generation.

*Post script: As noted in the comments, Bruce Sharp correctly pointed out that I made a mistake in calculating the annual premium, understating it by an order of magnitude. My practice with this site has been to leave my postings substantially untouched once they are up, revealing all my mistakes and errors of judgment for after the fact review. However, in this case the error is so significant as to make it worth specifically noting. On the Wind Concerns Ontario web site, Bruce has estimated the annual bill impact per household before taking into consideration the 10% bill reduction transferred to the provincial deficit of $23.

2 Comments

  1. Hey Tom,

    I plugged a $ 100/MWh reference price into my calculations and came up with a total annual premium paid of $ 161 million. (Using OPA load factor assumptions, 872 MW produces 1.826 TWh annually and is paid a weighted average price of $ 188/MWh).

    Re: jobs, one source said 100 MW Chatham wind project had 300 construction jobs (unknown duration) and only 15 ongoing jobs.

    Bruce

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