Typical press coverage of the secret, sole-sourced power deal between the Samsung-led consortium with the McGuinty government for wind and solar power development in Ontario describes the deal using only details in the McGuinty government’s press releases. The details normally set out are that it is a $7 billion deal with “economic development” incentive payments of as much as $437 million. On closer inspection, the deal is actually much larger than the description drawn from McGuinty’s press releases would suggest.
The deal is apparently for 2000 MW of wind and 500 MW of solar with preferred access to transmission and “economic development” incentive payments topping up standard 20 year guaranteed Feed-In Tariff prices. All of this is to be paid for by consumers, not taxpayers.
The “economic development” incentives payments are reported to be 1 cent/kWh for wind power and 3 cent/kWh for solar power. The published Feed-In Tariff prices are 13.5 cents/kWh for wind power and 44.3 cents/kWh for solar power.
Assuming capacity factors of 30% and 17% for wind and solar power respectively, if all the Samsung megawatts were installed today, consumers would be forking over about $1.11 billion per year to Samsung. Of this amount, approximately $75 million is for “economic development” incentive payments. If fully implemented today, the Samsung deal would jack up your rates by approximately 7%.
No matter how you slice it, the Feed In Tariff costs to consumers for solar power are a pure rip-off. Except for new nuclear, the Feed-In Tariff wind prices are far higher than any comparator. Keep in mind that intermittent wind and solar power is not worth as much to consumers as more reliable sources.
The marginal cost of operating the existing coal power stations, some of which have very good pollution controls and some of which do not, has in recent years when the plants were more regularly used, been approximately 3 cents/kWh. The charge to consumers for operating the existing nuclear power Ontario is in the range of 5.6 cents/kWh to about 7.1 cents/kWh, with some additional costs buried in the 0.7 cent/kWh Debt Reduction Charge. The cost of power from new state-of-the-art gas-fired power plants in steady use is in the order of 5 cents/kWh at current gas prices. The cost of power from the most recently competitively bid wind power contracts in Ontario is approximately 8-9 cents/kWh. If press reports pegging the cost of Darlington B capacity at about $10,800/kW are correct, the cost of power from Darlington B will be in the range of 18 cents/kWh assuming the plant operates well — more if the plant suffer hiccups.
Except for the preferred access to transmission, the deal offered to Samsung is less rich than deals offered to others of McGuinty’s friends.
The McGuinty government has steadfastly refused to verify the costs of canceling the Samsung deal.
Although the government has kept the details secret, enough information has leaked out to strongly suggest that the Samsung deal can be canceled with minimal blow-back on consumers. The fact that Samsung has still not bothered to comply with our lobbyist registry laws while government passes regulation after regulation in Samsung’s favour may enhance the case against damages.
It appears that Samsung does not yet have any firm power purchase agreements yet. If Energy Minister Brad Duguid was sitting on real contracts, the Liberals would have already done the ribbon cutting ceremonies already. Instead it appears that Samsung and the OPA are still in negotiations. The recent collapse of the Six Nations talks has set Samsung back, too.
The Samsung framework agreement, which may not be a contract but a memorandum of understanding, is to trade four manufacturing facilities for the incentive payments and preferential transmission access. The likely penalty for renegotiating the agreement would be fewer guarantees around promised manufacturing facilities.
There is a clear risk that McGuinty will make the Samsung deal and other similar outrageous rip-offs irrevocable in the dying days of his mandate. If there is a change in government, the new energy minister should release all the details on the ugly Samsung and similar deals, including the dates that any contracts were signed.