Wind Power Monopoly?

Poor Cameron Lewis figured he was in for bad news when he learned the people at the head of the line had been there for five days.

He had come to Peterborough to apply for wind power sites on Ontario Crown land and had arrived 11 hours before the provincial Ministry of Natural Resources would begin accepting applications – at 8 a.m., Wednesday, Feb. 20.

Lewis found himself fifth in line, and under previous ministry rules he would have had an excellent chance to get the sites where his two-year-old Environmental Electric Co. Inc. planned to erect wind turbines to generate electricity.

But the ministry changed the rules in January. It created a winner-take-all process that could allow the first in line – Toronto-based SkyPower Corp. – to virtually control all the remaining locations in Ontario where wind power would be most effective and the most profitable.

The stakes are high. Control of these sites potentially means millions in profits as Ontario switches its power sources from traditional to renewable.

Just before the ministry office opened, SkyPower's plan became clear to those shivering in the line when a car pulled up and handed over five file boxes to the company's line-sitters. Lewis estimated they contained at least 200 application forms, enough for sites totalling nearly one million hectares. In one chunk, the area would be bigger than Algonquin Provincial Park.

"We thought, 'uh oh, (the ministry) made a big mistake here,'" Lewis says. "They opened it up to a land rush. ... It allows one company to monopolize all the Crown land."

Officials are now assessing applications, which cost $1,000 each.

About 87 per cent of Ontario – or roughly 94 million hectares, mainly in the North – is Crown land, but only a small fraction of that is suitable for wind power. Last week's opening also included applications for offshore sites in Lakes Ontario, Erie and Huron.

With most of the likely sites on private land already taken, this opening of the provincially owned Crown land was "probably one of the last opportunities to get the better sites" that are left, says Gary Pundsack, senior business development manager with Invenergy, which sat sixth in line and had been seeking 13 sites for development.

Lewis fears a monopoly will stifle innovation and lead to higher prices.

The effort to get sites, though, also signals that wind energy has moved from the fringe of electricity generation on to the main stage. In fact, it's attracting billions of dollars in investment across Canada, says the Canadian Wind Energy Association, based in Calgary.

No one is suggesting SkyPower did anything illegal or unethical. Criticism centres on the government policy and a result that few appear to have foreseen.

"I don't think anyone anticipated someone would submit a large number of applications," says Pundsack.

SkyPower president Kerry Adler says with evident pride that his company did, indeed, grab the front of the line and "made a large number of applications ... We took advantage of a great opportunity, as everyone had an opportunity to do." Neither he nor the ministry would reveal how many applications SkyPower filed or how much land they cover.

A team of 12 company staff spent a long time scouting sites, Adler says. Before the opening, "several members of our management team spent the night in parkas and sleeping bags. Whether we secured the windiest areas, that's competition at its finest."

Back in 2004, the province announced it would, from time to time, accept applications for wind power sites on its unoccupied Crown land. Applicants would be allowed to bid on blocks covering about 4,400 hectares – with a limit of three applications per company.

Trouble was, some applicants set up new companies, lots of them, to get around the restriction, says David Bauer, spokesperson for Natural Resources Minister Donna Cansfield.

The solution, quietly unveiled in January, was to remove the limit and assess applications on a first-come, first-served basis. The earliest application for any piece of land would take precedence: Competitors would get a crack at the property only if the ministry rejected the original bid – a decision based on whether the applicant has the technical and financial strength to go through the approvals and construction process.

Industry observers say that isn't much of a hurdle for SkyPower, which Adler calls, "one of the leading renewable energy companies in Canada."

Applicants need deep pockets and a lot of expertise because approval simply allows them to begin a process of testing wind potential and securing environmental and other approvals that can take up to six years before construction begins.

The ministry has no policy on whether the sites should go to one or several companies, Bauer says.

No More Rebates for Green Cars

The Conservative government is eliminating a rebate program for fuel-efficient cars after less than two years. So if you want to get a fuel-efficient car for less you had better do so before the end of 2008.

The federal government announced yesterday that it will no longer offer rebates ranging from $1,000 to $2,000 on eligible 2006, 2007 and 2008 models under the ecoAuto program after the end of 2008. It was first announced in March 2007.

"The program will not be available beyond the 2008 model year," said a one-line statement in the government's budget papers.

However, the government added it will keep its gas-guzzler tax or "Green Levy" of up to $4,000 on a few big sport-utility vehicles.

Part of the problem was that consumers had to wait several months before the program started sending cheques to motorists who qualified. Automakers also had to wait months before knowing which vehicles would qualify.

The Conservatives are now favouring a gas tax idea, but this idea will not effect wealthy SUV drivers who can easily afford higher gas prices. Instead such a gas tax would harm poor drivers the most and drive up inflation on food.

Some industry analysts and several manufacturers opposed the rebate program because they said it also gave a few automakers an unfair competitive advantage.

Honda Canada responded by offering $1,000 incentives on two of its popular fuel-efficient models that didn't qualify for the rebate last year. Honda argued that the program penalized fuel-efficient vehicles that don't compromise on safety.

Another solution would be to up the levy on gas guzzlers by an extra $1000 for ever year, or to immediately double the levy. The money would go towards developing more hydrogen fuel cell technology and build a distribution network across Canada.

End to hydro rate subsidy

Clean Air Alliance recommends $5 billion better spent on consumer rebates.

An environmental research group called Clean Air Alliance says the $5 billion that goes toward subsidizing Ontario electricity rates annually should be completely eliminated over the next 10 years and instead given back to citizens in the form of an annual hydro rebate.

Such a move would cause electricity rates to rise 35 per cent over that time, but the Ontario Clean Air Alliance argues that higher power costs would encourage more homeowners and businesses to conserve energy and force industry to operate more efficiently.

"If you want to promote energy efficiency you don't subsidize the price of electricity, you've got to raise it," said Jack Gibbons, lead author of the study, called "Tax Shift: Eliminating Subsidies and Moving to Full Cost Electricity Pricing."

He said more people are likely to ease off on their air conditioners, turn out the lights, and purchase EnergyStar products if they see a 35 per cent hike on the power bill.

At the same time, the province should take the billions of dollars it would save by eliminating the subsidies and give it back to citizens in the form of an annual hydro rebate amounting to $386 for each person in the province, the group proposes.

Such a rebate would more than offset higher power bills in the typical household. A family of four, for example, would get back $1,544 under the plan compared to the $503 increase the average home would see on its electricity bill – excluding any savings through personal conservation efforts.

"It's true that one could use the (annual) tax reduction to pay for one's status quo level of electricity consumption, but that is not likely to happen," Gibbons said. "For example, when you get a $1,500 pay increase, you don't typically spend one-third of that on increased electricity consumption."

The study, funded by a number of philanthropic organizations – including the EJLB Foundation and the Laidlaw Foundation – identified a number of subsidies that keep electricity rates in the province artificially low (around 5.9 cents per kWh, when in reality it costs the government 9 to 10 cents per kWh).

Specifically, it determined the province pays nearly $2 billion so that Ontario Power Generation and other owners of hydroelectric power stations can pay royalties for water that are well below market rates. Ontario Power Generation also gets a below-market return on its generating assets that amounts to $850 million annually.

Another $2 billion goes toward a provincial sales tax exemption on grid-supplied electricity and interest payments on the former Ontario Hydro's $19.3 billion in stranded nuclear debt.

The study argues that eliminating these subsidies will encourage a "culture of conservation" and make Ontario's industries more efficient and competitive, though industry and businesses would not get rebates. Instead, the group is recommending that the government offer low-interest loans to companies wanting to do efficiency upgrades on their operations.

"In essence, a full-cost pricing strategy represents a tax shift from subsidizing wasteful consumption to rewarding efficiency, which in turn is a much more economically efficient and beneficial use of government revenues," according to the study.

Frank De Jong, leader of the Ontario Green Party, which has long advocated the use of revenue-neutral tax shifting, said he supports the plan in principle.

"This is absolutely the right way to go," he said. "But it's a question of the right mechanism for doing it."

De Jong said a simpler approach would be to use the $5 billion that goes toward subsidies and instead directly lower business and consumer taxes, freeing up more money to pay the higher cost of electricity or invest in energy efficiency.

He said the government's $3 billion health-care levy should also be turned into a carbon tax.

"Yes, we want the health care, but we should be paying for it on our electricity and gas bill rather than our health-care bill."

Biofuels harm Environment

February 8th 2008.

Biofuels – gasoline substitutes made from plants – can't make much of a dent in climate change and will actually make it worse, say two reports released yesterday.

One study concludes that the current race, propelled by massive government subsidies, to grow biofuel crops on existing agricultural land increases global greenhouse gas emissions because it causes farmers to clear vast tracts of forest and grassland elsewhere, releasing the carbon they store.

The second says the only option that might make sense – planting biofuel crops on land now considered degraded – could replace just a small fraction of the fossil fuels consumed by vehicles.

"Many people imagine that with all the talk about biofuels, they're going to give us all our energy," David Tilman, of the University of Minnesota in St. Paul and co-author of the report on using degraded land, said in an interview. "They're not. ... It's not the miracle" many people believe.

The studies were published in Science magazine on the same day the Helmut Kaiser Consultancy, based in Germany, reported that thanks to government subsidies and targets in Canada and many other places, global biofuel production hit 61 billion litres, at 2,000 refining plants, in 2007 and is forecast to grow by 15 per cent a year until 2025.

But the two scientific studies suggest such supports are bad policy.

"I no longer feel corn ethanol is a wise path," Tilman said.

Biofuels' main advantage is that they store carbon while they grow: That, in theory, offsets the greenhouse gas emissions generated when they're burned. Previous research has shown the gain is greatly reduced by the amount of energy required to grow the crops and convert them to fuel.

Most North American ethanol is produced from corn and wheat. It produces just 20 per cent more energy than it takes to grow and process the crop. That makes the savings in greenhouse gas emissions also about 20 per cent.

Producing fuel from grasses and other non-food crops is more efficient – although still technically difficult – and creates roughly a 50 per cent emissions saving.

But those benefits are wiped out by a consequence of biofuel production, says the first of the new reports by scientists at Princeton and two other U.S. universities and by the Woods Hole Research Centre.

Demand for food continues unabated after agricultural land is turned over to biofuel crops. As well, prices for the crops rise. The result: Farmers expand on to previously undeveloped land, and the carbon stored in the trees, grasses and soil is released into the atmosphere as carbon dioxide, a primary greenhouse gas.

The U.S. would need 43 per cent of its present food-corn land to meet its ethanol projection for 2016.

"Corn-based ethanol, instead of producing a 20 per cent savings, nearly doubles greenhouse emissions over 30 years and increases greenhouse gases for 167 years," the study says. The results for non-food crops aren't much better: "Biofuels from switchgrass, if grown on U.S. corn lands, increase emissions by 50 per cent."

The second study, by Tilman and other Minnesota scientists and funded by the Nature Conservancy, offers equally disheartening figures: "Converting rainforests, peat lands, savannahs, or grasslands to produce food-based biofuels in Brazil, Southeast Asia, and the United States creates a `biofuel carbon debt' by releasing 17 to 420 times more carbon dioxide than the annual greenhouse gas reductions these biofuels provide by displacing fossil fuels."

It says planting grasses for biofuel on the half-billion hectares of degraded land around the world would, for many years, have a double climate-change benefit. The crop could be harvested to make "green" fuel and its roots and the gradually improving soil would store more carbon.

But even if all that land were converted to biofuel crops – an unlikely event – they'd still meet, at best, only 20 per cent of the global demand for transportation fuels, Tilman said.

Michael Bryan, who heads the industry group BBI Biofuels Canada, said ethanol from corn, and even the "better" version from non-food plants and waste matter, isn't perfect, but is helping in the move away from a fossil fuel economy.

What the world needs is a clean alternative to burning ethanol. Whether we are burning oil-based ethanol or biofuel, it still amounts to the burning of carbon.