Green Energy: the Auditor Isn’t Impressed

January 26, 2012 at 3:04 pm

There’s too much to read, and too little time. But anyone who has an hour or so could learn a great deal about the alarming gap between wishful green thinking and stark reality by examining a couple of documents produced here, in my home province of Ontario, Canada.

We have an amazing institution known as the office of the Auditor General. It conducts independent value-for-money audits of government programs and policies. The intent is to ensure that tax dollars are used wisely – and that citizens have access to accurate information. Each year a report is issued that outlines how well the government is performing.

The entire 2011 Auditor General’s report is available online. Two sections of Chapter 3 are of particular interest. Each can be viewed/downloaded separately:

The first provides a big-picture overview of how electricity is managed in the province that is home to 40% of Canada’s population. On the third page – which is numbered as p. 69 – we read that:

…electricity prices for the average consumer have increased 65% since the restructuring of the electricity sector in 1999, and prices are expected to rise another 46% in the next five years.

Cantankerous consumers aren’t imagining things, therefore. Over the past decade our electricity bills have, indeed, increased by two-thirds. By 2016 we’ll be paying twice as much for electricity as we did in 1999.

Price increases of this magnitude are especially difficult for low-income families to cope with. They also hit the manufacturing sector hard. If you own a factory that was already struggling to survive, that was already paying tens of thousands per month for electricity, there’s no way you can afford that kind of increase. Dramatic price hikes kill businesses – along with thousands of jobs.

The other big takeaway is found on the same page. While the Ontario Energy Board is supposed to oversee our electricity sector,  it actually has no say over two-thirds of our residential hydro costs:

About 50% of the electricity sold to residential customers comes from suppliers who signed long-term contracts with the government…the price of this power accounts for 65% of the cost of the electricity component on the typical bill. However, the Board has no regulatory oversight role with respect to this portion of the electricity charge. Rather, it regulates only…about one-third of the electricity charges on a typical bill.

If our government had deliberately set out to bamboozle us this would have been a perfect strategy. First, assure the public that an impressive-sounding body is keeping an eye on electricity prices. Then circumvent the process by placing two-thirds of the raw cost beyond that body’s ability to influence.

But the news gets even more distressing in the second section of the Auditor General’s report, the one that examines renewable energy. On page 2 – numbered as p. 88 – we read that the audit team didn’t rely on the Ministry of Energy’s own numbers because there weren’t any. The ministry itself hasn’t conducted “any audit work on renewable energy initiatives” recently.

Gee, I wonder why. Could it be connected to the fact that our government is so obsessed with making itself look green that it doesn’t care what it costs? And I’m not talking just financially. The Auditor General points out that the 2009 Green Energy and Green Economy Act practically declares that the ends justify the means:

Under this legislation, the government created a new process to expedite the development of renewable energy by providing the Minister with the authority to supersede many of the government’s usual planning and regulatory oversight processes.

As a result, the government has been able to further its renewable energy policy agenda without the delays that these processes can sometimes cause.

In other words, if you want to build an oil pipeline you’ll have to jump through all sorts of regulatory hoops. You’ll be required to spend tens of thousands of dollars demonstrating that you aren’t going to harm the environment. Your project will be delayed for years while activists denounce you at public hearings – after which you’ll be obliged to make costly changes to your original plans before you’re granted the appropriate permits.

But if your project has the magic ‘green energy’ label attached to it you’ll be spared all of that hassle. You get to saunter to the front of the line. Your project will be fast-tracked. Environmental impact assessment, what’s that?

Such foolishness, of course, leads to grim real world results. The Auditor General’s report doesn’t mince words. It says the Energy Minister decided to shut down coal-fired electricity plants as quickly as possible – but did no homework first to determine if this made sense from an environmental perspective – never mind an economic one. In its words, “no comprehensive business-case evaluation was done to objectively evaluate the impacts.”

Instead, we got boatloads of wishful thinking. We were told that solar panels and wind turbines would reduce greenhouse gas emissions, but we weren’t told that, because the energy they produce is intermittent, gas-powered facilities will remain on standby.

According to the Auditor General, the government “has no data” on the emissions those backup facilities will produce. In other words, it’s entirely possible that we’re going to a great deal of trouble – and spending huge amounts of money – to usher in a new energy era in which the net emissions reduction will actually be minimal.

When the Green Energy and Green Economy Act was passed in May 2009 we were told it would result in a 1% increase in our electricity bills. A year-and-a-half later “the Ministry forecast that a typical residential electricity bill would rise about 7.9% annually over the next five years.”

We were told about the green jobs that would be created, but no one bothered to estimate the ones that would be lost as a result of soaring electricity costs.

Nor did any government official provide advance warning that we’d end up paying hundreds of millions of dollars per year to renewable energy companies to not generate electricity during periods of over-supply.

In other words, green energy is as much a boondoggle here as it is in Germany and the UK. The public is being hosed.

In Ontario’s case, it isn’t just politicians and journalists who are saying so. It’s the Auditor General himself.

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