Green energy costs lowballed, task force says 

Ontario’s government is overstating the benefits of its Green Energy Act and underestimating hydro rate increases, according to a new report on economic competitiveness set to be released on Tuesday.

The report – written by the Task Force on Competitiveness, Productivity and Economic Progress – points out that rising electricity costs could nullify some of the 50,000 new jobs the Liberals claim will be created.

The prediction is based on some stunning price estimates that go much further than the government’s own projections.

The task force notes a study of the Ontario green energy program by London Economics International, a global consultancy that estimated the act’s cost at between $247 and $631 per household per year – or the equivalent of two to six additional monthly electrical bills per year.

The task force report also cites a study by Aegent Energy Advisors Inc., an energy consulting group, which estimated recently that partly because of expenses related to the act, residential electricity costs are expected to increase at an annual rate of 6.7% to 8% over the next five years.

The predicted job-creation impact is also based, the report says, on what happened in Germany, which has implemented a similar green energy program that initially saw job increases that were eventually eroded by rising power prices.

“I think the province would be wise to have a fresh look at this and really ask themselves, is this the best way to go,” said Jim Milway, executive director for the Institute of Competitiveness and Prosperity, the task force’s government-funded research arm. “I’d strongly reconsider it before we get too far wedded to this.”

Mr. Milway says the impact on rates “will probably be higher than what the government says.”

The task force, created by the Ontario government in 2001 to recommend strategies to bolster long-term wealth, also casts doubt on the job creation from the act.

“While the GEA may create 50,000 new jobs, the higher energy costs may result in employment losses elsewhere in the economy, particularly in industries that are intensive energy users,” the report says.

The Green Energy Act offers huge 20-year guaranteed contracts for wind, solar, hydro and bioenergy projects at rates up to 20 times more generous than the current market price for electricity. The legislation was seen as a way to kick-start a homegrown green energy industry, but has lately become the focus of consumer anger as its costs begin to show up on home electricity bills.

Those bills have risen 20% in the past seven months.

In the past week, the government has moved to mitigate the mounting political damage, introducing a $1.1-billion hydro subsidy on Thursday and hinting Sunday it will expand off-peak pricing by two hours each weeknight, moving the start to 7 p.m. from its current 9 p.m.

A major report to be released by Energy Minister Brad Duguid on Tuesday is also expected to set limits on the amount of green energy contracts being awarded.

The task force report, meanwhile, also points to continued troubles with productivity in Ontario’s economy. Ontario ranks 14th of 16 equivalent-sized North American states and provinces. Ontario businesses invest less in research and development, produce fewer patents and its managers are still not as good as those in comparable U.S. jurisdictions.