Do the math

Since I launched this blog I’ve had a running debate with an old friend from engineering school. He’s not a fan of Ontario Premier Dalton McGuinty, nor does he like the Green Energy Act, and he’s a definite skeptic on the topic of solar energy. His position is that solar won’t meet the world’s energy needs in our lifetime.

Is that so?

Let’s figure it out together.

First, let’s look at just how much energy the world uses. According to the International Energy Agency, the Total Primary Energy Supply for 2009 was 12,150 million tonnes of oil equivalent (Mtoe). That converts to 141,304 terawatt-hours (TWh). The 2009 figure was actually a slight drop from the previous year, but the overall trend has been up, up, up. So, just for the sake of simplicity, let’s say that the annual energy production figure we need to reach is 150,000 TWh.

Now we know how much of a hill we have to climb if we want to replace all sources of energy with solar. Does the sun provide that much?

According to Astronomynotes.com, the sun produces 4×1023 kW. That works out to 23 trillion times more energy than we currently produce from all sources. Now, we’re just one small speck in the solar system, and we’re 150 million kilometers away from the sun, so very little of the sun’s energy output actually falls on the earth’s surface. Above the atmosphere, each square meter receives 1.361 kW (this value is called the solar constant).  Since half of the earth is in darkness at any given time, and most of the other half doesn’t have the sun directly overhead, the average is 0.342 kW per square metre.

Current photovoltaic technology cannot convert all of that sunlight into electricity. Modern solar cells have an efficiency of around 15%, meaning that they can only produce about 0.15W of electricity for each watt of sunlight. Solar cells also get less efficient as they get hot, so sunny summer days are a good-news-bad-news story; more sun means more electricity, but a hotter cell means less electricity. The reverse is true as well, though, so in the winter there’s less sun but the air is a more hospitable temperature. Over the course of the year, it pretty much averages out.

So we know how much sunshine we can expect, and how much of that sunshine we can convert into usable electricity. How many solar cells would we need if we want to replace all other energy sources that make up the global energy supply? Put another way, how much of the earth’s surface would we need to cover in solar cells? Would we need to pave every square meter just to satisfy our appetite for energy?

Nope.

We’d need a lot of space, to be sure – 3.3 million square kilometers. Assuming we can only build solar arrays on land, we have about 150 million square kilometers available, so that means we’d have to cover 2% of all land area with solar panels if we wanted to replace all of our energy supply. That’s about a third of the Sahara Desert.

Cost is a different matter. Based on current prices, all those solar panels would cost around 445 trillion US dollars, or seven times the entire world’s Gross National Income (GNI). That’s not taking into consideration supply constraints on the raw materials required to manufacture them, the fact that current production capacity could only meet the tiniest fraction of that demand, and the fact that there aren’t enough competent installers to even scratch the surface of such a monumental undertaking.

So it won’t happen tomorrow. But the day after that…maybe. After all, how do you eat an elephant? One bite at a time.

So many look at our energy situation, and throw their hands up in despair. It’s hopeless. We’ve done too much damage already. We’re too addicted to cheap but ultimately self-destructive energy sources like fossil fuels and nuclear. There’s no way we’ll dig ourselves out of the pit we’ve created before global climate change renders our world uninhabitable. So say the despondent as they survey our climate crisis.

It needn’t be so. Okay, covering half of the Sahara in solar panels is not realistic. However, while the cost of fossil fuels continues to climb and public opposition to nuclear energy continues to grow, the cost of solar energy continues to edge downwards. In any case, solar energy itself is not limited to the surface of the tiny pebble on which we live. It powers most of the satellites we use for telecommunications, weather forecasting, mapping, and a host of other services. Indeed, part of the original impetus for the US space shuttle program was a NASA scheme to harvest clean, abundant solar power using giant satellites, ending the energy crisis that the 1970s OPEC oil embargoes had caused.

Other renewable energy sources are being deployed alongside solar – wind, geothermal, tidal, and biomass. Each holds its own promise to play a role in rescuing us from a global warming apocalypse. Little by little, baby step by baby step, each of these renewable technologies will supplant our current unsustainable system.

On May 25, 1961, when John F. Kennedy made his famous speech announcing the NASA manned lunar program, many laughed. “Never in our lifetime,” they jeered. And yet, on July 20, 1969 – days after I was born – Neil Armstrong announced a “giant leap for mankind” as he planted his foot on the surface of the moon.

We will shake off our dependence on fossil fuels, and on the disagreeable nations that supply them. We will put an end to the damage we do with greenhouse gases and nuclear waste. We will find ourselves in a future where we can be prosperous without leaving our progeny poisoned and impoverished.

And it will happen a lot sooner than most people imagine.

Holding out for a hero

The centerpiece of Dalton McGuinty’s government has been the Green Energy and Economy Act (GEA). The linchpin of the GEA is the MicroFIT program, which allows individuals and small organizations to produce and sell electricity. The MicroFIT program is facing a significant challenge that may well threaten its future.

I’ve spoken of this challenge in previous posts, but I’m going to delve into it a bit further. The most lucrative and thus the most attractive opportunity to participate in MicroFIT is to sell electricity produced by a solar photovoltaic (PV) array, especially if that array is mounted on a roof. Rates for ground-mount systems are lower, so they offer a lower return on investment than rooftop ones.

Rooftop solar is attractive to the MicroFIT czars because in general, where there are rooftops there are buildings, and where there are buildings there are people, and where there are people there is electricity consumption. If you generate electricity right where it is used, you have no power losses due to transmission lines and substations.  MicroFIT implicitly assumes that rooftop arrays will be in cities, where most electricity is consumed.

It hasn’t quite worked out that way.

One farmer reads the fine print and figures out that the barn in the middle of his empty, windswept field fits the bill as a rooftop installation. Another realizes that she doesn’t have enough roof space to make it worth her while, but she can still make money from a tiny corner of the back forty by installing a ground-mounted array with a dual-axis tracker (that sounds complicated, but just imagine an engineer’s answer to the follow-the-light action of a sunflower). And soon there’s a flood of applications from rural areas.

So, MicroFIT has attracted a lot more applications from rural areas than its designers intended. So what?

The MicroFIT powers-that-be realize that a big chunk of the power they may be forced to buy is being generated not in cities, right at the point of use, but in, as they say, “God’s country”. So we’re back to dealing with big transmission line and substation losses. And suddenly the economics don’t look nearly as good.

But there’s more.

It turns out that the MicroFIT participant is not the only player with some work to do to get a solar array up and running. Our electricity distribution grid was designed assuming that power is generated in a few high-output facilities (nuclear and thermal plants). The grid has to be modified to accommodate so-called “distributed generation”. Those modifications are up to the Local Distribution Company, or LDC – Guelph Hydro, Toronto Hydro, and Hydro One are examples.

These modifications are economical if you have a lot of people in a small area that are getting in on the Act, so to speak. If a bunch of homeowners on one city street all agree to put solar panels on their rooftops, it’s easy for the LDC to justify upgrading the segment of the grid on that street so it can handle distributed generation.

If the MicroFIT applicant in question is a rural landowner like a farmer, it’s a different story. Even if all the farmers in a given concession join together like our urban friends mentioned above, there’s still an awful lot of grid to improve. Neighbouring farms are miles apart, not cheek-by-jowl like in the city. That’s a lot of wire, switches, and other electrical paraphernalia to replace.

We’re actually not talking about a huge amount of electricity. These farmers are probably producing barely enough to offset their own usage. So there really isn’t that much extra juice flowing through the wires as a result of all these solar installations. Hydro One and its ilk are getting flak from some players in the solar industry for being overly conservative about how much more power their lines can handle when the sun is at its brightest.

I’m a civil engineer, not an electrical engineer, so I’m not in any position to criticize Hydro One’s technical decisions. They are tasked with delivering electricity as safely and as reliably as possible. They’re good at the “safely” part. As for “reliably”, their standards are sadly rooted in the middle of the last century, long before our society became utterly dependent on the microchip (which doesn’t respond well to the power dips that occur with alarming frequency, at least where I live). But that’s a topic for a future post.

At any rate, it looks like MicroFIT applications are more likely to get connected if they come from urban areas. The GEA is already under attack by those opposed to wind power, nearly all of them non-city-dwellers. The experience with solar installations is likely another reason why in the provincial election earlier this month, rural Ontario gave Mr. McGuinty the finger.

The problem is, Hydro One has no incentive to speed along the adoption of solar power.  They were mandated under the GEA to provide responses to applicants on a particular timeframe, and they have decided they can’t live up to that. On October 11 they were granted an extension of six months to work through the application backlog. That’s a perverse incentive if there ever was one. If a student just gets granted an extension every time they complain, their assignment is never going to get handed in.

The Ontario Power Authority (OPA), on the other hand, has plenty of incentive. Part of its mandate is “…ensuring adequate, reliable and secure electricity supply and resources in Ontario.” They’re the ones that actually contract to buy electricity from MicroFIT participants. Every megawatt that comes from solar is a megawatt that the OPA won’t have to buy from financially risky, all-or-nothing, long-lead-time nuclear or fossil fuel plants.

However, while the OPA may have a general interest in signing as many solar MicroFIT contracts as possible, they have no specific interest in individual cases. If one applicant gets refused by Hydro One – especially if it’s a farmer, whose electricity will mostly bleed away to line losses before it gets to market – that’s nothing to the OPA. There are plenty of fish in the sea, and they can just sign the next guy in line.

The Liberal government has an incentive to speed things along. Every time the Globe carries a story about a MicroFIT applicant that got screwed over by Hydro One, it adds to a vague feeling of unease among the electorate. Voters wonder if the Liberals, by passing the GEA, bit off more than they could chew. If a government ministry were responsible for the whole process, citizens could petition their MPPs. But Hydro One is a provincial crown corporation, and the arms-length nature of that relationship means that there isn’t much room for political influence.

So in a nutshell, when rural MicroFIT applicants get burned, Hydro One has no reason to care. The OPA cares, but not enough to intervene in a particular case. And the governing Liberals care, but are too far removed from the action to be very effective on behalf of their constituents.

I discussed this with my friend Curt Hammond of Pearl Street Communications. We concluded that what these rural solar aspirants need is a hero. Someone in their corner. Someone with the specific responsibility of defending the interests of the little guy that just wants to do their part in the fight against global climate change and dependence on unsavoury petroleum-backed regimes. Someone with the clout to get Hydro One to play ball. Someone with a mandate from the people of Ontario to keep the province moving toward its brighter, cleaner, healthier, green-energy future.

A Green Energy Ombudsman.

What do you think?

The golf ball and the garden hose

A friend of mine once got a terrific deal on a queen-size bed. Prior to that, he’d only ever lived in tiny apartments with barely enough room for a cot. He measured the bedroom in his new digs and there was enough space for a queen, as well a dresser and shelving unit and other furnishings. He could barely contain his excitement. He hurried off to Sleep Country to make a deal. And a deal he got. Almost.

When he got the bed home, he discovered that there was no possible way the box spring could fit up the stairwell.

He tried turning it this way. He tried turning it that way. He checked to see if it could be hoisted in through the bedroom window. Nothing would work.

In the end, in utter frustration, he took a sawzall and cut the thing in half. Fuming all the while, he manhandled the two pieces up the stairs and nailed them back together with some scrap lumber. The bed looked awful. He put a skirt around the bottom and did his best to pretty it up, but it never did look like it had in the store.

Some folks have had the same experience with solar energy.

An article in the August 11 issue of the Globe and Mail tells the story of two such cases, and indicates that there are thousands more. The article states that the Ontario Power Authority gave these thousands of applicants something called a “Conditional Offer of a microFIT Contract”. Then Hydro One issued letters indicating that the systems could not be connected due to capacity constraints.

Problem is, the people profiled in the article assumed that the OPA offer constituted a green light, so they went ahead and installed their systems. Now their solar-produced electricity is all dressed up with no place to go.

Who’s to blame?

The applicants blame Hydro One. And they have a point. How many people really understand the relationship between the various entities formerly known as Ontario Hydro? Of course OPA and Hydro One have different responsibilities and therefore have to make go/no-go decisions independently of one another. But why do they each have to send their own independent letter to the applicant? The OPA letter is a red herring. It makes no difference that OPA is willing to buy your electricity if Hydro One then refuses to connect you.

In part, Hydro One blames the applicants. They claim that the application process is clearly laid out on the Hydro One website. That is true. There’s also a lot of CYA wording as well. The site warns that Hydro One may or may not make an Offer to Connect. The document describing the application process is equally explicit. One does wonder why a person making an investment of tens of thousands of dollars would not bother to read the fine print. You can’t buy a penny’s worth of mutual funds without clicking through pages of legalese acknowledging that past returns are not an indication of future returns yadda yadda yadda. If you don’t read the prospectus, that’s your tough luck, as any stockbroker will tell you. Why should solar energy be exempt from caveat emptor?

Hydro One also blames the grid. It was designed assuming that the electricity would be produced somewhere far away. The transmission wires get smaller and smaller as they near their destination. Most microFIT applicants are not urbanites sticking a few panels on the roof, but rather farmers installing a large array in an unused corner of the back forty. By the time the transmission wires reach some of these isolated farmhouses, they can only carry enough juice to power a few homes tops.  Hydro One claims the lines aren’t big enough to handle the load of a miniature power plant. To paraphrase, trying to get that much electricity down those wires is like trying to push a golf ball down a garden hose.

Then there’s a problem called “islanding”. The grid was designed to be a one-way street, with the source of the electricity at one end of the wire and the destination at the other. So if the guys in the yellow hardhats need to work on the lines, they know exactly where the power is coming from and they know exactly how to shut it off so they won’t get electrocuted. But when there are small generating stations scattered everywhere, it changes the game. You need switches that let you kill the power from both directions. Hydro One has yet to install those in all the locations where they’re needed.

So the applicants blame Hydro One, and Hydro One blames the applicants. Depending on how you look at it, it’s either David-versus-Goliath or Gulliver-versus-Lilliputians.

It’s a rare applicant that deals with enough microFIT projects to become an expert. For most, the number of applications they deal with is exactly one. So if there’s a weakness in the process, namely the fact that the go-ahead is not one green light but rather two half-green lights, it’s no surprise that these people get it wrong. Everyone is a newbie.

It would be nice if someone from Hydro One or OPA would warn the applicants. They could tell these kindly country folks about the pitfall that’s tripped up so many people like them. But neither organization, large as they are, has the staff to have all those conversations.

Is there anyone else that can help? Someone in the middle? Someone dealing with enough cases to be knowledgeable, but not so many that they’re snowed under?

There is. The installers.

If an installer accepts business from someone who has only the OPA letter, they are taking the chance of poisoning the well. They may well be creating a solar naysayer. The groundswell of dissent we’re seeing is not doing any good to the solar industry. The more that potential new customers hear stories suggesting that solar is a bear trap, the more likely that they’ll take their investment dollars somewhere else.

It’s in the best interests of solar installers to have one simple conversation before they start work. “Before you can make a penny off this thing, you need two letters – one from OPA, another from Hydro One. Do you have both?”

If more installers do this, they may get less business in the short term. But they will help to ensure there will still be a solar industry a few years down the road.

And installers, and their customers, will be able to sleep soundly at night.

Power to the people

Something very exciting is happening. Something that was once discussed only by highly trained experts is now the talk of ordinary people. Something that was once the exclusive preserve of huge corporations is now within the reach of small business and middle-class individuals. Something that everyone once had to buy, they can now make for themselves.

It’s like the advent of democracy all over again. But it’s not political power moving into the hands of the citizenry. It’s electrical power.

All across Ontario, people are discovering that electrical power can be like vegetables. With a bit of effort, investment, and TLC, you can grow your own – a few solar panels can bring your net electricity bill down to zero, or even earn you a few extra shekels. And like homegrown veggies, homegrown power encourages people to take a fresh look at the commercial alternative. Is it produced in a way that doesn’t harm people or the ecosystems on which people depend? Is the supply as reliable as it could be? Is the price fair?

People are learning that the answers to these questions are no, no, and no.

Most of our energy comes from fossil fuels or nuclear power, which present a host of threats to our environment and our society. The link from fossil fuels to global climate change is well established. Our economy’s dependence on often hostile and frequently unstable petro-dictatorships presents a threat to national security. Nuclear power plant construction projects suffer from chronic cost overruns as high as 250%. Nuclear accidents have poisoned crops and public opinion, and the problem of how to store and protect nuclear waste for tens of thousands of years remains unsolved.

Solar energy, on the other hand, is comparatively benign. Photovoltaics are manufactured using traditional energy, with all its warts. However, a day will come when solar panel manufacture is also solar panel powered.

Our electricity grid has remained largely unchanged since it was built fifty years ago. Back then it didn’t matter if the power went out for a second or two. Nowadays, a tiny outage like that can cause untold damage to computer systems, and can result in the loss of vast amounts of precious data. The unreliability of the grid led to the creation of an entire sub-industry, producing a product called an Uninterruptible Power Supply (UPS). No server room worthy of the name would be without one. But why do electricity customers accept the fact that a UPS is a must? Why do they not demand twenty-first century reliability from their local utility?

Solar power, coupled with local energy storage (for when the sun isn’t shining, or isn’t shining enough) as well as advanced fault-tolerant electricity supply management devices, will help mitigate the reliability problem. Some industry commentators and researchers point to electric cars as the ideal energy storage device. You won’t have to pay for a UPS when sitting in your driveway (or company parking lot) is all the necessary capacity to handle a temporary dip in supply. And you won’t have to worry about the wires going dead when you can isolate yourself from the fault by temporarily establishing your own “microgrid”. Bob Galvin, former CEO of Motorola, has extolled the virtues of such a system in his book Perfect Power, and continues to promulgate the idea through his Galvin Electricity Initiative.

Then there’s the price. Historically, utilities were rewarded for building more and more generation capacity just to meet peak demand. Many of the power plants would only be brought online during peak times; they would sit idle (or nearly so) the rest of the time. The price you pay would reflect the cost of all those plants, whether they were running or not. Even more nonsensical, if the plant cannot be throttled back during slack times – as is the case with nuclear plants – the utility actually pays customers to use up all the excess power.

Today, at least, the utilities have woken up to the fact that with proper price signals, people can be encouraged to make more economical decisions about electricity use. Hence, time-of-use pricing and smart meters. Instead of having to invest in more power plants, the utility just has to shift usage from peak to off-peak times. Solar energy generation goes hand-in-hand with time-of-use. Solar panels generate the most electricity at high noon – the exact time when demand is highest.

With Ontario’s Green Energy Act, anyone can get into the solar game. If you have a roof, you can buy a solar array and start generating electricity. If you don’t, you can buy stock in a company like Canadian Solar Inc. that produces the panels, or buy a share in an organization like the Hall’s Pond Solar Cooperative. It’s even more democratic than voting – you don’t even have to be of the age of majority to get in on it.

Solar energy is already helping to cultivate a new breed of informed electricity consumer. Such consumers will demand that their electricity utility deliver a service with a level of quality appropriate to the twenty-first century. They will demand that their energy expenditures stop funding hostile regimes and environmental degradation. They will demand the ability to influence their own electricity bills by adjusting their usage to reflect the cost.

Solar energy is helping to bring about an era where electricity is clean, reliable, and fairly priced. And produced not solely by a remote, hidebound, and unresponsive corporation, but rather by people like you and me.

Green is good for business

Green energy, in particular the Green Energy Act, has become the central issue in the Ontario election campaign. This is of critical importance to the renewable energy industry across Canada, since no other province – and certainly not the federal government – has gone so far to support the inevitable transition from fossil fuel and nuclear energy. Tim Hudak, leader of the Ontario Progressive Conservative Party, has taken aim at the GEA and decried the fact that electricity bills in Ontario have increased since the GEA went into effect.

Whether the GEA is to blame for increased electricity prices is another matter. It is definitely true that participants in the FIT (Feed-In Tariff) and MicroFIT programs are paid a higher rate for the electricity they produce than, say, Bruce Power (operator of one of the three nuclear plants in the province). The citizens of Ontario are paying two prices for energy – one for traditional nuclear or thermal energy, and one for renewable energy. The price for renewable energy is higher.

I used to work for an accounting firm. The standard jibe at accountants is that they know the cost of everything, and the value of nothing. The campaign rhetoric from GEA opponents suggests that the price of renewable energy is higher, and there could not possibly be any defensible reason why this might be. Hence, the cause for the higher price must be rooted out and eliminated.

Could it be that renewable energy has a higher price because it is worth more?

Let’s say you have a business, and that business requires you to lease a car. The leasing company has two options. Plan A has a monthly lease cost that is guaranteed to increase over time. That doesn’t sound too attractive. But the bad news doesn’t end there. The price is also subject to incredible spikes that may mean your payment today is double what it was last month. And Plan B? The price is higher, but it is guaranteed to drop. And unlike Plan A, the price has no random jumps.

Which would you pick?

Businesses thrive on predictability. So do households. Companies like Direct Energy have made lots of money selling contracts that guarantee a particular rate for natural gas or electricity. The customer pays more in the long run, but the price is fixed, and there’s comfort in predictability. Whether you’re a business or an individual, when one of your most significant bills can fluctuate like mad, it wreaks havoc on your ability to plan. You either have to sock away precious cash in a rainy day fund, or pay the price of borrowing the money when the nightmare bill is due. Multiply that by every business and household, and you have a huge drag on economic growth.

Non-renewable energy is Car Lease Plan A. All fossil fuels have been trending upward in price in the long term. All of them took a huge spike upwards in 2008. The per-barrel price of West Texas crude oil fluctuated around the US$20 mark from 1986 to 2000, and then it started a relentless climb to today’s price of around US$83. That’s a fourfold increase in only eleven years. Along the way, it took some eye-popping spikes; its 2008 peak price topped US$130.

Natural gas has seen similar volatility. The current price is close to a ten-year low, but its 2008 peak was nearly double that figure. Coal is selling for nearly twice what it was five years ago, and its 2008 peak was nearly double today’s price. Even uranium, which admittedly doesn’t account for a significant portion of the cost of providing nuclear power, is five times what it was five years ago and hit a 2006 peak of two and a half times the current price.

The price of renewable energy is relatively high, but it is dropping. It is also relatively stable – it doesn’t bounce all over the place.

The reason for this is simple. Renewable energy, with the exception of biomass, is all about the technology. The input is free, and always will be – sunshine, wind, waves, or falling water. So the price is directly related to the technology; as the technology improves, the price drops. But the technology only improves when it has customers. So if you want to see green energy become cost-competitive with brown energy, you need to encourage customers to buy in. The more customers that buy in, the more rapidly the technology improves, and the more rapidly it approaches what energy wonks call “grid parity” – the energy nirvana, where green is actually cheaper than brown.

If I could lease a car for my business at a nice, predictable price, and I knew that price would drop rather than rise over time, that’d be great news. I could make plans for growing my business, maybe hiring another employee, secure in the knowledge that I wouldn’t suddenly see my bottom line going into the red because one of my bills went through the roof.

It’s time we got down to the business of eliminating the drag that volatile fossil fuel prices place on our economy. It’s time we invest in green energy. And it’s time that the Ontario PCs realize that the Green Energy Act is not just good for renewable energy businesses, but for all businesses, and for all households.

Not a great leap forward

Until now, with its Green Energy Act (GEA) of 2009, Ontario was the only jurisdiction in Canada with a genuine renewable energy program. This week, Nova Scotia is taking its place as the second such province. You’d think that would be good news for green energy. You’d think that means that the country is finally getting some momentum in the fight against climate change and overdependence on unreliable energy imports. You’d think that an NDP government would take the boldest steps of any major Canadian political party, other than perhaps the Greens. Think again.

Compared to the GEA, Nova Scotia’s Renewable Electricity Plan (REP) is like alcohol-free beer. It has taken the best renewable energy technology – solar – and effectively excluded it. And, it has taken the most promising program participants – businesses and individuals – and excluded them too.

Wind, biomass, hydro and tidal energy are the only technologies that may be used to generate power under the ComFIT (Community Feed-In Tariff) component of the plan. The larger-scale FIT program applies only to tidal energy. Although the province is not, in fact, perpetually shrouded in darkness, solar is not eligible. Oh, you can install a solar array and connect it to the grid, but you’ll only get paid the going retail rate for the electricity you supply. Power is cheap enough in Nova Scotia that only a financial illiterate or an off-the-deep-end tree hugger would bother. The program website shows an image of a rooftop solar array, but don’t expect to actually see any appearing in the province any time soon thanks to the REP.

To keep power generation profits from departing the province, applicants must be a “community”. Private individuals and businesses, the most promising sources of investment dollars (and the overwhelming majority of participants in the Ontario FIT and MicroFIT programs), have been turned away. Instead, the hope is that such famously flush-with-cash entities as First Nations band councils, universities, municipalities, and nonprofits will step up to construct wind turbines and biomass-fueled CHP (Combined Heat and Power) systems. I want to believe it will work. But I want to believe in flying saucers, too.

As an added bonus, the program looks to be suffering from crass political manipulations. At the last minute, some definitions were changed in the legislation that effectively ruled out one wind turbine manufacturer in favour of another. The change had nothing to do with the public interest. When the government sets up one company to be the monopoly supplier, it reeks of political patronage.

In other words, Nova Scotia has brought its track star to the starting line with much fanfare, and tied a cinder block to each ankle.

I grew up on Cape Breton Island, and I still maintain a certain irritation with Upper Canada perpetually being in the driver’s seat. I’d love to see the Maritimes stand up and take the lead while the rest of the country sits up and takes notice. I was hoping to see a paragon of policy innovation and courage, but Nova Scotia’s REP ain’t it. The Ontario GEA remains the Canadian gold standard for green energy legislation.

Take the high road

Last week I spoke about democracy. This blog is supposed to be about solar energy, not political science, but today I’ll take a stroll down the majority-rule road again. That’s because an issue that is critical to the future of Canada will shortly be decided by less than 14% of its people.

On May 14th of 2009, the government of Ontario passed the Green Energy Act (GEA). The first of its kind in the country, this legislation was intended to boost investment in clean, renewable energy. In just over two years, the act has given birth to an entire industry in the province, and attracted thousands of Ontarians into the business of generating and selling green electricity. Dozens of new companies are now doing manufacturing, installation, maintenance, and financing for projects that produce power from sun, wind, and biomass. Wind turbines and rooftop solar arrays are becoming an increasingly common sight in the province.

So far, the only Canadian jurisdiction that has followed the Ontario lead is Nova Scotia. Next week the province launches the “ComFIT” (Community Feed-In Tariff) program as part of its Renewable Electricity Plan. I’ll talk more about that next week.

My suspicion is that politicians in the other provinces and territories, as well as those at the federal level, are waiting to see what happens in Ontario before they commit to any big, bold initiatives. It is a rare politico that will go out on a limb with a new, unproven policy. On the campaign trail, the candidate that plans to tackle any more than three issues is the candidate that won’t get elected. Unfortunately, green energy is rarely such a front-and-centre topic that it makes the top three list.

So all eyes are on Ontario. If the GEA succeeds, chances are other jurisdictions will give serious consideration to imitating it. But if the GEA fails, it will set the renewable energy clock back a decade.

There are storm clouds on the horizon for the GEA. For one thing, some “Buy Ontario” stipulations of the GEA are under attack. Both Japan and the European Union have launched legal action at the World Trade Organization. They allege that these local procurement provisions violate WTO agreements, and constitute protectionism.

In my opinion, they’re right. In Canada, we’ve always had to contend with the occasional jingoistic American senator that wants to put an end to all this nasty importing of goods from foreign countries. 73% of our exports go to the US, so when “Buy American” fever takes hold, we’re the ones that get the shakes. So we can hardly turn around, get protectionist ourselves, and expect no repercussions.

Ontario didn’t sign the WTO agreements that form the basis of the complaints, but Canada did. That binds Ontario just as surely as if Bob Rae, the premier at the time of the WTO’s birth, had affixed his name to the document. So did Premier McGuinty’s entire policy formulation team miss the fact that his bill would inevitably bring nasty attention in the global trade deal negotiating table? It seems incredible.

Of course they knew. Just like they knew the well-established economic principle that protectionism is self-defeating in the long run – it breeds second-rate businesses that probably couldn’t survive in a truly competitive environment, and costs the consumer a bundle as a result. That’s why all the WTO signatories agreed to work together to keep trade barriers down.

But the GEA authors also knew that in the short run, protectionism can help to create something called a cluster. A cluster is a self-reinforcing network of interrelated enterprises and a rich pool of talent, all located in the same geographic area. Think of Silicon Valley. The cluster develops advanced technologies for the product itself and  for the production process. It also establishes powerful brands, and a workforce with deep skills and experience. For anyone left on the outside of the cluster, these present a formidable barrier to entering the market.

When an industry is in its infancy, and there are no clearly dominant global players, the rules of the protectionism game are different. Some countries recognize the opportunity to cultivate an industry cluster, others don’t. The ones that move first, and set up their incubator and surround it with trade barriers, can set the stage for their industry to be a global player.

It takes a while for other countries to wake up to the fact that a market has been illegally closed to their exports. It takes a while longer for bilateral negotiations to run their course, longer still for an action to be brought at the WTO, and even longer for that action to have a noticeable effect on the trade barrier. By that time, the protectionist hothouse has done its job. If there were any established global industry leaders to begin with, they now have a new competitor in their midst. The countries that failed to see the potential of the emerging industry in the first place will never be more than branch plant territory.

Of course Premier McGuinty’s team knew all this when they created the GEA. Their intent was to make Ontario a global contender in the renewable energy arena. And from what I see, the province is already well on its way, at least on the solar energy front. There are companies like ATS that provide production line machinery for solar panel manufacturers. There are manufacturers like Canadian Solar Inc., which recently (despite what you might think from its name and its $219M market capitalization) set up its very first Canadian manufacturing plant. And there is a myriad of companies installing and maintaining solar arrays.

It’s not clear if the Japanese and European actions will snuff this blossoming industry. They probably won’t. But a much greater threat is looming, and it’s not on another continent; it’s in Queen’s Park, and its name is the Progressive Conservative Party of Ontario.

The PCs have taken a hard line against the GEA. Party leader Tim Hudak has promised to scrap the most important parts of the act if he wins the provincial election next month. Given that the rest of the country is looking to Ontario to decide whether to get into the renewable energy game, and that our proportional representation system means that a party can form a majority with less than 40% of the popular vote, that means that less than 14% of Canada’s population is making a decision that will affect the future of the renewable energy industry nationwide for a decade to come.

Here’s hoping they choose well.

Best of a bad lot

Democracy is about majority rule. The candidate with the most votes wins the election. A newcomer to the whole idea of democracy – a school child, for example – might infer that the winner is best candidate: the most qualified, the most experienced, the most popular, the most effective, or some or all of the above.

It doesn’t always work out that way.

Oftentimes during election campaigns, you realize that you don’t particularly like any of the candidates. In fact, you actually detest one or two of them. When you head to the polling station, you aren’t actually voting for a particular person. Instead, you’re voting against all of the candidates except one. You’re voting for the least bad alternative.

It’s like that with solar energy.

Don’t get me wrong. Solar energy has many terrific selling points. With minimal capital investment and a rapid installation process, you can start producing power. Solar arrays are completely scalable, and can be sized precisely to the application – from a single panel powering a roadside sign, to a multi-megawatt solar farm covering several hectares.

Solar energy can be generated right where it is used, eliminating the construction cost, maintenance overhead, and losses inherent in long-distance electricity transmission infrastructure. Once installed, photovoltaic systems produce zero emissions. They have no moving parts, and so are extremely reliable and require minimal maintenance. Panel manufacture is energy-intensive, but the panels generate many times more energy than that during their usable life.

All is not sweetness and light, however. The manufacture and end-of-life disposal of solar panels suffer from the same environmental perils as the semiconductor industry. The production process uses toxic metals that must be handled carefully to keep them from leaking into rivers and other water bodies. And like consumer electronics, clapped out solar panels are nasty things if not disposed of properly. Fortunately more and more manufacturers are offering recycling services, and third parties are getting into the act – one man’s trash is another man’s treasure.

Then there’s the cost. At present, solar cannot compete with most other energy sources on an installed cost-per-watt basis. However, this is mainly because most traditional energy sources carry costs that aren’t included in the price. They appear cheap, but the price you pay is only the first installment; there are more costs hidden in the fine print, and they’re brutal. Economists call this an “externality”. More on this below.

So solar is not perfect. But let’s look at the alternatives.

In Ontario, Canada, the three main sources of energy are hydroelectric, nuclear, and thermal. So let’s focus on these three.

At first glance, hydroelectric power is pretty sweet. It’s always been expensive to construct a dam. But once it’s built, the water is free and maintaining the turbines is cheap.  However, the best locations for large-scale hydro projects are already tapped. Further, hydroelectric projects can wreak havoc on river ecosystems, and the flooding when a river becomes a reservoir has displaced entire communities. The cost of managing these social/environmental impacts is rising, and may even kill some projects outright.

Next up is nuclear. It’s reliable, and it doesn’t produce greenhouse gases. But it is incredibly costly. Nuclear plants are the most expensive of all, and the costs don’t end with the construction. Uranium mining is an unpleasant business. Operating the plants always costs more than the builders anticipate. Spent fuel rods remain incredibly dangerous for thousands of years, and that’s a horrible legacy to leave our descendants. Even the low-level waste from refurbishing or decommissioning reactors is a hazard, and a tempting target for terrorists seeking to build a dirty bomb.

Then there’s the risk of accident. Three Mile Island, Chernobyl, and now Fukushima Daiichi all loom large in the mind of the public, and currently China is the only country with plans to build new plants. Germany is getting out of the business entirely. Few private companies are willing to accept the risk associated with nuclear plants, so often state agencies or corporations have to assume the risk instead. That means that when things go wrong, it’s the general public that foots the bill. This is an externality, as mentioned above – the price you pay does not reflect the total cost.

Thermal power plants generate power by burning fuel – usually the non-renewable kind, like coal or natural gas.  Their main attraction is that they are one of the few methods of power generation that can be brought online in a pinch to deal with spikes in demand that happen when, for example, everyone cranks the air conditioning during a heat wave. They cost a fair chunk of change to build, but the fuel is cheap and that means the power is too.

However, the thermal power party may have the biggest hangover of all. Burning fossil fuels produces greenhouse gases, and this leads to global climate change. That is yet another externality. When a hurricane wipes out New Orleans, the companies that run coal-fired generating plants and gas station chains aren’t presented with the bill. Instead, the population at large gets nailed with higher taxes and insurance rates.

So solar’s competitors suffer from many disadvantages. They generally cost a bundle just to get into the game, and the investment earns no return during the long period of construction and startup. That’s a huge financial risk. Nuclear and thermal require fuel, and the price of that fuel varies, which presents another short-term financial risk. Since there’s only a limited amount of fuel in the earth’s crust, the long-term price trend will always be upward; that’s not even a risk, that’s a certainty.

Finally, the power is usually generated a long way from where it is used, so there’s a big infrastructure cost to get the power to market. If you want to compare apples to apples, the sunk cost of high-voltage transmission lines should be included when evaluating competing energy sources.

That’s why developing countries will likely leapfrog us – when they electrify outlying villages, they will likely skip over central power generation completely and jump straight to on-site generation with wind and solar. This is analogous to the way that they have largely skipped landline telecommunications, and jumped right to mobile phones.

Solar does have its downside, make no mistake. But when you make an honest, thorough comparison, it’s the best of a bad lot.