Why Politicians Should Never Be In Charge of Anything–Part 41

https://grantcoulson.files.wordpress.com/2014/04/incentiveseverywherepicturecorrect1.jpg?w=444&h=288

    Do not think about, write about or deal with  human behavior without determining the effects of incentives.

   I was listening to a radio show with excerpts from interviews with Canadian Members of Parliament who were present when a “Soldier of Allah” shot a soldier in the back and had a brief tour of the House of Commons. One of them said something like–I freely admit I’m suffering from PTSD.  Others made similar comments. Apparently Canada has elected a number of frightened children to Parliament, eager to embrace the psychobabble of the day. One of the people who shot the murderer, and could have been shot by him, Kevin Vickers, was on the job the next day. I cannot imagine a member of the Knesset expressing some nonsense about PTSD. We’re at war folks, have been for some decades or 1400 hundred years, start talking as if we were.  Stop talking about your feelings and show some leadership.

     As added insult, Thomas Mulcair, the national leader of the New Democratic Party, Canada’s hyper-liberal national party, say that the shooting was not a terrorist act. The wearing of the jidhadist paraphernalia, the killing of a soldier in uniform and radical mumbling for many years is not enough to say terrorist. Hmmm.

    Wherein we see that the long-ago discredited green movement–alternative electricity sources-is still being supported in the face of massive costs and debt and economic stagnation. Politicians have no place in economic decisions.

Ros s McKitrick and Tom Adams Ross McKitrick is a Professor of Economics at the University of Guelph and Senior Fellow of the Fraser Institute. Tom Adams is an independent energy consultant and advisor.
    Financial Post

Ontario’s green fiasco
Adding renewable generating capacity triggers changes … that multiply costs for consumers

Ontario’s green energy transformation – initiated a decade ago under then-Premier Dalton McGuinty – is now hitting consumers. The Nov. 1 increase for households is the next twist of that screw. As Ontario consumers know all too well, the province has gone from having affordable electricity to having some of the highest and fastest-increasing rates in Canada.

Last year, in a report for the Fraser Institute called “Environmental and Economic Consequences of Ontario’s Green Energy Act,” one of us (McKitrick) explained how the Green Energy Act, passed in 2009, yielded at best tiny environmental benefits that cost at least ten times more than conventional pollution control methods, and was directly harming growth by driving down rates of return in key sectors like manufacturing.

But complex financial structures and a lack of official disclosure around large embedded costs have let supporters of the green energy act deny that green power is responsible for the price hikes. Green industry advocates, including the consulting firm Power Advisory and advocacy group Environmental Defense, have added up the direct payments to new renewable generators, and concluded that since those costs are relatively small, the impact of renewables on the total cost of power is likewise small.

However, such analyses ignore the indirect costs that arise from the way renewables interact with the rest of the power system. Adding renewable generating capacity triggers changes throughout the system that multiply costs for consumers through a mechanism called the Global Adjustment. Our new study, released today by the Fraser Institute, quantifies the impacts of different types of new generators on the Global Adjustment. The analysis pinpoints what causes the raw deal for consumers.

<insert>

    These green initiatives have one positive aspect. I want to stay alive to see them dismantled. I will. I must.

Here’s how it works: over the last decade, Ontario closed its coal-fired power plants and built a rapidly expanding portfolio of contracts with other generators including renewable energy companies producing power from hydro, wind, solar and biomass. These companies charge the Ontario Power Authority (OPA) higher-than-market-value prices for energy. To make up the difference, the OPA slaps an extra charge – called the Global Adjustment – on the electricity bills of Ontarians.

The Global Adjustment adds to the commodity portion of rates, which combined with charges for delivery, debt recovery, and regulatory factors constitute the overall rate. Elements of the Global Adjustment that are not disclosed include payments to generators to not generate, rates paid to historic non-utility generators, and costs for new hydro-electric developments.

Since 2007, the Global Adjustment has risen six cents per kilowatt-hour in inflation adjusted terms, pushing up the commodity portion of bills by 50%. Not long ago, Ontario’s total industrial rate was less than six cents per kilowatt hour. The rising Global Adjustment is by far the biggest driver of the resulting 21% increase in the overall average cost of power in the province over the period 2007-2013. The Global Adjustment’s upward path is a direct consequence of government intervention in the electricity market. Our analysis unpacking the costs of different types of generation shows that the consumer impact of new renewables substantially exceeds the direct payments to those generators by as much as 3 to 1. And renewables are a big part of the problem: Wind and solar systems provided less than 4% of Ontario’s power in 2013 but accounted for 20% of the commodity cost paid by Ontarians.

<insert>

     As they say in politics, 4% benefit, 20% cost–is that a bad thing?

Getting to the bottom of the rate implications of adding renewables gained new urgency when Premier Wynne declared last month that the 2013 fleet of wind and solar will almost triple by 2021. This is an incredibly reckless decision. In his National Post column recently on the 2014 Ontario Economic Summit, co-chair Kevin Lynch, Vice-Chair of BMO Financial Group, stated bluntly “That Ontario has a serious growth problem is rather difficult to deny, or debate.”

What’s the solution? If the Province wants to contain electricity rate increases it needs to halt new hydroelectric, wind and solar projects. In order to reverse rate increases, the province should seek opportunities to terminate existing contracts between renewable energy companies and the OPA. Alas, as the Premier has indicated, that’s not where they’re headed.

Alternatives to costly new renewables include using some imported electricity from Quebec while Ontario refurbishes its nuclear power plants and maintaining 4 of 12 coal-fired power units at Lambton and Nanticoke that had been outfitted with advanced air pollution control equipment just prior to their closure, making them effectively as clean to operate as natural gas plants. Costly conservation programs encouraging consumers to use less electricity make particularly little sense these days in Ontario. Right now, Ontario is exporting vast amounts of electricity at prices that yield only pennies on the dollar, and also paying vast but undisclosed sums to generators to not generate.

<insert>

   As they say in government, “Spending money foolishly is our business, our only business.”

Many European countries made costly commitments to renewable energy but are now winding them back. Germany is investing in new smog-free coal power generation. Environmentalists often suggested that following Europe is the way to go. Perhaps Ontario should consider following them now.

<end>

    If it’s not your money, you tend to waste it. Pass it on.

Government Job or Respect–Which’ll It Be?
Cheerio and ttfn,
Grant Coulson, Ph.D.
Author, “Days of Songs and Mirrors: A Jacobite in the ‘45.”
Cui Bono–Cherchez les Contingencies

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: