The Globe & Mail is reporting on a new deal between the Ontario government and Samsung:
South Korean industrial giant Samsung Group will invest $7-billion in Ontario to build 2,500 megawatts of wind and solar power.
Samsung and the Korea Electric Power Corp. are receiving a generous sweetener of $437-million. But the so-called economic development adder is conditional on the group creating manufacturing jobs in Ontario.
Under the deal, the Samsung group will operate wind and solar power plants in Ontario over the next 20 years.
In addition to the sweetener, the group will receive the going rate for the electricity it produces – 13.5 cents a kilowatt hour for wind and 44.3 cents for solar.
The Samsung group is promising to create 16,000 jobs in a province whose manufacturing heartland has been hit hard by the global economic recession. But only about 4,000 of those jobs will be permanent.
There are a few interesting points about this. 2,500 MW is a very large project but it still only represents 6% of Ontario’s electricity needs (projected need by 2025). I point this out because it is very clear that wind, solar and tidal energy – by even the most aggressive policies like Ontario are still only going to make up a small portion of generation by 2025. In Ontario’s case, they are projecting about 15% in total will come from non-hydro renewable energy by 2025.
Ontario is 15 times larger than New Brunswick so on a scale basis this Samsung project would amount to about 166 MW in generation here.
The bigger issue is the job creation. This is old time time industrial policy. Paying $437 million up front and giving a guaranteed market for power for 20 years at premium rates 13.5/kwh for wind and 44.3/kwh for solar. This is a huge government subsidy to sustain 4,000 manufacturing jobs.
Again, if you scale this it would be equivalent to a manufacturing project that created and sustained 266 jobs here (4,000/15) but I think it is an important objective to tie the manufaturing and direct job creation in green energy to energy policy objectives.
The Globe and Mail had a very good article on this last week. The Hydro-Quebec MOU is providing 14 TW of power to New Brunswick at 7 cents a kwh, Ontario is bringing on new green power at between 13.5 and 44.3 cents/kwh.
The government of Ontario will say they are getting cheap power from hydro and from Bruce Power (nuclear) to offset the high cost green energy and that the green energy is tied to a longer term economic objective (thousands of jobs in the sector).
You know I favour ambitious sector development efforts. I am not sure this is a particularly good one – but I don’t know enough to see all the angles. It seems to me that making Ontario consumers pay 44.3/kwh for wholesale solar electricity (the retail price now in Toronto is around 12/cents a kwh) will end up being a high price to pay for the new jobs created (in addition to the $437M). But a high percentage of Ontarioians heat with natural gas and there is also the feed in tariff model that is coming online so in the end who knows?
But again back to industrial policy. If New Brunswick took such a focused approach to sector development I would be supportive. In addition to Samsung, they are spending hundreds of millions on other projects in this sector (in addition to the guaranteed markets).
I think we should be deliberate and intentional about developing a few key sectors here.