Carbon Con: It's only economics

part 2 in a series imagining the participants at a 'Comic Con' like convention for reducing greenhouse gas emissions. The first post was ECO communication

"Assume I'm an economist..."

Way back when I began the second post to this blog with that ask. Over seven subsequent years of research, data analysis and communicating on electricity supply, emissions, and markets, I've since revised my perspective.

A man walks into a Doctor's office and says, "Doc, it hurts all over when I do this."
The doctor prescribes of a Pigouvian tax.

graph from Wikipedia 

In an April blog post I hinted at my envy of those utilizing richer media tools - from richer graphics to audio/podcasts to video. At that time a group called the EcoFiscal Commission had just released, on their attractive website, "Clearing the Air: How carbon pricing helps Canada fight climate change." A beautifully formatted .pdf provided more depth than the web page, and all were accompanied by short video explainers. The work features 3 case studies of jurisdictions with pricing of greenhouse gas emissions - only 1 of which has significantly reduced emissions. I was going to focus on these case studies but they're really a footnote to addressing a bigger issue, enunciated by in a video clip Ecofiscal Chair Chris Ragan:

"Canadians do care about climate change but they also care about the economy... until Canadians are presented with a solution that makes sense for both the environment and the economy they are not going to put this at the top of their list.

Carbon pricing is that solution."

As they say outside the hallowed halls, "to a hammer everything looks like a nail."

I am going to rebut the evidence supporting the "Carbon pricing is that solution" claim, while recognizing why there could be roles for economists to play following the introduction of The Paris Agreement.

I realize a credibility gap probably exists as the Ecofiscal Commission is stacked with prominent names whereas I am known by far fewer and often as an opponent of "green" energy - and/or a proponent of nuclear energy. To encourage reading on I'll note Ontario has greatly lowered its emissions since I began blogging - a fact which need not be credited to me to any extent, but it also has much less generating capacity from "green" energy, and more from nuclear, than was planned at when I started arguing for retaining nuclear and halting the wind and solar subsidies.[1] Certainly many names from Ecofiscal are recognizable, but I recognized none as being active and influential where emissions have been significantly reduced.

Ontario's rotten wind era at its end

There are three stories from recent news indicating the poverty of competence in Ontario's industrial wind turbine tale. Two occur in bucolic counties near the eastern end of Lake Ontario, the other just south of the forest fire burning in French River Provincial Park - where the fire originated. Most discussion of industrial wind in Ontario is delivered in a narrative of good (renewables) and NIMBY (not in my backyard). Occasionally somebody wades in pretending there's a business angle, so I thought I'd rebut that ignorant assessment while commenting on the three recent wind stories.

The foundation for the post has to be a little dry.

The world of cost estimates for electricity is complex, but it's not hard to understand the capital expenditure (CapEx) per Watt of generating capacity is important element. This excellent graphic, from the respected National Renewable Energy Laboratory (NREL) 2016 Cost of Wind Energy Review, puts CapEx at the top of its cost parameters stack

At today's currency values the U.S. report's $1530-$2370/kW range equates to a $2000-$3100 in Canadian dollars.

The NREL report builds on figures from the U.S. Department of Energy 2016 Wind Technologies Market Report. Drilling into some numbers shared for that report reveals most projects were built with CapEx below $1800USD/kW ($2360CDN/kW), and that in real dollars that $2360CDN/kW is an above average cost over the past 20 years.

It is also notable that the highest pricing of the past 2 decades, per Watt of capacity, occurred about the time (2009-10) Premier Dalton McGuinty introduced Ontario's lucrative feed-in tariff contract mechanism - or perhaps it would be more correct to say Ontario's Premier introduced Germany's feed-in tariff contracts to Ontario.

The International Renewable Energy Ageny (IRENA) Renewable Power Generation Costs in 2017 report agrees with NREL's figures, and notes similar 2016 weighted average pricing for onshore wind in North America, Europe, South America (excluding Brazil), and Eurasia. Call it $2,400 Canadian per kilowatt of onshore industrial wind turbine (IWT) capacity.

This background on capital expenditures (CapEx) in constructing industrial wind turbine projects provides a basis for analyzing 3 Ontario projects that have recently been in the province's news.