Toronto: The figures are staggering: $7 billion of investment, 2500 MW of new generating capacity, and 16,000 jobs. As a result of signing an historic agreement January 21 with a consortium led by Samsung, the Ontario government expects to make the province a global centre for the manufacturing of renewable energy equipment. The Green Energy and Green Economy Act had already attracted international interest in generating power from renewables, but the Samsung agreement stands to underpin the province’s green power generation business with a range of associated manufacturing and support industries basing themselves in Ontario.
Premier Dalton McGuinty said, “With this step, Ontario is becoming the place to be for green energy manufacturing in North America.”
In addition to the Feed-in Tariff program, the province’s investment in renewable energy infrastructure could reach $15 billion over the next ten years, in the same league as megaprojects like the Churchill Falls hydro project or the proposed nuclear new build. Taken together, it will be the single-largest investment in renewable energy in provincial history and arguably the largest climate change initiative in Canada.
“This is a huge achievement for Ontario. ... These projects will help clean up our air and replace dirty, coal-fired generation as well as bring more green-collar jobs to communities across the province,” said Brad Duguid, Ontario’s Minister of Energy and Infrastructure.
With the province’s previous procurement programs (CES, RES and RESOP, among others), it had already become a Canadian leader in clean and renewable energy. “These have contributed to Ontario’s international reputation as a renewable energy leader,” said APPrO Executive Director Jake Brooks, while noting that the organization continues to object to the Samsung agreement. Like many others who have voiced concerns, APPrO believes that reserving transmission capacity for one player is inappropriate. “The transmission system is a common carrier and should be available to all in a non-discriminatory fashion,” he said. “The Korean consortium is entirely welcome here, but should be expected to play by the same rules and vie for transmission like any of the other competitors in the market,” he said.
The agreement was first outlined on September 30 when then-Minister George Smitherman sent a directive to the OPA instructing it to reserve transmission capacity for signatories to a “framework agreement.” The capacity to be protected was 240 megawatts in Haldimand County and 260 megawatts in Essex County and the Municipality of Chatham-Kent. The final agreement is not public, but the signatories are the Ontario government, Samsung C&T Corporation, and the Korea Electric Power Corporation (KEPCO), the national power company of South Korea. With annual revenue of US$173.4 billion in 2008, the Samsung Group is the world’s largest conglomerate by revenue and the 12th largest company in the world. Samsung C&T Corporation actually represents a large number of constituent companies, many of which will likely have roles in the Ontario renewable energy sector as a result of the agreement. In Korea, KEPCO owns and operates the transmission and distribution system, and owns about 60,000 MW of generation, approximately 85% of the total generation capacity in South Korea. The Ontario government says the consortium “will be an anchor tenant in growing a new, vibrant green economy in Ontario.”
Following the signing of the agreement on January 21, Sung-Ha Chi, President and CEO, Samsung C&T Corporation, said, “We commend Ontario for creating a welcoming climate for green energy investment. Samsung takes pride in its global efforts to support a more sustainable future and looks forward to working with Ontario residents and businesses to create clean, green power.”
Chan-Ki Jung, Executive Vice-President, Korea Electric Power Corporation, said, “This is an exciting opportunity to help create new manufacturing facilities and be on the cutting edge of an emerging renewable energy supply sector in Ontario.”
The Korean consortium expects to work with major partners to attract four manufacturing plants. In addition to the standard rates for electricity generation, the Consortium will be eligible for an economic development adder (EDA). The government says the “total cost of the EDA, assuming the manufacturing facilities are built according to the schedule set out in the agreement, will be approximately $437 million (net present value) over the lifetime of the contracts. The EDA is expected to add on average $1.60 annually to a residential bill over the lifetime of the generation contracts.”
The adder is contingent upon the Consortium manufacturing partners operating four manufacturing plants according to the following schedule:
• Towers – in full operation by March 31, 2013
• Solar Inverters – in full operation by March 31, 2013
• Solar Module Assembly – in full operation by December 31, 2013
• Blades – in full operation by December 31, 2015.
These manufacturing facilities will produce wind turbine towers, wind blades, solar inverters and photovoltaic module assembly in Ontario, creating more than 1,440 manufacturing and related jobs in the renewable energy industry. The local availability of these manufactured components will also help other renewable energy developers meet the Feed-In Tariff (FIT) domestic content requirements.
The Consortium is committed to the construction of 2,000 MW of wind power and 500 MW of solar power generation capacity in Ontario. Construction is expected to occur in five phases, beginning in 2012. The first phase of the project is scheduled to be completed in 38 months. It will be a 500MW cluster (400MW of wind and 100MW of solar) that will be built in the Chatham-Kent and Haldimand County regions of Southern Ontario. A government statement says, “Assurance of transmission in subsequent phases is contingent on the delivery of four manufacturing plant commitments mentioned earlier.”
Each power project put forward by the consortium will have to obtain all the normal permits and licenses required in Ontario, like other private power projects are required to do. They will also have to ensure that any Duty to Consult obligations are met, and pay market rates for lease of government land.
The Canadian Wind Energy Association (CanWEA) also welcomed the companies to Ontario while criticizing some aspects of the arrangement: “(T)he process and incentives used in the deal create a great deal of uncertainty for all investors and will likely prevent some projects from moving forward. It is clear that investor confidence has been damaged and needs to be restored.”
For a copy of the Minister’s directive, see the OPA website under “directives from the Minister.” For further information, readers are invited to peruse the following online resources: visit http://www.premier.gov.on.ca/news/ and go to January 21, also http://www.samsung.com/ca/ and http://www.kepco.co.kr/eng/.