29 Jun Drinking the feed-in tariff Kool-Aid

In his latest Herald column, the normally estimable Ralph Surette drinks the feed-in tariff Kool-Aid. Moneyquote:

Check out how they’re doing it in Ontario and other out-front jurisdictions, where “feed-in” laws or “standard offer contracts” are in effect — in which the utility is required to take power produced by entrepreneurs at a fixed rate, no haggling. Wherever it’s been tried, there’s been an explosion of energy entrepreneurship and new jobs.

The [Nova Scotia Power] system of calling tenders one project at a time didn’t work elsewhere, and it hasn’t worked here.

Ralph makes a few good points in the column, but these two paragraphs contain more foolishness than enough.

Ontario passed a bill authorizing the Minister of Energy to permit the use of feed-in tariffs just six weeks ago, and the regulations haven’t been written yet. So it hasn’t produced “an explosion” of anything yet, except perhaps hyped expectations among the uncompetitive producers who have been pushing for such a law here. As for other jurisdictions, in North America, Ontario is it: the first state, province, or country to pass a feed-in tariff law.

As for tendered contracts not working, that will come as news to generations of good governance experts. Elsewhere in the same column, Ralph rightly criticizes NSP’s attempt to win Utility and Review Board approval for an untendered biomass project.

The feed-in scheme would require Nova Scotia Power to buy unlimited amounts of wind power at above-market prices. What proponents of this scheme fail to acknowledge is that our electrical transmission grid cannot handle unlimited amounts of intermittent, unpredictable wind power.

At the moment, about 12 percent of NSP’s generation comes from renewable energy sources including hydro, wind, and tidal. Provincial law requires NSP to ramp that figure up to 20 percent renewable energy by 2013. A recent wind integration study found that, with some tweaking, NSP could just meet the 2013 standard. Any additional wind power beyond that will require massively expensive upgrades to the transmission grid.

When NSP sought competitive bids for wind power last year—not “one project at a time,” but in an open call to all bidders—producers ponied up  240 megawatts, more than enough to meet the 2013 standard.

So the question is: If we can buy as much wind power as the grid can currently absorb at market prices, why on earth would we promise to pay non-competitive producers above-market prices for intermittent power we can’t currently use? Wouldn’t that money be better spent on grid upgrades to enable another round of competitive bidding on renewable supplies?

Now here’s the rub: As everyone who has been following this story knows, many if not most of the wind projects recently contracted by NSP are in trouble. That’s because the worst economic downturn in Ralph’s and my lifetimes dried up credit and sent some project backers to the wall. That in turn led NSP to pursue the ill-advised biomass project now before the UARB.

How we get out of this mess is one of the many big environmental issues facing the new Dexter government, but turning to uncompetitive  producers hardly seems like the ticket.

[Disclosure: The main reason I know anything about this subject is that I spent much of last year on contract to the Nova Scotia Government, helping put words to its 2009 Energy Strategy and Climate Change Action Plan—and a fascinating crash course it was.]