A $100,000,000 subsidy from us taxpayers to this private developer

Summary
As noted in many recent articles such as this and this, Ontario taxpayers would be paying massive subsidies to private developers so that renewable energy projects would be profitable – hugely profitable. As detailed below, for just the one proposed Bala Falls hydro-electric generating station, the subsidies to the private developer would be over $100,000,000 over the 40-year duration of the supply contract.

So we would be paying a hundred million dollars to a private developer so they can;

• Ruin the Bala Falls and the area’s economy.
• Make in-water recreation that has been going on for over a hundred years too dangerous to continue.
• Make over 500′ of the only publically-accessible shoreline too dangerous to access (plus putting up with the sirens sounded daily throughout the summer and having to look at barbed-wire fencing instead of Muskoka’s natural beauty).

In these times of government cut-backs for libraries, public transit, infrastructure repair and so many other services, we do not want our tax dollars going to a private developer. This project should not be allowed to proceed.

Detail – Run-of-river Regime
In their 2005 proposal (which was for a smaller-capacity station than they are currently proposing), the proponent estimated their proposed station would generate 20.77 GW•h/year of energy (which would be 20,770,000 kW•h per year).

Ontario Power Generation financial reports show that existing hydro-electric generating stations (such as at Ragged Rapids and Niagara Falls – that do not receive the Feed-In Tariff subsidized price) receive between 2.0 ¢/kW•h and 3.6 ¢/kW•h for the power they generate.

When the proponent signed their contract with the Ontario Power Authority in 2010 the guaranteed price for the power to be generated was 13.1 ¢/kW•h (FIT 1 2010 rates are here, IESO/OPA FIT document archives are here). Being very conservative and comparing this to 4 ¢/kW•h for existing stations, would be a subsidy of 9.1 ¢/kW•h, which would be a subsidy of ($0.091 /kW•h x 20,770,000 kW•h =) $1,890,070 per year, and $75,602,800 over the 40-year life of the contract.

However, the actual subsidy would be greater, as the proponent intends to operate the generating station in a cycling mode (as detailed below), which creates additional dangers to the public and impacts on fish habatit which they have not assessed.

Detail – Cycling Regime
We note that in their environmental screening report, the proponent proposed a “Best Management Zone” which would allow them a tolerance of 4 cm to 6 cm in water height in all the months when the proposed station would not have enough water to run at full capacity. And running their station at full capacity for 24 hours with only 10 m³/s of flow into Lake Muskoka would change the water level of Lake Muskoka by about ((69 m³/s x 86,400 s/day) / 120 km² =) 4.97 cm. That is, their requested change to the Muskoka River Water Management Plan would permit them to run their proposed station at full capacity during the daily peak demand period throughout the year.

The proponent has already requested to cycle operation of their proposed generating station during the peak demand period during at least the summer months. If the proponent therefore generated ¾ of their power during the daily peak period of 11:00 am to 7:00 pm, then they would receive the following subsidy per year:

• (0.25 x 20.77 GW•h) at a subsidy of (0.9 x 13.1) – 4 ¢/kW•h, which is $404,495 for the non-peak periods.
• (0.75 x 20.77 GW•h) at a subsidy of (1.35 x 13.1) – 4 ¢/kW•h, which is $2,131,780 for the peak periods.

This would be a total annual subsidy of $2,536,276. Over the 40-year FIT contract, this would be a subsidy of $101,451,065 (that’s over a hundred million dollars). And for the larger-capacity station currently being proposed, the subsidy would be even greater.

But what about the discounted cash flow
And yes, an accountant could talk about the discounted cash flow / net present value of this subsidy. And an environmentalist could talk about the cost of CO₂ emissions that may not be eliminated. But then maybe we should estimate the loss in the area’s residential property values or the lost revenue to local businesses. Or find out if Ontario Power Generation’s Big Eddy and Ragged Rapids hydro-electric generating stations just downstream (which generate electricity for less than 4 ¢/kW•h) would need to shut down in the spring and fall because the government has committed to paying (1.35 x 13.1 ¢/kW•h =) 17.685 ¢/kW•h for the proposed generating station at peak times whether the power is needed or not. So let’s just agree that indeed Ontario taxpayers would be massively subsidizing this proposed  project.