May 30, 2018 4:30 am
Updated: June 11, 2018 9:01 am

EXCLUSIVE: Liberals ignored green energy advice that could’ve saved Ontarians billions, lead engineer says

Carolyn Jarvis investigates whether poor government decisions led to costly contracts and eventually to sky-high hydro bills for consumers.

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It’s been nearly a decade since Ontario Liberals passed the Green Energy Act, an ambitious plan to rid the province of coal-fired electricity and make Ontario a powerhouse in renewable energy manufacturing.

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But the lead engineer responsible for designing and implementing a key component of the plan – the FIT and Micro-FIT programs that saw billions of dollars in green-energy contracts awarded to solar and wind companies – tells Global News in an exclusive interview the Liberal government ignored expert advice that, if followed, could have saved Ontario electricity customers billions of dollars in unnecessary spending.

He also says the government never provided details of public promises about how much the plan would cost Ontarians – even though he asked the ministry responsible to provide this information two months before the Green Energy Act was passed.

WATCH: How big is Ontario’s hydro problem? And can the Liberals, NDP or PCs fix it? 

Despite these concerns, the government pushed ahead with its green energy “agenda,” against the better wisdom of its own policy advisers and to the detriment of Ontario electricity customers, he said.

“It was definitely frustrating,” said Jim MacDougall, a former employee of the now defunct Ontario Power Authority (OPA) and the person responsible for design and implementation of the province’s Feed-in-Tariff (FIT) and Micro-FIT programs.

READ MORE: Hydro: Ontario permanently bans winter disconnection from electricity

“We were trying to give what we thought was the best advice to the government. We were looking at how things played out in other places, and [the government] had a different agenda. Their agenda was to go big and go home.”

Calls for “cautious” approach ignored

Global News obtained more than 4,000 pages of internal emails, ministerial briefings and other documents created by the OPA between January 2009 and August 2010 – the months leading up to and after the FIT and Micro-FIT programs were launched.

The documents suggest – as MacDougall has indicated – that the government’s own experts, those employed to design and implement the province’s energy policies, were advising the government that technologies such as solar power needed to be developed “gradually” to prevent a “potential flood” of renewable-energy contracts from overwhelming the province’s electricity system and sending hydro bills skyrocketing.

READ MORE: Ontario Liberals say hydro bills will increase by 43% over next decade

“Due to rapid advancements in solar technology, the OPA is cautious about pricing ground-mounted [solar] too high, due to potential impacts on customer rates,” reads a March 19, 2009, email from a policy analyst at the OPA.

A draft report prepared by the OPA in the spring of 2009 – roughly five months before the FIT and Micro-FIT programs launched and a month before the Green Energy Act was passed – warned against unchecked growth of these emerging industries, a clear indication of how worried the OPA was about the potential impact rapid growth of these technologies could have on Ontario electricity customers.

“To ensure the long-term sustainability of the Ontario FIT program, it is important that the ground-mounted [solar] industry is grown gradually over time, in order not to unduly burden rate-payers,” the report said.

WATCH: Hydro One leaves family of six without power for six months

By ignoring this advice, MacDougall says the government missed an opportunity to save billions of dollars and grow the industry slowly. It’s kind of like the government agreed to purchase millions of flat-screen TVs at inflated 2005 prices without taking any steps to take advantage as prices for the new technology dropped rapidly. For example, between September 2009 and February 2010, the OPA said the price of installing ground-mounted solar panels dropped by as much as 30 per cent.

But these recommendations were never implemented by the government and the number of contracts signed in the first two years of the program was enormous, representing roughly 80 per cent of the renewable power purchased through the plans over the past decade.

READ MORE: Customers could pay steep price for Ontario’s hydro plan, auditor warns

While MacDougall says the OPA wanted renewable energy in the province to grow at a snail’s pace, the government – pushed by industry groups and individual investors – instead chose to implement a policy that saw the floodgates opened wide. (Global News has obtained notes from stakeholder meetings where industry groups/individuals were pressing the government to increase prices).

“We really wanted to put forward a timeline against how quickly new projects would get developed,” MacDougall told Global News. “Instead, we got a big uptake in year one and year two, followed by a tremendous decline in subsequent years.”

“The key downfall was that it was just too much, too quickly,” he said.

Government failed to “take advantage” of falling costs for green energy

A key factor in the OPA’s advice to the government was recognizing the costs of producing solar and other renewable energy in Ontario were declining rapidly at the time the Green Energy Act was signed.

To counter this steep decline in the cost of solar, the OPA recommended the government lower the prices energy companies were paid to produce electricity. After a certain amount of electricity was purchased, the prices would “automatically adjust” to ensure new contracts received the lower prices.

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But this never happened. And according to a 2011 report from the auditor general, this was because the government chose “stability” for energy investors over protecting the pocketbooks of consumers.

“Those experts were saying one thing, and the government was doing the other,” said Brady Yauch, an economist and executive director of the Consumer Policy Institute. Yauch has independently reviewed all 4,000 pages of documents created by the OPA and received by Global News.

“For me, that’s the most important part as a rate-payer,” he said. “Who’s looking out for my interest? And it appears the people that were supposed to, were actually just being overruled.”

Meanwhile, George Smitherman, the then-energy minister responsible for launching the FIT and Micro-FIT programs, has told Global News he remembers things differently and that all prices for the FIT and Micro-FIT programs were established based on advice from the OPA.

READ MORE: Hydro One to reconnect more than 1,400 customers without power

Referring to the idea that prices would decline automatically after a certain amount of energy was purchased, he said, “I do not recall that as a policy option” presented by the OPA.

This is despite the fact the OPA had presented this as a policy option during public consultations before the Green Energy Act was passed and the 2011 auditor general’s report that said it was the government’s decision to abandon this policy – a policy the report said could have saved Ontarians $2.6 billion in additional spending on ground-mounted solar alone had it not been “counter to the government’s goals.”

Still, Smitherman says the FIT and Micro-FIT programs receive a “disproportional” share of the blame for rising electricity costs, “Well beyond its capabilities as a very small portion of our overall energy supply mix.” And that he says the program provided other benefits.

“These upward influences that we’ve had on electricity pricing are not solely because of green energy,” he said.

Rebuilding the province’s nuclear plants, investing in transmission improvements and constructing new hydroelectric dams in northern Ontario have all put upward pressure on electricity prices, he says. According to Smitherman, renewable energy has brought many other benefits, too. Like not having to build two new nuclear plants, getting the province off coal and investing in local communities.

WATCH: After midnight ultimatum, government forced to bring in legislation banning disconnections

The government would not answer specific questions about the FIT and Micro-FIT programs. They did, however, issue a statement saying prices for the programs were set to include the cost of installation, maintenance and return on investment. In later years, these prices were dropped to reflect decreases in the cost of technology.

Meanwhile, the Independent Electricity System Operator (IESO), which merged with the OPA in 2015, says it was instructed to design the programs. When issues arose, they responded appropriately and worked to lessen the impact on ratepayers by making changes. This included lowering prices for the Micro-FIT program in August 2010 and making sure projects were built in areas of the province where they could easily be connected to the grid.

OPA favoured lower prices for other technologies, too

According to a 2015 report prepared by Auditor General Bonnie Lysyk, Ontarians will pay as much as $9.2 billion in unnecessary spending directly linked to the purchase of renewable energy under the FIT and Micro-FIT programs when compared to earlier schemes for buying renewable power. The OPA challenged this number at the time, saying it’s actually closer to $5.3 billion.

What’s more is that according to OPA documents, policy advisers like MacDougall also wanted declines in pricing for rooftop solar projects and wind energy – not just for solar panels on the ground.

READ MORE: Ontario Energy Minister admits mistake with Green Energy program

In an email dated March 3, 2009, MacDougall said he supported a “trigger” for price declines in wind energy like the one proposed for ground-mounted solar.

“I would like to include a similar trigger [in the FIT program] for big wind, but am unsure it sends the right message,” wrote MacDougall.

Because the prices paid to wind-energy producers were “more closely aligned” with the cost of electricity in Ontario, MacDougall says the issue of automatically decreasing the cost of wind was not as “politically charged” as it was for solar.

“Big wind was not something we lost a lot of sleep over, but we did know solar was on a downward price trajectory and that’s the one that was a higher priority,” MacDougall told Global News.

WATCH: What is the Global Adjustment fee? The mysterious fee Ontario hydro customers must pay

Looking back, he says the size of wind farms would have made price declines for wind difficult, if not impossible. Ultimately, he says a program like FIT may not have been the best method for securing wind energy if cost was the determining factor.

“I think, well I know, a competitive procurement process for wind [meaning companies bid for contacts proposing different prices based on their expected costs] would have yielded lower prices,” he said.

After early problems with the FIT and Micro-FIT programs, the government made changes in 2013. Any project larger than 500-kilowatts capacity was to be procured through a competitive bid process, the government said.

READ MORE: How much have hydro bills in Ontario really gone up?

In response to questions from Global News, the government pointed out it is no longer looking to buy large amounts of renewable energy. These purchase plans were cancelled in 2016 amid rising tensions over increased energy costs.

And while many of the contracts signed under the FIT and Micro-FIT programs don’t expire until the early-2030s, the government says these programs are now dead.

OPA had “no info” on the cost of green energy plan

In February 2009 – two months before the Green Energy Act was passed – Smitherman said the plan would add about one per cent a year for 15 years to the cost of electricity bills in Ontario. He later repeated this message before a government committee studying the act.

At the time, opposition parties criticized the estimates, saying Smitherman’s numbers didn’t add up.

Employees at the OPA were also concerned. Emails sent around the time of Smitherman’s announcement show the OPA – which was responsible for figuring out exactly how much the plan would cost – had no idea where Smitherman was getting his information.

“With respect to impact on customer rates – Minister Smitherman did mention one per cent, however, I have been unable to verify this number,” wrote an OPA policy analyst in an email dated April 6, 2009 – two days before Smitherman appeared before the committee.

“I am very uncomfortable using [this figure],” the analyst wrote. “I will investigate further. I think, for the time being, we will need to come up with a more qualitative answer to this question.”

WATCH: Ontario energy minister admits mistake with Green Energy program

MacDougall also expressed concerns about Smitherman’s estimate. In an email dated March 11, 2009, MacDougall said he had no information to support Smitherman’s claim.

“I have no info on the basis for [the] one per cent rate impact over fifteen years,” wrote MacDougall, referring to comments made by Smitherman. “I asked the ministry for details on this a while ago and never heard back.”

READ MORE: Ontario electricity support fails to reach most vulnerable customers

Smitherman says he’s hard-pressed to understand these emails. He says the cost estimates presented to the committee and to the public were approved by cabinet and developed by the ministry with advice from the OPA. He says this was an “exhaustive process” involving multiple levels of approval

“It’s very surprising for me to see the OPA writing messages about that,” he said. “Suffice to say… approval for a policy like this is a very significant process.”

Despite Smitherman’s assertions, Yauch says the public was misled. He says Ontarians were told the Green Energy Act would have marginal impact on their bills, when in reality, it appears neither the government nor those tasked with designing key components of the plan had any indication of what it would cost.

“Anger over the hydro file is very real and very justified,” he said. “I mean, there’s no reason why it had to turn out like this.”

“Right now, people are going to look at this and say, ‘The government, the province, totally ignored its agencies. It went ahead with policies and programs that it knew were going to be costly, ineffective and inefficient,” he said.

“But if you sell the public on a policy and then the evidence doesn’t line up – do you stand down? Or do you just push ahead?” he asked. “They just pushed ahead.”

© 2018 Global News, a division of Corus Entertainment Inc.

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