Ontario Energy
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Struggling Manufacturers Ontario's energy debate has been raging for decades, but is particularly animate d of late, and highly political. Our infrastructure is aged, and much of it need s replacing over the next two decades. The reigning Liberal Party ran some numbe rs and dared to admit that it will cost money to do this, resulting in perhaps > 40% net increases to electricity rates over the replacement period. Of course th e opposition parties jumped on this opportunity to blame the Liberals, and the p olitics is continuing to interfere with good planning. Ontario's Progressive Conservative (PC) ly blames energy prices for the decline Naughton recently received and posted a high electricity costs as rationale for rio. Party is particularly upset, and routine of manufacturing in Ontario. PC Monte Mc letter from manufacturer Wescast citing closing a manufacturing facility in Onta
With help from a few friends, I decided to do a little sanity check on these cla ims. Comparing Apples to Apples So how do you compare energy prices from across North America and Europe? These prices are all posted in public places and are reported upon regularly, so the s hort answer is that you need to know where to look. As it turns out, Ontario's rates for industry are actually very competitive stil l. Even with a 50% increase, Ontario would still be much more affordable than Eu rope, and would still compare well with many US states. This is not to minimize the importance of having competitively priced energy, but it certainly shows tha t some of the hype around our increasing rates is exaggerated. Indeed, most US s tates are facing the same infrastructure challenges as Ontario, so their prices will shortly be increasing as well. And this is without considering the carbon m arkets: if the international move to fix a fee on carbon takes root, then Ontari o has already closed its coal plants, reducing Ontario's electricity related car bon emissions by some 75%. Much of the US will be disadvantaged there and will s ee new fees. If anything, it puts the ball back in the hands of manufacturers to use their en ergy more wisely. There aregood incentatives in Ontario right now to help manufa cturers save energy, including up to 50% subsidiesfor Energy Audits, and further subsidies for retrofit projects. The Ontario government will literally pay you to hire help to plan how to save energy, and then pay you again to go do Productivity & Value: The Real Problem Here's what Canadian industry (Manufacturing CEO's and other colleagues) has bee n telling us is the real problem: Exchange Rates: Historically low Canadian dollar values vs US dollar meant that Canadian wages were comparatively low, thus making it attractive to produce in C anada for US companies, with Canadian products being relatively inexpensive but still high quality. When the dollars reached parity during the recession, US com panies retreated and had no reason to produce in Canada any longer, unless the C anadian plant in question was highly productive, and Canadian plants now routine ly compete to improve themselves and their standing within their global organiza tions. Some Canadian producers suffered more layoffs/closures than others of cou rse, but the exchange rate affects all Canadian exporters. Culture of Excess: Canada is blessed, and has enjoyed historically low electrici ty and transportation costs for most of its industrialized history, which has nu rtured a culture of relative wastefulness. Efficiency has never been important u
ntil recently: there has always been more energy, water, and material to simply use. The World Wars were fought on other soils and forced rebuilds "over there", and resources were more constrained during those rebuilding efforts, so other j urisdictions have had to conserve where we have not: Canada's industry was relat ively protected from the wars, and resources were abundant here. If necessity is the mother of invention, then Canada's need to conserve has been limited until now, and Canadian industry has been proportionately less inventive: other jurisd ictions are much more productive with the same energy, where Canadian industry o ften uses 50-100% more energy per unit GDP than most other nations. What is Really Leaving? Ontario's industry in particular is very globally integr ated, and has not really been home grown so much as it has grown branch plants f or larger globally integrated manufacturers. Global capital is highly fluid, and the global shipping industry delivers goods efficiently and reliably: jobs are relatively easily relocated now. If large manufacturers are struggling, then con solidation can easily pull jobs away from Ontario that are more competitively pl aced in developing countries with lower wage employees. This problem is not new to Ontario, but has been exacerbated by the recession. Indeed, one could argue that it is surprising how many companies are actually su rviving in Ontario, and that there may be echoes of delayed effects from the rec ession: if the Canadian dollar stays strong for the foreseeable future, and our costs of electricity and transportation will not become cheaper any day soon, on e can only wonder how many other businesses will relocate in the coming years. I suppose it's fortunate that forecasts for the Canadian exchange rate are varied into 2014 (ie: it looks like we're in for a weaker rate through this summer), b ut I can't see that lasting too long: oil sands and natural gas exports have a w ay of faithfully pulling our dollar back up. What To Do? On that cheery note, let's understand the problem a little better and then turn our focus to improvement. For example, there are measurable reasons for our incr easing energy costs in Ontario, many of which we can affect positively, but not until we understand them better. Let's start with a bit further exploration of O ntario's present reality. Ontario's energy price increases can be compared with other jurisdictions in Can ada and can be trended. Note that the most stable markets are powered mostly by hydro (water), and that the most volatile (AB, ON, NB) have large dependence on coal and nuclear, with modest (<5%) inclusion of renewables (wind, solar). Ontar io and New Brunswick have suffered significant challenges with nuclear cost over -runs (billions each), whereas the lower cost provinces have simply stayed with their hydro resources. In other words, those provinces who invested in renewable power (mostly hydro) a re now reaping the benefit. Those tied to nuclear have seen the greatest increas e in cost. Those most tied to fossil fuels (coal/gas) have seen the greatest pri ce volatility. Alberta's rates fluctuate with the fossil fuel markets. Ontario's addition of gas plants and infrastructure upgrades did not stabilize r ates. Conservation is King But of course, this wouldn't be a Mindscape blog if we didn't remind ourselves t hat the cheapest energy is always the energy we don't use. New Yorkers still use 50% less energy per capita than Ontarians do, and their culture and industry is not so very different from ours. We can do better. The Ontario Power Authority has many very successful conservation programs already in place, and these tend
to conserve energy at no more than 1/10th to 1/7th the cost of new generation. O ntario needs to do a lot more of this, and we have the programs to do it. They j ust need more political support. Rather than continue to squabble about billion dollar gas plant relocations, bil lion dollar nuclear feasibility studies, or the few hundred million spent on FIT contracts, Ontarians would do well to simply use less, and Ontario's politician s would save money by increasing investment in their already successful conserva tion programs. And that brings us full circle back to manufacturers: when the Canadian dollar i s strong, it's a great time for manufacturers to invest in equipment upgrades th at will help them reduce their energy use and increase their competitiveness. Ex change rates are always fluctuating, but there is never a bad time to save energ y. Through this summer, when the dollar is weaker, it will be a great time to in vest in simple measures like air tightness and recommissioning: creating some im mediate savings that can be leveraged later. Through the winter, when the dollar recovers, will be a great time to invest in equipment upgrades, and use the sav ings from the summer to help fund those upgrades. New Brunswick has hydro, but also nuclear. Quebec had nuclear but as a much smaller fraction of total generation. All marke ts with significant dependence on fossil fuels have seen significant cost increa ses over time, and only the large hydro projects have helped to successfully con tain rising rates. From a political view, this should impact discussions about the Long Term Energy Plan (LTEP): history has shown that hydro is the most predictable and reliable source of energy, so it would stand to reason that this should be a primary focu s for future supply. Ontario has the luxury of significant hydro resources domes tically, and even more through neighbours Quebec and Manitoba, both of whom are looking to export. Ontario can stabilize its rates by working with QC and MB. On tario's LTEP should prioritize this over all other forms of new generation, espe cially expensive nuclear. Manufacturing Context: Greener Grass Back to manufacturing jobs. Some of Ontario's political parties continuously rem ind the population about the jobs lost during the recession, and continuously bl ame these losses on energy prices, particularly on renewable energy. It should b e clear by now that Ontario's energy prices are indeed not unreasonable, and ren ewable energy (particularly wind and solar) make up a very minor portion of that price. Indeed, Ontario's manufacturers benefit from lower corporate income tax rates than many other areas. Opposition political parties often want us to believe that the grass is greener elsewhere, but indeed this is not so true for Ontario: Ontario looks pretty good when compared fairly. Healthy Skepticism It would seem that energy and jobs are like most other topics: when approached b y politicians, we would do well to be cautious about what we hear. It can be dif ficult to dig up the facts to disprove the claims that politicians make, and ind eed most of the politicians themselves are not qualified to dig up those facts: they rely on advice from their policy research teams. A little bit of healthy sk epticism is never a bad thing. By Derek Satnik, with thanks for contributions from Chris Young, Christine Koeni
g and Michel Fortin. Mindscape's professional speakers and engineering consultants offer instruction on the topics contained in this article, and professional services in planning a nd implementing related projects. Contact us at http://www.mi-group.ca for help. Thank you for your interest in this article! Article Source: http://EzineArticles.com/?expert=Derek_Santik
Article Source: http://EzineArticles.com/8289838
With help from a few friends, I decided to do a little sanity check on these cla ims. Comparing Apples to Apples So how do you compare energy prices from across North America and Europe? These prices are all posted in public places and are reported upon regularly, so the s hort answer is that you need to know where to look. As it turns out, Ontario's rates for industry are actually very competitive stil l. Even with a 50% increase, Ontario would still be much more affordable than Eu rope, and would still compare well with many US states. This is not to minimize the importance of having competitively priced energy, but it certainly shows tha t some of the hype around our increasing rates is exaggerated. Indeed, most US s tates are facing the same infrastructure challenges as Ontario, so their prices will shortly be increasing as well. And this is without considering the carbon m arkets: if the international move to fix a fee on carbon takes root, then Ontari o has already closed its coal plants, reducing Ontario's electricity related car bon emissions by some 75%. Much of the US will be disadvantaged there and will s ee new fees. If anything, it puts the ball back in the hands of manufacturers to use their en ergy more wisely. There aregood incentatives in Ontario right now to help manufa cturers save energy, including up to 50% subsidiesfor Energy Audits, and further subsidies for retrofit projects. The Ontario government will literally pay you to hire help to plan how to save energy, and then pay you again to go do Productivity & Value: The Real Problem Here's what Canadian industry (Manufacturing CEO's and other colleagues) has bee n telling us is the real problem: Exchange Rates: Historically low Canadian dollar values vs US dollar meant that Canadian wages were comparatively low, thus making it attractive to produce in C anada for US companies, with Canadian products being relatively inexpensive but still high quality. When the dollars reached parity during the recession, US com panies retreated and had no reason to produce in Canada any longer, unless the C anadian plant in question was highly productive, and Canadian plants now routine ly compete to improve themselves and their standing within their global organiza tions. Some Canadian producers suffered more layoffs/closures than others of cou rse, but the exchange rate affects all Canadian exporters. Culture of Excess: Canada is blessed, and has enjoyed historically low electrici ty and transportation costs for most of its industrialized history, which has nu rtured a culture of relative wastefulness. Efficiency has never been important u
ntil recently: there has always been more energy, water, and material to simply use. The World Wars were fought on other soils and forced rebuilds "over there", and resources were more constrained during those rebuilding efforts, so other j urisdictions have had to conserve where we have not: Canada's industry was relat ively protected from the wars, and resources were abundant here. If necessity is the mother of invention, then Canada's need to conserve has been limited until now, and Canadian industry has been proportionately less inventive: other jurisd ictions are much more productive with the same energy, where Canadian industry o ften uses 50-100% more energy per unit GDP than most other nations. What is Really Leaving? Ontario's industry in particular is very globally integr ated, and has not really been home grown so much as it has grown branch plants f or larger globally integrated manufacturers. Global capital is highly fluid, and the global shipping industry delivers goods efficiently and reliably: jobs are relatively easily relocated now. If large manufacturers are struggling, then con solidation can easily pull jobs away from Ontario that are more competitively pl aced in developing countries with lower wage employees. This problem is not new to Ontario, but has been exacerbated by the recession. Indeed, one could argue that it is surprising how many companies are actually su rviving in Ontario, and that there may be echoes of delayed effects from the rec ession: if the Canadian dollar stays strong for the foreseeable future, and our costs of electricity and transportation will not become cheaper any day soon, on e can only wonder how many other businesses will relocate in the coming years. I suppose it's fortunate that forecasts for the Canadian exchange rate are varied into 2014 (ie: it looks like we're in for a weaker rate through this summer), b ut I can't see that lasting too long: oil sands and natural gas exports have a w ay of faithfully pulling our dollar back up. What To Do? On that cheery note, let's understand the problem a little better and then turn our focus to improvement. For example, there are measurable reasons for our incr easing energy costs in Ontario, many of which we can affect positively, but not until we understand them better. Let's start with a bit further exploration of O ntario's present reality. Ontario's energy price increases can be compared with other jurisdictions in Can ada and can be trended. Note that the most stable markets are powered mostly by hydro (water), and that the most volatile (AB, ON, NB) have large dependence on coal and nuclear, with modest (<5%) inclusion of renewables (wind, solar). Ontar io and New Brunswick have suffered significant challenges with nuclear cost over -runs (billions each), whereas the lower cost provinces have simply stayed with their hydro resources. In other words, those provinces who invested in renewable power (mostly hydro) a re now reaping the benefit. Those tied to nuclear have seen the greatest increas e in cost. Those most tied to fossil fuels (coal/gas) have seen the greatest pri ce volatility. Alberta's rates fluctuate with the fossil fuel markets. Ontario's addition of gas plants and infrastructure upgrades did not stabilize r ates. Conservation is King But of course, this wouldn't be a Mindscape blog if we didn't remind ourselves t hat the cheapest energy is always the energy we don't use. New Yorkers still use 50% less energy per capita than Ontarians do, and their culture and industry is not so very different from ours. We can do better. The Ontario Power Authority has many very successful conservation programs already in place, and these tend
to conserve energy at no more than 1/10th to 1/7th the cost of new generation. O ntario needs to do a lot more of this, and we have the programs to do it. They j ust need more political support. Rather than continue to squabble about billion dollar gas plant relocations, bil lion dollar nuclear feasibility studies, or the few hundred million spent on FIT contracts, Ontarians would do well to simply use less, and Ontario's politician s would save money by increasing investment in their already successful conserva tion programs. And that brings us full circle back to manufacturers: when the Canadian dollar i s strong, it's a great time for manufacturers to invest in equipment upgrades th at will help them reduce their energy use and increase their competitiveness. Ex change rates are always fluctuating, but there is never a bad time to save energ y. Through this summer, when the dollar is weaker, it will be a great time to in vest in simple measures like air tightness and recommissioning: creating some im mediate savings that can be leveraged later. Through the winter, when the dollar recovers, will be a great time to invest in equipment upgrades, and use the sav ings from the summer to help fund those upgrades. New Brunswick has hydro, but also nuclear. Quebec had nuclear but as a much smaller fraction of total generation. All marke ts with significant dependence on fossil fuels have seen significant cost increa ses over time, and only the large hydro projects have helped to successfully con tain rising rates. From a political view, this should impact discussions about the Long Term Energy Plan (LTEP): history has shown that hydro is the most predictable and reliable source of energy, so it would stand to reason that this should be a primary focu s for future supply. Ontario has the luxury of significant hydro resources domes tically, and even more through neighbours Quebec and Manitoba, both of whom are looking to export. Ontario can stabilize its rates by working with QC and MB. On tario's LTEP should prioritize this over all other forms of new generation, espe cially expensive nuclear. Manufacturing Context: Greener Grass Back to manufacturing jobs. Some of Ontario's political parties continuously rem ind the population about the jobs lost during the recession, and continuously bl ame these losses on energy prices, particularly on renewable energy. It should b e clear by now that Ontario's energy prices are indeed not unreasonable, and ren ewable energy (particularly wind and solar) make up a very minor portion of that price. Indeed, Ontario's manufacturers benefit from lower corporate income tax rates than many other areas. Opposition political parties often want us to believe that the grass is greener elsewhere, but indeed this is not so true for Ontario: Ontario looks pretty good when compared fairly. Healthy Skepticism It would seem that energy and jobs are like most other topics: when approached b y politicians, we would do well to be cautious about what we hear. It can be dif ficult to dig up the facts to disprove the claims that politicians make, and ind eed most of the politicians themselves are not qualified to dig up those facts: they rely on advice from their policy research teams. A little bit of healthy sk epticism is never a bad thing. By Derek Satnik, with thanks for contributions from Chris Young, Christine Koeni
g and Michel Fortin. Mindscape's professional speakers and engineering consultants offer instruction on the topics contained in this article, and professional services in planning a nd implementing related projects. Contact us at http://www.mi-group.ca for help. Thank you for your interest in this article! Article Source: http://EzineArticles.com/?expert=Derek_Santik
Article Source: http://EzineArticles.com/8289838
