Ontario’s Samsung green energy deal ripens slowly
Ontario’s Samsung green energy deal ripens slowly
Three years after Ontario signed a $7 billion green energy deal with Samsung, the first projects are in sight.
By: John Spears Business reporter, Published on Fri Feb 08 2013
Ontario’s controversial $7 billion deal with Samsung Renewable Energy is running late. And delays in the initial stages of the deal are likely to cascade into further deferrals, the company says.
But in a rare interview, Samsung’s top man in Canada defended the company’s agreement with the province, which has become a lightning rod for critics of the Liberal government’s renewable energy policies.
Ki-Jung Kim said that Samsung has been surprised at the length of time it has taken to get regulatory clearance for its wind and solar projects.
With the first two phases of the five-phase mega-project already delayed by a year, Samsung is now negotiating with provincial officials to extend deadlines for completing the other three phases beyond the original date of 2016.
Kim, who is executive vice president for Samsung’s Ontario project, said the company hasn’t wavered in its commitment to green energy. “Samsung is a globally responsible company; we are doing the right things in the right way,” he said.
“Renewable energy we believe is the right thing we have to pursue.”
Critics aren’t so kind. Conservative energy critic Vic Fedeli views the Samsung deal, along with the rest of the Liberals’ green energy policies, as extravagant — though he doesn’t blame Samsung for taking it: “If somebody opens up a treasure chest in front of you and says: ‘Dig in,’ you’re going to dig in.”
With the storm of debate around the deal, Samsung has rarely been heard from. “We are a little bit shy,” acknowledged Kim. “That is our corporate culture.”
There’s not much shy about the project, signed in 2010. It commits the company to invest $7 billion. It must set up four manufacturing plants and develop 2,000 megawatts of wind power, plus 500 megawatts of solar. In return, the company gets 20-year power contracts at guaranteed prices considerably higher than current wholesale market rates.
It’s eligible for a further $110 million in incentive payments — an amount negotiated down from $437 million after Samsung couldn’t meet original target dates for some projects.
So far, Kim says, the company hasn’t received anything. That’s because its first projects haven’t yet started to deliver power — and won’t until next year.
It’s not for lack of effort, Kim insists. “We are working very hard to fulfill our contractual obligations to the people of Ontario.” Three of the four manufacturing plants have opened to date, each with a different corporate partner: A turbine blade plant in Tillsonburg; a wind turbine tower plant in Windsor; and a facility for solar equipment in Toronto.
Kim says the total investment so far is about $300 million, with 380 jobs created. That’s a far cry from $7 billion and 900 jobs.
But Kim says once the generating projects get built, the investment total will rise rapidly. Equipment orders will also start flowing to the manufacturers — which haven’t yet hired their full complement of workers because the energy projects have been slow to get off the ground.
Kim says the company never figured it would take three years to get the first permit for a wind farm. “Also our dialogue with the communities, and First Nations communities, took some time.”
The two wind projects on the north shore of Lake Erie in Samsung’s first phase got environmental clearance only in December. Construction will get under way this spring, with completion by March 2014 — a year behind the original schedule. Total investment in that phase, says Samsung, will be $1.8 billion by the time it’s completed.
But the early delays will have an impact on succeeding phases. With the delay in the early phases of the project, Samsung is negotiating with the province to extend deadlines for the remaining phases. “A conclusion is not yet made, but we’re having a very constructive discussion,” Kim said.
While Samsung plugs away at its projects, its political critics continue to snipe from the sidelines, partly as a way of criticizing the Liberal government that signed the deal. The Conservatives have mounted a full-on attack on Liberal renewable energy policies, saying they’d scrap the feed-in tariff program — with its 20-year contracts at fixed prices.
Conservative leader Tim Hudak even vowed to tear up the Samsung agreement before the last provincial election.
But Tory energy critic Vic Fedeli sings a slightly gentler tone now, aiming his fire at green energy and feed-in tariffs generally rather than Samsung specifically.
Ontario’s pursuit of green energy is wrong-headed because it drives up power prices, Fedeli argues – and for every job created in the green energy sector, two to four are lost due to high-cost energy.
Companies across the province are threatening to leave because of high energy prices, he said. “Am I happy about a Samsung deal?” he asked. “I’m not happy about any company that’s involved in the Green Energy Act.”
Fedeli says he doesn’t blame Samsung for taking advantage of an overly generous program. “I cannot blame, I will not blame the farmer, the multi-national or Samsung specifically.”
Peter Tabuns of the New Democrats also blames the Liberals, rather than Samsung. The NDP says the green energy push should have been led by publicly owned Ontario Power Generation. The Samsung deal “certainly isn’t turning out the way it was billed,” he said. “Whether that’s all because of Samsung or because of the way the Liberals are approaching green energy is an open question.
“But I don’t think we’re seeing all the jobs created that were promised. We’re not seeing all the investment.”
An NDP government would honour contracts, Tabuns says — but that means Samsung also has to live up to its bargain. “Contracts in place with Samsung, we would hold them to it,” he said. “If they didn’t satisfy it, we would act on behalf of the people of Ontario.”
Renewable energy boosters are more charitable about Samsung. Kristopher Stevens of the Ontario Sustainable Energy Association says when the Samsung deal was signed — just as the Canadian economy was pulling out of a deep recession — Ontario was envied. “Anybody in North America would have killed to have that investment coming into their state or province.
“We got it, and we should be proud of that, and we should figure out what needs to be done next to continue to move the agenda forward,” Stevens said.
(Samsung is not a member of OSEA; Pattern Energy, Samsung’s partner in several of its projects, is a member.)
The province is now considering spending billions on new nuclear units at the Darlington power station, Stevens says; he’d like a debate on whether that money should be devoted instead toward developing renewable energy and boosting conservation.
Mark Winfield of York University says that there was a rationale for the province to ask a company like Samsung to jump-start its renewable energy sector and use it as a springboard to renew the flagging manufacturing sector. But there was also a risk that inviting a new player into the province would simply undercut existing manufacturers who might otherwise have moved into the sector, he said in an interview.
So far, there’s not much hard data on what the impact has been, he said — especially with the delays in getting Samsung’s projects launched.
Winfield, who co-chairs the university’s sustainable energy initiative, says what was missing from the Samsung deal was an over-all provincial strategy for the sector — including trade missions to boost exports and support for high-end design and technology development.
He worries that the province’s domestic demand for renewable energy equipment will slow by about 2016, before provincial companies have established dependable export markets.
That slowdown in renewables may be exacerbated by renewal of the province’s nuclear sector, he fears.
As for Samsung, the company is certain that it’s doing the right thing, says Kim. And even though renewable energy seems more expensive, he argues, it’s a good deal when the health and environmental damage wreaked by other forms of energy is considered.
“We have to consider what is the ultimate price we are paying,” he says. “It is not just limited to the price that every consumer pays from his pocket.
“We have to consider what is the total price.
“The cost of health, the cost of life is getting more and more expensive.”