Wednesday, November 24, 2010

Ontario Government to Heavily Invest in Green Energy... at What Cost?

The Ontario government has announced Billions of dollars for green energy projects over the next 20 years or so. In an era of chronic budget deficits and skyrocketing taxes in Ontario, I am not sure if the Liberals have planned for where the money for these projects will come from, but undoubtedly, given their track record, it will be in the form of borrowing and higher taxes on Ontario's working class.

They have earmarked large amounts of money for various segments of the green energy economy. There will be $4 billion going towards energy generated from bio-mass. This includes composted organics, or methane from garbage dumps or agricultural facilities. This will increase the share of power generated by bio-mass from 1 per cent to 1.3 per cent by 2030. Hardly a blip for 4 billion dollars.

Solar spending will ring in at $9 billion, which will increase solar power’s share to 1.5 per cent from 0 currently.

Investments in wind power will be $14 billion, which will take its share to 10 per cent from only 2.

According to energy minister Brad Duguid;

“Together we’re building cleaner air, together we’re building an economy with thousands of clean energy jobs, and together we’re building a healthier future for our kids and grandkids. That’s something worth fighting for.”

Another viable option not really tabled by the Ontario Liberals is buying excess renewable energy from Hydro Quebec. Currently, Hydro Quebec is selling vast amounts of excess renewable energy to the North-East United States, and Ontario could benefit significantly from importing power from Quebec as well. On a cost basis, buying power from Quebec is significantly cheaper than developing any form of renewable resources at home. But the argument of the Liberal government is that the development of green energy here will create jobs and other economic spin-offs that will benefit the province as a whole. Whether this will come to fruition, however, is highly questionable. Especially considering the economic drawbacks of higher taxes and large budget deficits.

With respect to Ontario, there are few opportunities for investment in this area. So the contracts for the construction of such development projects will probably go to foreign firms. General Electric, Seimans, and Vestas are the best international ways to play the boom in wind energy, and solar energy stocks have been a disaster on the earnings front. The technology is simply not there yet for conservative investors. To gain exposure to a basket of green energy stocks one could look to the PowerShares WindHill Clean Energy exchange traded fund. It's mandate is to "deliver capital appreciation through the selection of companies that focus on greener and generally renewable sources of energy and technologies that facilitate cleaner energy." It trades in New York under the symbol PBW.

For more information on the above mentioned stocks or investments look to the following:

General Electric:
WindHill Clean Energy:

No comments:

Post a Comment