Steel stands to benefit from wind power deal
January 22, 2010
The Hamilton Spectator
http://www.thespec.com/News/Business/article/709771
Samsung Group will buy up to 250,000 tons from Ontario's steelmakers to build wind farms across the province.
A consortium including Samsung and state-owned Korea Electric Power Corp. is investing $7 billion to build the wind and solar clusters expected to generate 2,500 megawatts of power. About 2,000 megawatts of that will come from wind turbines, hulking structures made almost entirely from steel.
"The Korean consortium will use two-megawatt towers, more than likely," said Garry McKeever, the province's director of energy supply and competition. "That will mean 1,000 towers ... and those towers are extremely steel intensive."
The consortium has committed to meeting domestic content requirements under the Ontario Power Authority's feed-in tariff program -- rules that call for at least half of their materials to be made in Ontario. The firm will receive an extra 9 per cent tax credit if all of the steel is made in Ontario and another 4 per cent credit if it is shaped here, McKeever said.
It all adds up to "a very powerful incentive" to use Ontario-made steel, he added.
Renewable energy is a new market for steelmakers still struggling to recover from the economic downturn. While the average automobile uses a ton of steel, each of the Samsung towers will likely require between 200 and 250 tons of alloy, said Paul Gipe, a California-based expert in wind power and renewable energy.
"Wind towers use a lot of steel and it's the kind of steel Hamilton is famous for," he said.
The Samsung Group will also build four plants to manufacture components for green energy projects, creating about 16,000 jobs in the process. Most of those will be temporary, but 1,440 permanent manufacturing and related jobs are to be created.
"We're trying to lay the foundation here for new economic growth in Ontario ... to build the capacity here to deliver renewable technology to the U.S. market," Premier Dalton McGuinty told reporters yesterday after signing the deal.
But critics said Ontario was giving Samsung big advantages over Canadian-based wind and solar producers, including special access to crowded transmission lines and incentives that they said amount to a huge taxpayer subsidy of a foreign multinational.
"This sweetheart deal is a bad deal for Ontario families," said Progressive Conservative Leader Tim Hudak. "For every job that Dalton McGuinty claims will be created at a Samsung site, the taxpayer is on the hook for $303,000."
The New Democrats wondered why Ontario partnered with a Korean energy company when government-owned Ontario Power Generation is capable of taking on similar large-scale projects.
"This government has put its faith in a publicly owned Korean electrical utility," said NDP energy critic Peter Tabuns.
The Association of Power Producers of Ontario said its members feel like they were "thrown under a bus" by the Liberal government in favour of the Korean consortium and were "appalled" at the lack of an open and transparent process.
Samsung will be paid "slightly more" than the 13.5 cents per kilowatt hour feed-in tariff rate given to other wind power producers, which critics warn will add even more to rising electricity bills.
Direct Energy, which sells electricity to homeowners and small businesses who don't buy power from their local utility, said the Samsung deal will send everyone's bills skyrocketing because of the so-called "global adjustment" the province uses for pricing.
"Our customers see it as a separate line on their bill, with a year-over-year increase that's over 300 per cent for some businesses," said Direct Energy vice-president Hillary Marshall.
"Ontarians are going to get a shock over the coming months and years as they see their monthly electricity bills rise due to the government's global adjustment mechanism that pays the tab for deals like this one."
-- With files from The Canadian Press
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