Yes. Green energy can challenge monopolies
One of the smartest things the outgoing provincial government did was to sell half of Hydro One, the monopoly utility that distributes electricity throughout Ontario. Too smart, in fact, as the province’s recent revolt against competence proved. A policy that made so much technocratic sense — transferring assets frozen as built infrastructure into infrastructure that needs building — proved fatally susceptible to emotional misrepresentation.
“You want people to believe that we sold Niagara Falls, and we did not,” former premier Kathleen Wynne lamented helplessly as NDP leader Andrea Horwath channelled public disapproval during the final leadership debate. “We sold a piece of a piece of a piece.”
So much for her — and for Horwath’s plan to renationalize the copper wires that still carry the province’s electricity. It’s now up to Premier Doug Ford to complete the job of privatizing Hydro One.
Ford’s promise to decapitate the corporation by firing CEO Mayo Schmidt, the “six million dollar man,” won a lot more votes than Horwath’s promise to embrace it. Cutting Hydro One loose completely is a logical next step for a new government hunting cash to fund its irresponsible election promises.
The Ford government can now sell the rest of Hydro One with the assurance that a disapproving public will face no direct negative consequences as a result. The Ontario Energy Board will continue to set hydro rates no matter who owns the wires. After four years, nobody will remember what all the fuss was about.
One way or another, Hydro One will remain an ungainly behemoth teetering on obsolescence. The green energy revolution is challenging utilities worldwide, and none could be more vulnerable than a utility whose sole asset is 123,000 km of copper wire. Every new solar or wind installation in Ontario, and every new energy-efficient building, is a crack in the monopoly that Hydro One depends on for survival.
The reason is that green energy is a local resource that is being developed primarily for local consumption.
Rather than transmitting electricity from central power plants to consumers hundreds of kilometres distant, the emerging new system of “distributed generation” will ultimately comprise thousands of more-or-less self-sufficient micro-grids serving individual institutions, industries and homes. In this likely scenario, the primary grid becomes a backup, distributing a declining share of the province’s electricity.
Home-based solar systems with battery storage are now feasible and indeed common elsewhere in the world. But the tipping point will come, as it already has in Germany and elsewhere, when steadily upward trending prices for grid-supplied power cross steadily downward trending prices for solar- battery installations.
Hydro One and its workers both understand the implications, and the company has responded by taking over U.S.based Avista Utilities in an attempt to diversify its assets by adding generation as well as distribution. But the deal will add $6.7-billion in debt to the company’s balance sheet while diluting public ownership to 42 per cent.
Meanwhile, Hydro One’s revenues are declining and its share price is drifting well below the $20.15 opening price set three years ago.
Signs of decline that are obvious to company executives, as well as its workers and shareholders, made no impression on the province’s independent Financial Accountability Office when it released its analysis of the sale earlier this year.
The FAO bolstered opposition with its conclusion that the province’s strategy of deploying hydro assets to build transit will add $1.8-billion in avoidable costs to the multi-decade project. Naively, it assumed that everything is rosy at Hydro One, and its provocative conclusion rested on an assumption that the company’s revenues will steadily increase in coming years.
It won’t take much distributed generation to permanently cripple Hydro One’s business. Losses in the utility’s core business will translate into higher rates, no matter who owns it. And higher rates will hasten adoption of more home solar and micro-grids.
The tragedy of Hydro One is not that it’s slipping out of public hands. The tragedy will occur when the ample proceeds from its sale — a tidy $9-billion so far, with as much as another $7-billion to come — are redirected from public transit to gas-tax cuts and buck-a-beer.