Kevin O’Leary knows a good deal when he sees one. The lead investor on both popular TV shows, Canada’s Dragon’s Den and the US-equivalent Shark Tank, is no-nonsense when it comes to money-losing ventures and bad business ideas. His reaction to a request for him to invest in green energy in Ontario is a good indicator of where that industry is headed.
“If you look up the definition of hell on earth,” said O’Leary on a recent episode, “it’s trying to build a solar farm in Ontario and partnering with the government.”
The Dragons rejected the investment proposal, after some stern warnings about doing this type of business. Despite billions of dollars in initial funding from the Ontario government under Dalton McGuinty, the renewable energy industry has gone nowhere.
Why? Well, according to Mr. O’Leary, “because the government’s idea is bankrupt.”
Solar farms are not alone. The other components of McGuinty's Green Energy Act are just as bankrupt, and new premier Kathleen Wynne would be wise to take the Dragons advice when it comes to green energy.
While the capital and infrastructure funding has mostly dried up, the subsidies in green energy are still solvent. In order to encourage investors like the Dragons to buy into their green energy scheme, the government set an artificial price on renewable energy, and then slapped a 20-year guarantee on that price. This price-setting structure is called the Feed-In Tariff program (FIT), and the World Trade Organization has struck it down as an illegal subsidy that violates international trade law.
Having to pay this rate doesn't just harm competitor energy producers from our trading partners; it also harms energy consumers in Ontario who are stuck paying these high rates. The Ministry of Energy predicts that the monthly electricity charge related to renewable energy will rise from $2 per month in 2010 to $31 in 2018 for residential users. For small commercial users such as convenience stores or restaurants, it will skyrocket from $38 per month up to $500 per month.
To ease the pain of this quagmire, the government responded with yet another subsidy--this one provides a 10 per cent discount on electricity bills for households, small businesses and farms. It's called the Ontario Clean Energy Benefit, and the cost to taxpayers is $1.07 billion in 2012-2013.
With a debt load of $255 billion, Ontario can no longer afford to fund failing green energy ventures, provide household energy subsidies, allow illegal feed-in tariffs and sell energy at a loss. While Premier Kathleen Wynne prepares to release her government's first budget, she surely will be looking for places to cut. These wasteful projects would be a good place to start.
Like so many too-good-to-be-true investments, green energy sounded good in theory, but has been a nightmare in practice. A wise investor knows when an idea has run out of energy; they know when to walk away and cut their losses.
On Dragon's Den, Kevin O'Leary told the Toronto businessman involved in Ontario's green energy subsidy game that he should give up. If not, O'Leary said, "I think what ends up on your tombstone is: I partnered with the government and it killed me."
It is not too late for Premier Wynne to listen to Kevin O'Leary. Kill the green energy fiasco and start the process of saving Ontario's finances.
Candice Malcolm, Ontario Director
