Canada's Wind Future Take a Tumble

Edgy energy investors seeking to diversify their portfolio away from Big Oil and nuclear have taken a revived interest in renewables, especially projects in investor-friendly countries with progressive governments.

At the top of the list would be Canada, right?

Stable, largely English-speaking, progressive and environmentally friendly, right?

Therein hangs a tale, proving the timeless value of the adage, "caveat emptor."

Trillium Power Wind Corp., according to its website, is "a privately owned company headquartered in Toronto committed to the development of offshore wind in Ontario and The Great Lakes region. The Trillium Power management team has developed and operated waterpower facilities in Ontario since the 1980s and has been involved in other major energy installations around the world" and has spent millions of dollars over the years planning its projects.

Trillium Power Wind Corp. had planned to build a series of massive wind farms in Lake Ontario but is now suing Ontario's provincial government for $2.25 billion, claiming its Liberal government sandbagged them by unfairly cancelling all offshore wind projects in February.

The reason? Ontario's government said it would not consider any offshore development until more scientific studies were done. In the suit filed 28 September in Ontario Superior Court, Trillium alleged that the government's decision was made for purely political reasons, to appease wind-power critics in the electoral run-up prior to next week's provincial election. Ontario's existing regulations on offshore wind farms, adopted in 2010, already forbid offshore wind farms within three miles of the shore.

Not so, said Ontario Minister of Energy and Infrastructure Brad Duguid, who dismissed the lawsuit as "ridiculous" and "frivolous" before adding the amount of the claimed damages is "laughable" before noting that Trillium did not have contracts with the government for any of its projects and concluding with a grand rhetorical flourish that Ontario had an obligation to ensure offshore wind is safe before allowing any construction to proceed.

Trillium's lawsuit charges that Ontario's ruling constituted "a confiscation of property rights, without warning or substantive justification," forcing the company to "effectively cease its corporate operation and organization, to lay off staff and to cancel contracts with advisers."

Where does the $2.25 billion damage claim come from?

Well, Trillium had four offshore projects on the drawing board and one, near Kingston, in the advanced planning stages. While Trillium had spent about $5.3-million in planning the Kingston wind farm, the company projected that its future loss of profits adds up to $2.25 billion.

Lest citizens think that Trillium's lawsuit was solely about extortionate damages, dangling the employment carrot as well, Trillium CEO John Kourtoff stated that offshore wind projects could have generated thousands of spinoff jobs in manufacturing in Ontario. It might be noted here that the "Employment and Economic Impacts of Ontario's Future Offshore Wind Power Industry" report, issued by the Conference Board of Canada last December concluded, "Development and operations of offshore wind in Ontario would create between 55,000 and 62,000 person-years of employment and lift real gross domestic product by a cumulative total of up to $5.6 billion over 2013 to 2026."

Further buttressing Kourtoff's assertions of political foul play is the fact that the Liberal party is worried about holding its seats in Scarborough in next week's elections, where community opposition to a wind farm off the Scarborough Bluffs proposed by Toronto Hydro is extremely loud and vocal, with Duguid seeking to retain his seat in Scarborough Centre. Making the picture even more interesting, Jeff Mole, a supporter of the Save the Bala Falls Group, announced his intention to run against Duguid for his Scarborough Centre seat as a member of the Green Party of Ontario.

An energy consultant, Mole is the founder of Muskoka Community Energy, the first renewable energy company in Ontario to be run in a cooperative model, and surprise surprise... is a consultant for Trillium Energy Alliance.

Interestingly enough, in researching this piece Ontario Minister of Energy and Infrastructure's website "is currently unavailable."

If there is a cautionary tale in all this, it is - don't discount the effect of local politics in impacting energy policies, whether old warhorses like Big Oil, coal and nuclear, or more environmentally friendly renewable energy sources. While in a perfect investor world it might only be necessary to read a company's spreadsheet and prospectus, wise investors even in such a friendly environment as Canada would do well to read the local press, in Trillium's case The Muskoka Sun.

By. Dr. John C.K. Daly of Oilprice.com