For a year now there has been a moratorium on the development of offshore wind projects in the Great Lakes. The Ontario government issued the ban because it said more study was needed to make sure the projects can be developed safety and responsibly, even though such studies were supposedly already done when the previous moratorium was lifted in January 2008. It’s more than likely that the latest ban was politically motivated, which is why a consortium of companies stretching from Kingston to Niagara Region has high hopes of changing the government’s mind.

The consortium, calling itself the Lake Ontario Offshore Network, aims to make Ontario the North American capital of offshore wind development. The group includes Windstream Energy Inc., the only company that holds a feed-in-tariff contract with the Ontario Power Authority to sell power from offshore wind turbines into the province’s electrical grid. It doesn’t matter that Windstream, because of the moratorium, can’t currently develop its project. It hopes that by bringing together an industrial consortium it can dangle thousands of jobs in front of the government and possibly convince the powers that be to reconsider its offshore ban.

The cast that has been assembled for this PR play is impressive. The consortium includes turbine suppliers Siemens Wind Power and Vestas Wind Systems, steel fabricator Walters Inc., steel supplier Essar Steel Algoma Inc. and a number of small and medium-sized companies — Anchor Concrete Products Ltd., Ortech Power, Samuel & Son Limited, Akzo Nobel Coating Ltd. and Bermingham Foundation Solutions, to name a few. In total, 18 companies/organizations large and small have signed on, representing a comprehensive supply chain and about 1,800 jobs that could exist over a five-year period if Windstream’s project ever got the go-ahead.

And what is this project? Windstream, which is based in Burlington, Ontario, is planning to build a 100-turbine, 300-megawatt offshore wind project about five kilometres west of Wolfe Island, which is an island just offshore the city of Kingston, itself about 250 kilometres east of Toronto. My own personal feeling is that it’s not the greatest site for development, if only because it’s not far from the onshore wind farm that’s currently located on Wolfe Island and has been a lightning rod for controversy from the beginning (partly because of the density of wind turbine development there). Windstream is proposing that the government keep its moratorium but allow an exemption for its $1.5 billion Wolfe Island shoals project, on the grounds that it would be a pilot project used as part of studies that would determine if further offshore development is the right step forward.

You’ll recall from an earlier column of mine that the “pilot project” approach is one that I support and proposed last July. Specifically, I wrote, “Maybe we would have been better off to focus initially on a public-private pilot project, one located several kilometres offshore in a carefully selected location; one that could be closely studied and be a launch pad for future economic growth.” I’m happy that Windstream has embraced this approach, and it will be interesting to see how the government responds to this invitation.

But here’s the thing: I’m not convinced this is the “carefully selected location” that would be ideal for a pilot project. I’m also not convinced that a 300-megawatt project could rightly be called a “pilot”. I understand the need to go big. There are simply better economies of scale. But if a pilot was truly what Windstream envisions, it should break up the project into smaller phases, with the initial pilot phase being no larger than 20 or so megawatts (similar in size to the world’s first lake-based wind farm in Lake Vanern, Sweden) with plans to develop larger phases once the pilot has been properly studied and ultimately convinces the Ministry of Environment that offshore wind makes sense for Ontario.

I would also argue that there are much better sites to consider for a pilot, including those once held by Trillium Wind Power before the government wiped the slate clear and unjustly forced all developers without a FIT contract to start from scratch. Trillium, by the way, had also started developing a supply chain consortium before the rug was pulled from under it, resulting in a $2.25 billion lawsuit filed against the Ontario government. One wonders how any company could trust dealing with Queen’s Park these days.

But Windstream is the one that finds itself in the fortunate position of being the only developer with a FIT contract. Whether the piece of paper it holds gives it the edge when it comes to pilot-scale projects, that’s unclear. After all, pilots are given special consideration. Presumably, FIT or not, picking the location of a pilot project should be based on the site, not the developer.

The saga continues…

Natural gas is inexpensive, seemingly plentiful and much cleaner-burning when used as an alternative to diesel fuel in transportation fleets, so it makes sense that Waste Management is converting its entire North American fleet to run on compressed natural gas. The company announced this week it has added 25 new CNG waste collection trucks to its fleet in Ottawa. About 80 per cent of all new trucks purchased by the company now run on compressed natural gas. To accommodate this fleet conversion, Waste Management has been increasing the number of fuelling stations it has to support the fleet. Currently it operates 17 of these stations across North America, but that number is expected to expand to 50 by the end of this year. Overall, the company has more than 1,400 CNG trucks in its fleet, including 100 added to its fleet in Vancouver last year. While this represents only 3.5 per cent of the entire fleet, conversion is happening at a healthy clip. It should be noted that Waste Management is also using route optimization software to reduce driving time and all trucks are programmed to turn off automatically after five minutes of idling. These are all solid initiatives that will help reduce emissions, but also reduce company costs.

From a greenhouse-gas perspective, the emission reductions aren’t massive — up to 25 per cent reduction — but the real gains here are in the reduction of smog-causing pollutants. Nitrogen oxides and diesel particulate matter are reduced by 90 per cent. Over time, it leaves open the possibility of using renewable natural gas, sourced from landfill gas and municipal wastewater biogas, to displace its fossil fuel cousin. The city of Surrey, B.C., is already heading in this direction. It now requires that natural gas-powered trucks be used for its municipal waste collection, a service being performed by BFI Canada, which has purchased 75 trucks that run on CNG. At the same time, it is launching an organics collection program for Surrey’s 470,000 residents and businesses that will see the household waste converted into biogas that will be cleaned, conditioned and used in BFI trucks. Surrey hopes the new biogas facility will begin operation in 2014.

Toronto was supposed to head in this direction as well, but from what I understand the plan has unraveled under the administration of Mayor Rob Ford.

I touched on this McKinsey report earlier, but my most recent Clean Break column delves a  bit deeper into the consultancy’s analysis of commodity trends past and future, and how this will impact the way corporations operate.

——————————————————

Tyler Hamilton

Has the global economy entered a long period of persistently high, volatile commodity prices?

That’s a question asked recently by international consultancy McKinsey & Co., which analyzed a century of data and found that the trend – for at least the next 20 years – doesn’t look good.

The previous 100 years told a different story. Since 1910, it found that the average combined price (inflation-adjusted) of food, agricultural raw materials, metals and energy reached its lowest historical level in the late 1990s.

Sure, there were big dips during the post-World War I depression and the Great Depression a decade later. But major technological advancements in areas such as exploration, extraction and cultivation allowed us during prosperous times to satisfy the demands of a growing global population, while keeping commodity prices at record lows.

“This ability to access progressively cheaper resources underpinned a 20-fold expansion of the world economy,” according to McKinsey’s analysis.

But that same analysis shows that the past decade has bucked a century-long trend. The commodity price decline achieved over the previous 90 years has, in just eight years, been completely wiped out, says McKinsey. Pre-WWI peak prices were surpassed in 2010, and all of this is happening during extremely trying economic times.

Shouldn’t commodity prices, like during past recessions and depressions, be falling?

Not this time around, the consultancy says. “Our analysis suggests that they will remain high and volatile for at least the next 20 years if current trends hold — barring a major macroeconomic shock — as global resource markets oscillate in response to surging global demand and inelastic supplies.”

There are many reasons why this time is different. Our world population surpassed seven billion in 2010 and of that, three billion will join the ranks of middle-class consumer over the next two decades, putting immense stress on those natural resources that give us energy, food, metals and fresh water.

McKinsey, which says we are entering a new era for commodities, throws out a few sobering stats: by 2030 the global vehicle fleet will double, per-capita calorie intake in India will jump 20 per cent, and Chinese consumption of meat — production of which is energy- and water-intensive — will rise 60 per cent.

Technology, no doubt, will continue to help us boost the supply of the commodities we have come to depend on, but the concern is that it can’t do it fast enough to meet rapidly growing demand.

Meanwhile, attempts to do so will require more expensive approaches and access to more remote locations — for example, drilling for oil in the Arctic — adding cost and putting more pressure on the fragile ecosystems we depend on.

On the issue of environment, there’s also the parallel need to rein in carbon emissions to avoid catastrophic changes to the climate by the end of this century. In other words, what we’re faced with today is unprecedented, and it will require an unprecedented response.

Of interest is that some corporations are already responding, and in doing so are positioning themselves as leaders of their respective packs over the long run.

A recent Harvard Business School study that tracked the performance of 180 corporations over nearly two decades found that the most progressive companies with respect to sustainability policies and practices outperformed their peers.

A big part of this is about resource-productivity. As commodity prices increase those companies that can best minimize waste and be most efficient with the consumption of energy and water are also the ones that will be most competitive.

In addition to cutting costs and reducing their exposure to volatile commodity prices, they’ll reduce their greenhouse-gas emissions and avoid paying future prices placed on carbon.

McKinsey says the future will be all about “squeezing greater productivity” from natural resources. “Better resource productivity could single-handedly meet more than 20 per cent of forecast 2030 demand for energy, steel, water and land,” it estimates.

This bodes well for the many clean technology companies I have written about in this column over the years.

Never has there been a greater need for technologies that can help us, for example, reuse scarce water resources, reduce the carbon footprint of the products we consume and services we use, and turn what has traditionally been considered waste into valuable products or sources of energy.

These may be trying economic times, but the companies that test drive and ultimately embrace these technologies will be much better off in the long run. There will be short-term risks, but they must be measured against the longer term risks of not acting.

This is something investors may want to keep in mind as we enter 2012.

Tyler Hamilton, author of Mad Like Tesla, writes weekly about green energy and clean technologies. Contact him at tyler@cleanbreak.ca

When the Canadian federal government decided earlier this year to delay plans to phase out inefficient light bulbs, it drew the ire of environmental groups who argued the delay was unnecessary and would further set back the government’s already weak emissions-reduction strategy. The Pembina Institute, for example, said the two-year delay — from Jan 1, 2012 to Jan 1, 2014 — would negate 13 million of avoidable greenhouse gas emissions and potentially $300 million in permanent energy savings.

Fortunately, the provinces can do their own thing. As of Jan. 1, 2010, for example, retailers in British Columbia have been prohibited from restocking 75-watt and 100-watt incandescent bulbs. It was also assumed that Ontario would follow through with a similar commitment beginning Jan. 1, 2012, but there’s a strong possibility the government will backtrack at the 11th hour.

I was curious about the status of the planned phaseout, so put in a query to the Ontario Ministry of Energy. Here was the initial reply: “Following the decision by the federal government, Ontario is reviewing its options to proceed with proposed efficiency standards for general service lighting,” wrote spokesman Paul Gerard in an e-mailed reply. I asked whether the review would continue into next year, meaning the government would miss the Jan. 1 start date of the phaseout. “The outcome of the review will be announced very shortly, before the new year,” Gerard replied.

I’m not expecting good news — you never get good news during the holiday season. It may be that the province will stick to its guns and follows through, but I’m getting the feeling they won’t given the fact that, just today, U.S. Congress succeeded in neutering its own country’s 2012 light bulb phaseout by preventing the U.S. Department of Energy from enforcing the law, as detailed in the Energy and Independence Security Act 2007.

That would be a tremendous shame, making one question whether Ontario — despite the rhetoric — is taking the issue of greenhouse-gas reductions seriously. It would also further tarnish Canada’s already lackluster reputation on the climate file in the aftermath of climate talks in Durban, South Africa. At a time when we should be adding to our efforts, it seems we’re instead backtracking on previous commitments, including delaying our participation in the Western Climate Initiative (fortunately Quebec is following through). The momentum is in the wrong direction, and this is alarming. Perhaps some public pressure is needed over the next few days to convince Ontario to stick with its guns and start the light bulb phaseout Jan. 1, as planned.

Let’s be clear, this isn’t about banning incandescent bulbs — this is about bulb efficiency, where compact fluorescent bulbs and LED bulbs have the advantage. But there have been innovations around incandescent technology as well. As Steven Nadel, executive director of the American Council for an Energy-Efficient Economy, pointed out today, “five manufacturers are now producing and selling efficient incandescent bulbs that meet the standards.”  In the U.S. context law-abiding companies will still follow the rule. “Less scrupulous companies will take advantage of the lack of enforcement, selling products that waste energy and increase energy costs for consumers. If many manufacturers take advantage of the lack of enforcement, recent investments that these five manufacturers have made to produce efficient lamps could be undermined.”

Ontario needs to consider this as well. Many companies have made business decisions based on the expectation of a phaseout starting Jan. 1. Companies such as Sears Canada and IKEA have already stopped selling (inefficient) incandescent bulbs, proving that the time is right to follow through. There’s no justification for putting on the brakes now. Indeed, by forging ahead Ontario can stand out as a leader and not fall under the shadow of a federal government that’s more concerned about short-term economic gain than the long-term health of our economy and environment.

So what path will you choose, Mr. McGuinty?