Only those in fantasyland should expect a contract to be sacrosanct when one party to the transaction makes the law.
This article by Lawrence Solomon first appeared in the Financial Post
Europe taught us to spare no expense in supporting wind and solar projects, the better to help the planet survive. Now Europe is teaching us how to tear down those same projects, the better to help ratepayers, and politicians, survive.
UK Prime Minister “David Cameron wants to go into the next election pledging to ‘rid’ the countryside of onshore wind farms,” the London Telegraph announced this week. He intends “to toughen planning laws and tear up subsidy rules to make current turbines financially unviable – allowing the government to ‘eradicate’ turbines,” the goal being to “encourage developers to start ‘dismantling’ turbines built in recent years.”
Cameron will have no shortage of methods in taking down the now-unpopular wind turbines — in recent years countries throughout Europe, realizing that renewables delivered none of their environmental promises, have been systematically cutting their losses by ditching their renewable commitments. Here’s Spain, unilaterally rewriting renewable energy contracts to save its treasury. And France, slashing by 20% the “guaranteed” rate offered solar producers. And Belgium, where producers saw their revenues slashed by as much as 79%. And Italy and others, which clawed back through taxes the gross profits that renewables companies large and small were raking in at the expense of average citizens and the economy as a whole.
North America has been slow in systematically recognizing the damage wrought by renewable megaprojects but its turn will come soon enough, possibly among the 30 U.S. states with onerous renewable mandates, possibly among the Canadian provinces. No citizenry would more benefit from reversing the wind and solar gravy train than Ontario’s: Its developers have received up to 20 times the market rate of power, leading to a tripling of power rates and a gutting of the province’s industrial base, and helping to turn Ontario into a have-not province.
North America’s politicians have at their disposal all the methods employed in Europe to undo the odious arrangements voters find themselves in. Those squeamish about the optics of unilaterally ripping up a contract with the private sector can consider more genteel methods of skinning the cats.
Ontario’s property tax system, for example, allows for numerous residential and industrial tax classes, among them farms, forests, and pipelines. The provincial government could add wind and solar to the list, and then let local governments set whatever tax rates the local councillors, in fulfillment of the democratic will of their constituents, deem just. Given the view of many rural residents toward their windfarm neighbours, councillors will swiftly ensure a just end, sometimes by deterring new installations, sometimes by speeding their dismantling, sometimes by using the extra revenues to compensate victims.
Penalties also provide a mechanism for clawbacks. When Syncrude Canada’s lack of foresight led to the death of 1600 birds, it was fined $3-million, or $1875 per bird. Wind turbines kill birds in large numbers — according to a study in Biological Conservation, between 140,000 and 328,000 per year in the U.S. At $1875 per bird, the fine would be between $262.5-million and $615-million per year.
But governments need not feel squeamish about forthrightly shredding deals they enter into with private sector companies. Contracts are sacred when inked between private parties — if one party transgresses, the other has recourse to the law. But only those in fantasyland should expect a contract to be sacrosanct when one party to the transaction makes the law.
The Ontario Court of Appeal said as much when a major wind developer, Trillium Power Wind Corporation, objected when the provincial Liberals, to win some seats in the last election, abruptly changed the rules of the game. Trillium sued for $2.25-billion in damages on numerous grounds. According to an analysis by the law firm Osler, Hoskin & Harcourt, the Appeal Court all but laughed Trillium out of court.
The Appeal Court noted “that not only was it ‘plain and obvious’ but ‘beyond all reasonable doubt’ that Trillium could not succeed in its claims based on breach of contract, unjust enrichment, expropriation, negligent misrepresentation, negligence, and intentional infliction of economic harm,” Osler stated. The only part of Trillium`s claim that could proceed was based upon misfeasance in public office, which would require proving that a public official knowingly acted unlawfully to harm Trillium.
Can the government break a contract for political purposes? Yes, says Osler. The Appeal Court, in fact, “made it clear that proponents who choose to participate in discretionary government programs, such as Ontario’s renewable energy program, do so primarily at their own risk. Governments may alter the policies that underlie a program, and may even alter or cancel such programs, in a manner that may be fully lawful and immune from civil suit.”
Renewable developers take note: Governments are entirely within their rights in going back on a deal. In a democracy, when the deals are not only inspired by rank politics but are also so odious as to outrage the voters, developers should expect nothing less.
Lawrence Solomon is executive director of Energy Probe. LawrenceSolomon@nextcity.com