Contributed by Robert Lyman ©2019
Robert Lyman is a former public servant of 27 years and prior to that was a diplomat for 10 years.
“For the most part, that is the Chinese-American economic relationship.
The Chinese sell, the Americans buy, and the jobs move one way – to China.”
While many parties continue to search for evidence of external interference in the 2015 American national election as the reason why Donald Trump won, there is an increasingly prominent alternative explanation. That explanation is that he appealed to a profound sense of grievance on the part of many Americans; they had been betrayed by economic policies that opened the borders to unfairly priced manufactured goods, thereby eliminating millions of jobs, destroying communities, and causing the average person’s income to stagnate or decline. In effect, many voters thought that the United States’ national elites had betrayed the average worker’s interests for the sake of the international “community”.
Canadians may come to see some parallels in the policies promoted by federal and provincial governments. Catherine McKenna, the federal Minister of Environment and Climate Change, has repeatedly claimed that policies that discourage the production and use of hydrocarbons are good for Canada while those that promote increased renewable energy production and use open the doors to future economic opportunities. The people living in Alberta and Saskatchewan need no persuading as to the effects of climate policies on the hydrocarbon industry and the economies of the Prairies. It is there to see with every company that shutters its doors and every job that is lost. What, however, about the promised benefits of renewable energy? Let us examine the facts.
Who Makes Solar and Wind Generation Equipment?
There are no authoritative sources that provide statistics on the production and sale of solar energy panels in the world, and the industry observers report only sporadically. However, according to IHS Technology, in 2014 the following were the top ten manufacturers of solar panels in the world:
- Trina Solar
- Yimgli Green Energy
- Canadian Solar
- Jinko Solar
- JA Solar
- Sharp Solar
- First Solar
- Hanwha Solar
- Sun Power and Kyocera
Don’t be confused by the names. Canadian Solar has its headquarters in Canada, but its manufacturing base is in China. In fact, six of the top ten solar panel manufacturers are Chinese, the results of a deliberate strategy by the Chinese government to dominate the market.
It matters where solar equipment is manufactured. As argued in a recent paper by Harvard Business School’s Gary Pisano and others, manufacturing capabilities underpin innovation. When non-Chinese firms are stressed by below-cost competition from China, they reduce spending in research and development, and receive fewer patents. Based on present trends, not many patents will be issued in Canada.
Foreign dominance of manufacturing characterizes the production of wind turbines as well, only in that case the centre is Europe. While the Asia-Pacific region (mainly China, India and Japan) is the largest wind turbine market in terms of installed wind power capacity with a 45% share in 2017, the following are the 10 largest wind turbine manufacturers and their manufacturing bases.
- Vestas ( Denmark)
- Siemens Gamesa (Germany)
- Goldwind (China)
- Enercon (Germany)
- Nordex Group (Germany)
- GE (United States)
- Senvion (Germany)
- United Power (China)
- Envision Energy (China)
- Suzlon (India)
So, Canadian firms rank nowhere near the top in terms of manufacturing either solar or wind equipment. Worse, the tendency of China’s government to over-build capacity and to decide by regulation what domestic demand will be leads to periodic massive surpluses that depress product prices and drive western companies out of business. This makes manufacturing renewables a very risky business.
Clean Technology is not a Growth Industry in Canada
In a previous report entitled, “The Clean Growth Hallucination”, I showed how Minister McKenna’s claims about the growth of “green technology” had no basis in facts, based on the data published by Statistics Canada. In short, Statscan refers to a group of economic activities as “clean technology” and groups them in two categories: “clean energy and environmental goods and services” and “ the environmental and clean technology products account”. Its definition of “clean technologies” is very broad. It includes anything whose primary purpose is to remediate or prevent any type of environmental damage.
The “Clean Technology Goods and Services” accounted for $14.3 billion in income in 2015. Of this, production of wind, solar and hydro goods and services accounted for only $1.3 billion; Statscan provides no separate breakout for wind and solar alone. In fact, less than $2 billion in income on these goods and services were related to greenhouse gas emissions reduction.
Statscan’s Environment and Clean Technology Products Account totaled $57.2 billion in income in 2015 and $59.3 billion in 2016. The $57.3 billion figure is the one Minister McKenna uses to claim that “clean technology is a booming part of the Canadian economy”. The electricity production included is mostly from hydro sources and the services are mostly related to waste recovery and treatment. So, here again, only a small portion of what is included in the “clean technology products account” relates to activities that reduce greenhouse gas emissions. For 2017, Statscan changed the definition to include more activities in this account, but the result was only to increase the total value to $61.9 billion.
That $61.9 billion accounts for 3.1 per cent of Canadian GDP, a proportion that has remained stable since the start of this time series in 2007. In 2015, the Environment and Clean Technology Products Account grew by 1.3 per cent, while the Canadian economy grew by 3.2 per cent, marking the eighth consecutive year that the economy has grown faster. Since 2007, this account has held an ever-shrinking share of Canada’s economy.
What Effect Has Renewable Energy Had on Canada’s Economy?
The increased use of wind and solar energy for electricity generation in Canada has resulted from actions taken by both the federal and provincial governments. Federal regulation of emissions from coal-fired power plants has accelerated the retirement of plants well before what would have been their economic lifetimes. The decisions to require electrical utilities to contract for wind and solar generation over cheaper alternatives were made by provincial governments. Of the various actions taken to date, the most significant and well-documented were the decisions of successive Ontario governments. They decided to institute a feed-in-tariff program that provided long term guaranteed contracts to generators with wind and solar plants at a fixed price above market prices, combined with a direction to utilities to grant such generators “first-to-the-grid” rights.
These and other actions caused residential electricity costs per household to rise by 71 per cent, making them among the highest in North America. Industrial users in Toronto and Ottawa experienced cost increases of 53 per cent and 46 per cent, respectively. The Fraser Institute published a series of essays on the results. Overall, it estimated that Ontario’s electricity prices were responsible for approximately 75,000 job losses in the manufacturing sector from 2008 to 2015.
Its increased reliance on renewable energy means that Ontario must keep a large amount of fossil fuel-based generating capacity available on standby to protect consumers from brownouts when demand is there but the wind or sun do not cooperate. It also means that Ontario frequently finds itself with surplus generating capacity, so that generators must be curtailed (i.e. paid not to produce) or the surplus power must be sold in export markets at distressed prices. This, of course, benefits the manufacturing sectors in New York and Michigan that compete with Ontario firms.
The use of regulation and subsidies to force installation of costly renewable energy generation in Canada has reduced income and employment here while benefitting the suppliers of solar and wind generation equipment in other countries, and largely in China. This is being done allegedly to serve a globalist goal of reducing greenhouse gas emissions at a time when global emissions, largely from Asian countries, continue inexorably to grow.
The impact of this falls heaviest on working Canadians who face reduced opportunities or, worse, lose their jobs. When they, like Americans, go to the polls, will they continue to support such policies?