It seems as if the Green Energy Act (2009) is the new punching bag of political pundits. While widely criticized for paying “too much” to renewable energy producers with Feed-in Tariff rates that are “too high”, the math paints a different picture.

If we assume that Ontario wishes to replace its coal plants with renewable energy sources by 2014 this would represent an approximate replacement of 15% of Ontario’s current grid. Assuming the grid is 35,000 Megawatts in total (give or take a megawatt) this represents approximately 5,000 Megawatts of renewable energy power required. It is also assumed that this will be a mixture of wind, solar and biomass with wind and solar representing the bulk of the 5,000 Megawatts. While politicians like to attack the “high FIT” rates in Ontario the truth is that wind pays 13.5 cents per kilowatt hour and large ground mounted solar 44.3 cents per kilowatt hour. Rooftop solar and small rural solar installations only comprise of approximately 5% of the current FIT applications. In fact the highest FIT rates are paid for the smallest of all installations which represent the lowest percentage of FIT applications.

The Feed in Tariff projects (with the highest rates) represent a fraction of all applications submitted. If we assume that the 5,000 Megawatts is a blend of large scale wind and solar with a sprinkling of smaller scale projects we can assume an average FIT rate of 40 cents per kilowatt hour paid to power producers. On a base of 5,000 Megawatts installed this would represent approximately $2.6 Billion in annual power generation payments per annum for a period of 20 years under Power Purchase Agreement. Stopping here this represents just over 2% of the annual expenditures as measured in the overall Ontario budget for 2011. While health care remains the largest expense at 37% of the budget.

However we need to factor in the following:

1)            The potential to create 20,000 to 50,000 high paying jobs in the green sector

2)            The direct investment from the private sector to build these 5,000 Megawatts of power generation stations ($20 Billion to $25 Billion in direct investment)

3)            The income tax benefits of taxing this income stream paid to power producers as corporate income. Hundreds of millions of dollars per annum.

4)            The fact that power producers will be paying much of the capital costs to upgrade the hydro transmission lines directly impacted by their energy projects. A potential multi-billion dollar upgrade paid for by power generations.

5)            The Ontario Government will retain the rights to the carbon credits of approximately 120 Million Tons of C02 with a current market value of over $1.2 Billion at today’s spot prices.

6)            The health benefits of reducing coal which will directly benefit the air quality and indirectly benefit the health care system in Ontario (difficult to measure or quantify)

If we factor in all of these potential benefits it is clear that the “cost to go green” are much lower than the rhetoric would suggest.  The broader question we all need to ask ourselves is:

Are we willing to allocate less than 2% of our annual budget to reduce our reliance on coal by 2014, upgrade our energy grid and add clean and renewable energy power sources for the benefit of current and future generations?