Prologue: allegory of a one-time political dynasty
There was once a successful Premier of Ontario, who took directions to a road promising everlasting electoral success and praise in posterity for green deeds “done no expense spared.” A few short kilometres down that green road, he was waylaid by furious voters and ignominiously forced out of office, which was lucky for him as his once-mighty party was soon reduced to a laughingstock rump in the legislature, ignored by all except comedians seeking standup material.
RBC and Rattlesnake
Last time we covered the Royal Bank of Canada (RBC) financial relationship with Rattlesnake Ridge, an Alberta wind farm. RBC in 2022 concluded a power purchase agreement (PPA) with Rattlesnake’s owner, Berkshire Hathaway Energy, for 30 million kilowatt hours of electricity annually.
We pointed out that Berkshire’s entire business case for investing in Rattlesnake Ridge was for the purpose of attracting intermediate buyers of the farm’s erratic output, who would recoup their investment by selling renewable energy credits (RECs) to further buyers and then crow about it in the “Sustainability” sections of their corporate reports.
Why such a Byzantine scheme? Because none of the PPA buyers has either of the following:
- An electric power load profile for its own operations in which erratic, unpredictable electric power supply does not cause major problems.
- Desire to write themselves into a long-term contract that would require them to either use or pay for erratic, unpredictable wind output, since that is the only financial arrangement that would guarantee an adequate return on investment for the wind farm owner.
Because neither of the above two points applies to any of the PPA buyers, Berkshire’s strategy is to “launder” Rattlesnake Ridge’s erratic, unpredictable output by folding it into the entire Alberta grid, where the 111 non-wind, non-solar sources and sinks of supply will bring it into synchronicity with the 60 Hz waveform that that grid, and neighbouring grids, are based on. The REC buyers could then point to output delivered to the grid, which is the basis for RECs, and claim that it had displaced fossil output.
We speculated that RBC’s rationale for entering into such a convoluted agreement was desire to mollify “green” critics of its investments in Alberta’s oil sands. These critics include Ecojustice, a Canadian environmental non-governmental organization (ENGO) that was formerly a Sierra Club chapter. Ecojustice had successfully lobbied the Canadian Competition Bureau to open an investigation into whether RBC’s claims of “sustainability” in corporate reports constitute false advertising, in light of the bank’s oil sands involvement
We suggested that RBC believes it can mollify the Ecojustices of the world by pointing to PPAs with the “correct” forms of energy and saying “see, we’re investing in the green energy of the future.”
And we said that that was a mistake. Eventually, some brave and numerate quant—numerate in that he/she knows which two and two to add together—either inside or outside of RBC will successfully impress upon senior management that the scheme rests entirely upon the provably false claim of “green” benefits of Rattlesnake’s erratic, unpredictable output. When the secondary buyers of Rattlesnake’s output (the buyers of the RECs) realize this claim is provably false, RECs suddenly won’t look like the greenwash panacea they looked like before.
And what then? Should RBC just abandon PPAs with purveyors of zero-emitting electricity? Of course not. We suggested RBC simply shift emphasis to actual zero-emitting electricity. In reality, only nuclear fits that bill.
RBC the Singing Elephant
RBC is like a circus elephant, performing tricks for the ringleader which is the green lobby. The ringleader told the elephant to invest in green energy, or else, and the elephant obeyed.
But it doesn’t have to obey the ringleader. RBC has shackled itself to erratic, unpredictable renewable energy out of worry about how the green lobby, the ringleader, would react to a shift off renewables and onto nuclear, the greens’ perennial bête noire. The bank is a 6 meters tall and 4-metric-ton beast, tied to a stake with a thin rope around its ankle. The elephant could, with a slight jerk of its leg, snap the rope and free itself. But just as the elephant was taught as a youngster that it’s impossible to escape so as an adult it doesn’t even try, RBC has been taught by decades’ worth of false advertising, most of it unpaid in the form of tacit media endorsements, that investing in renewable energy is the only way for the bank to redeem itself for its evil fossil fuel ways.
Well, RBC can snap the green rope, just as easily as the adult pachyderm can snap the real one. The bank just has to consider the implications of certain political realities in the sub-national jurisdiction where it is headquartered, Ontario. These realities are:
- The ENGO lobby will never support the Doug Ford PCs, or any PCs, as long as they walk this earth.
- The Ford PCs won the two most recent Ontario elections, easily.
- Ford has governed since June 2018, with zero support and lots of opprobrium from ENGOs. As of early February 2024, he and his party look ok in the polls.
- The greens will always support the Liberals; you could say they are the eco-wing of the Liberal Party.
- The Ontario Liberals, with total support from the greens, failed to gain Official Party Status in the Ontario legislature in the same two elections in which Ford won massive majorities.
It is tempting to take this as meaning the green lobby is irrelevant in Ontario politics. True, it can be ignored with impunity. True, its antinukery, devoid of facts and perspective, is a relic of the 1980s. And true, green objections are easily debunked by simply pointing to the stark differences in electric grid CIPK in Ontario versus jurisdictions where wind and solar are the preferred “zero emitting” sources. Ontario’s grid CIPK in 2023 was on average 50 grams. Alberta’s was 450 grams—nine times Ontario’s. Ontario achieved its low CIPK almost entirely with nuclear; Alberta chose “green energy,” and the result is its CIPK is nine times that of nuclear Ontario.
But the green lobby is not irrelevant. Its advice can be calamitous—for those who follow it. Again, consider the Ontario Liberal Party. The OLP followed green advice to the T. The result was the worst electoral debacle in Ontario history. That debacle was repeated in 2022, with the Liberals failing for the second time in a row to achieve official party status in the legislature. Green damage is lasting.
For corporate followers of green advice, the effect so far has not so much been devastating as it has been disappointing and underwhelming. Suncor, one of RBC’s clients, recently abandoned its wind farms in Ontario and Alberta, likely after realizing the payoff, in the form of praise from greens, was negligible.
And green advice doesn’t even contain anything practical. Several days ago, after the Ontario government announced that it supported refurbishing the Pickering Nuclear plant, furious greens flooded the airwaves with sputtering outrage and when asked what’s the alternative, reverted to the same Gish Gallop they’ve used for years: Pickering is “too old,” Ontario could easily replace the plant’s 24/7 2,500 MW output with “conservation and efficiency,” the cost of wind and solar is dropping, and we can just run an extension cord to Quebec, whose national electric utility will be happy to abandon its rich American customers and sell to Ontario for bottom dollar.
Following ENGO advice leads to disaster, and not following it has led to unparalleled success for Doug Ford, and good business for Suncor.
RBC’s strategy of mollifying greens with investments into wind and solar won’t mollify the greens. It’s a waste of time and money. The bank should stop performing circus tricks for a delusional ringleader, and go where the preponderance of data leads—invest in nuclear power. It can do so with impunity. The elephant just needs to flick its leg. The rope will snap.
Epilogue: a new political dynasty, built on real foundations
The ousted Ontario premier mentioned in the Prologue thought “green deeds done with no expense spared” would win him everlasting success. Ironically, that premier had all the green he needed, right under his nose, from the very beginning of his premiership—in the form of 3,500 megawatts of laid up nuclear capacity. He could have greened Ontario electricity nearly completely with those 3,500 MW, and in fact he did green it with them. “Green deeds done dirt cheap” could have brought him the electoral success he craved. But the premier chose to pretend he could green the economy with wind and solar, because wind and solar are popular with the ringleaders of the Green Circus and he thought he could win the coveted success by performing tricks for them.
That decision put him on the road to Perdition, not Triumph. Wind and solar require balancing, and the only balancing source available in Ontario’s mature system was natural gas, and the premier’s rush to install gas on top of wind and solar is what did him in.
That premier’s ultimate successor, who holds the office today, didn’t repeat that mistake. From the outset the current premier made clear he is pro nuclear, and anti-renewables. He went on to win massive majorities, back to back, while the pro-RE Liberals today fight the one-man Green party for media attention.
The Pickering B station, which has an excellent chance of being refurbished, consists of 4 515-MW CANDU generators. Each of them runs at or close to capacity, typically for many days at a time; see the figure below for the last ninety. That’s over 1.2 billion kWh of provable zero-emitting energy, every business quarter. Provable, because baseload supply can be defined as ability to consistently meet the tranche of electrical demand “assigned” to that generator by the system operator.
Could this be the basis for a PPA with a major corporate buyer of REC-worthy electrical output? Ontario’s current government appears to understand what comprises a real basis for our electrified future. Corporate Canada should consider CANDU nuclear the future of green finance in Canada.
