Aluminium poisoning

Aluminium poisoning in the body manifests itself with progressive dementia, bad judgement and hypersensitivity.

Aluminium poisoning in governments manifests itself in the same way.

This starts when normally rational governments suddenly get the idea that running cheap electricity to aluminium smelters automatically presents great development opportunities.

Because the jobs are high paying and numerous, these are tempting plums to bring into hardpressed areas.  I'm sure that was in the Premier's mind when, announced today in the Telegram, Premier Williams said he is pitching for an aluminium smelter in Labrador.

And smelters do present great development opportunities.  Sometimes.   But many times they don't.  For smelters to work out for people and government (jobs, taxes), you need to have specific and clearly definable conditions in place.

And because these facilities are huge energy consumers, one of those conditions is a large and reliable source of energy.

Iceland is a great example.  It has energy that is surplus to their needs and cheap to produce (geothermal energy).

But more important than cheap is that it is stranded energy.  Stranded means what you think it might mean - it's pretty well stuck in one place because it's too expensive to move around because it's isolated from end-user markets.

So Iceland generates power for cheap and then feeds it into smelters.  And except for the fact that the country itself has taken on substantial debt to make it all happen, Iceland appears to have been reasonably successful with that.

Because they do appear to be so success, other jurisdictions with cheaply generated energy figure it's smart for them to do that too.  Like Quebec.

In Quebec they take cheap hydro power and feed it into smelters and are planning more soon.  Except in their case, the power they are using is not stranded power.  The power they use has lots of potential alternative markets nearby in the US and Ontario.

Because these markets will pay far more for the power than the smelter does, government ends up subsidizing the power to the smelters through forgoing the difference in the electricity rates they could get elsewhere.

So what, you might say.  Isn't that subsidy worth the jobs created?  Maybe.  It depends on how much you want to pay in subsidies.

Would it make sense to pay, say, $300,000 per year per job?  Most, I think, would consider that level of subsidy ridiculous.  After all, at that level, doesn't it make more sense sell the power elsewhere, pay off each potential jobholder $100,000 year and then government can pocket the other $200,000 year and use it for services for everybody else?

Yet in Quebec, the ridiculous is actually happening.

In recently announced projects, to create 740 jobs, the government is giving up $2.7 billion in revenues in exchange for a $2-billion investment by Alcan.

The total cost to the government of the subsidy to Alcan equals nearly $274,338 per job each year for 35 years.

But the government calculus is that a $2.7 billion subsidy stretching out into the the future is worth the political benefit of having jobs in place today (or very soon).

The government of Quebec has aluminium poisoning.

Now we have to watch for signs of aluminium poisoning here.