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Canada

Canada

A thinking man's incentive

Canada's Federal Finance Minister Paul Martin has promised a new long-term program to provide incentives for the production of wind power. It finally puts wind power on Canada's political agenda -- and not just at the federal level. The incentive plan also lays the foundation for the development of a truly competitive, sustainable industry. Contrary to the US Production Tax Credit, the Canadian incentive is not tax based.

At the Canadian Wind Energy Association's recent annual conference, one veteran wind developer summed up the industry's growing frustration quite succinctly. Give us a policy, he pleaded. Any policy. To the amazement and delight of long-suffering wind power advocates, Canada's 2001 budget showed someone was listening. Federal Finance Minister Paul Martin promised a new long-term program to provide incentives for the production of wind power (page 19). True, the size of the incentive is only half what the industry was seeking. And, as CanWEA past president Fred Gallagher warns, the devil is in the still unknown details. But even so, the budget announcement accomplishes two significant things.

First, it finally and firmly puts wind power on Canada's political agenda -- and not just at the federal level. The budget clearly signals that Ottawa wants the provinces to do their share. It's no accident that Martin cut CanWEA's request in half. Now provincial governments who want to see the federal investment benefit their economies will need to find ways to attract wind development activity. The industry sees the provinces playing a role on the demand side of the equation, through renewables portfolio standards (RPS), wind set-asides or government purchases. Wind is already making inroads. BC Hydro has instituted a voluntary RPS and Hydro-Quebec has laid out its plans to buy 50 MW a year (page 20). The Saskatchewan and Prince Edward Island governments are powering some of their facilities with wind. In Ontario, where Canada's largest power market is in the process of deregulating, calls for an RPS are gaining strength.

Second, the incentive plan lays the foundation for the development of a truly competitive, sustainable industry. It is designed to gradually wean wind developers off government subsidies after five years. This was the industry's idea. Companies, CanWEA argues, will get out and start developing quickly while the incentive is at its highest -- and will be encouraged to strive for cost efficiency as the incentive level drops. The plan also avoids the kind of development roller coaster wind producers ride in the US every time their production tax credit (PTC) is set to expire.

What's more, unlike the PTC, the Canadian incentive is apparently not tax-based. This is fundamental to creating the kind of industry CanWEA envisions. It appears the benefit will flow to all, including small, growing businesses that don't pay enough tax to use a credit, large oil companies interested in broadening their definition of what it means to be in the energy business, and non-tax-paying, government owned entities that dominate Canada's utility business. It is only on a level playing field that competition thrives.

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