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Kyoto strategy will limit role of wind -- Canadian wind industry fears federal policy proposal

Last year's ratification of the Kyoto climate change protocol was expected to be an important driver for the wind industry in Canada -- but now there are concerns that policy developments could seriously limit wind's role in meeting the country's emission reduction targets. The industry is "extremely disappointed" that the federal government's recently unveiled C$1 billion plan for tackling climate change includes no new money for wind, says Robert Hornung, director of the Canadian Wind Energy Association (CanWEA).

The association had been lobbying for an expansion of the federal wind power production incentive (WPPI). Although the government is counting on the C$260 million WPPI program to take a 2.8 megatonne a year bite out of Canada's carbon emissions, Hornung says the incentive is not enough to stimulate investment in most parts of the country. Eighteen months into the five year program, less than 100 MW of new wind has been installed, yet developers have registered proposals for nearly 3800 MW. Part of the problem is that the incentive, which averages C$0.01/kWh for the first ten years of a project's life, covers only one quarter to one half of wind's cost premium. Provinces are expected to make up the difference with their own wind subsidies.

"While some provinces have taken initial steps to close the gap, the federal government's modest greenhouse gas emission reduction objectives for wind power production are in danger at this time," says Hornung. Payments under WPPI are also limited to 1000 MW of new capacity, with a cap of 300 MW for any single province. The low ceilings, says Hornung, mean that the emissions reduction potential in Canadian wind could remain largely untapped.

"Ten years ago, it was estimated that Canada's wind energy potential was almost 30,000 MW. With advances in technology over the past decade, we now believe that Canada's potential is more than two to three times that amount," he adds.

Spending plan

CanWEA had hoped the government's billion dollar spending plan, which includes more than C$300 million for cleaner fossil fuels, hydrogen technologies and decentralised energy, as well promotion of renewable technologies in commercial buildings and remote communities, would increase the WPPI budget to support 4000 MW of new wind and double the incentive payment to C$0.02/kWh. Instead, all that is promised is a review of the WPPI provincial caps over the next year, "in light of the growing interest in wind energy"

The lack of new funding, says Hornung, raises concerns that "a significant gap exists between the federal government's strong verbal support for wind power" and the money it is willing to provide. "More federal government leadership is required," he says.

The question of what happens to Canada's wind policy when the WPPI program expires in 2007 is also raising concerns among power producers. When the federal government released the WPPI details last year, it claimed the program would "help establish wind energy as a full fledged competitor in the electricity marketplace by the Kyoto commitment period of 2008-2012." The assumption within the industry was that, by then, some kind of market based emissions trading system would be in place to "carry wind forward," as CanWEA president Glen Estill puts it,

Emissions trading

But a draft proposal for a national greenhouse gas (GHG) offset trading program circulated by the federal government earlier this year excludes renewable energy generators from claiming and trading offset credits. The risk, the government argues, is that the reductions will be counted twice, once by the fossil fuel generator whose output was reduced and again by the renewable generator. It also points out that some of the reductions from renewables are already being counted through targeted measures, such as the WPPI program.

CanWEA argues that emission reductions are the "defining attribute" of wind power and producers must be able to claim them. "Excluding wind energy from an offsets trading system will fundamentally undermine our industry since the only developers that would be able to realise value from the lack of emissions are existing fossil fuel generators," it says.

The association, like other renewables advocates fighting the plan, says concerns over double counting can be dealt with relatively easily through system design. In Ontario, the provincial NOx and SO2 trading system sets aside a pool of emission allowances for green power producers to claim. "Although it's not a perfect system, it has allowed for some participation in Ontario's system by clean power producers," says the Independent Power Producers Society of Ontario (IPPSO). Excluding renewable energy producers will severely restrict what could be a significant source of genuine reductions, says IPPSO. Instead of becoming a cornerstone of cost-effective GHG emission reduction, renewables would be delegated to play a marginal role, it adds

The government completed consultations on the proposal over the summer and plans to develop an offset system design paper this fall.

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