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Canada

Industry hopes reality will match rhetoric -- Waiting for the budget from Canada's new government

The Canadian wind industry is hoping for significant new federal financial support even though the new national government is stressing the need for fiscal constraint as it prepares to introduce its first budget. Finance Minister Ralph Goodale is being asked to quadruple the budget for the government's wind power production incentive (WPPI) to support the installation of 4000 MW of new capacity, to extend the program deadline to 2010, and to remove all caps that limit how much of the WPPI money any single project, developer or province can access.

Right now, payments under WPPI are limited to 1000 MW of new capacity, with a cap of 300 MW for any single province. The program, which makes payments averaging C$0.01/kWh for the first ten years of a project's life and expects provinces to add further production incentives to back WPPI, is set to expire in 2007.

closing the gap

WPPI covers only one quarter to one half of the premium needed to make wind competitive with existing energy on the market. But, says Canadian Wind Energy Association (CanWEA) president Robert Hornung, provinces are working on policy initiatives that would help close the price gap. Expanding WPPI, he argues, would send a signal that Ottawa is serious about partnering with them in the development of wind on a large scale.

"We think many provincial governments will be taking decisions within the next 12 to 18 months on how strong their initiatives are going to be with respect to renewables. Because the federal government, to this point, has really been thinking small about renewables, that may lead provinces to come to the same conclusion."

Fiscal constraints

As Goodale criss-crosses the country as part of his pre-budget consultations, he is making no secret that money is tight and the budget, expected in late February or early March, will reflect that fact. The first clue about how the government views new investments in wind could come early this month, when it makes its so-called throne speech outlining its legislative priorities.

"If, at the end of the day, funds are not available this time around in the budget, it is absolutely essential that there be a clear signal in the throne speech that those funds are coming," says Hornung.

CanWEA's proposal to quadruple WPPI will cost an average C$50 million a year for 16 years, but the association stresses the draw on those funds will be lower in the first few years, an argument Horning hopes will circumvent Ottawa's current financial concerns. "We believe we've crafted a proposal that can send a very strong signal to provincial governments and that can stimulate and spur investment from the sector, while not actually drawing off federal resources, probably for two or three years," he says.

Optimism

Despite the fiscal uncertainty, the wind industry does have grounds for optimism. Goodale says he is considering divesting the government's C$3 billion stake in Petro-Canada, one of the country's largest oil and gas producers, and investing the proceeds in environmental technology. And the new prime minister, Paul Martin, has repeatedly spoken about his own commitment to the development of environmental technologies. It was Martin, as finance minister, who created WPPI in 2001 and it was Goodale, the natural resources minister at the time, whose department was in charge of designing and administering it. "I do think that the new government certainly has the potential to be more favourable towards wind energy in terms of attitude and perspective," says Hornung. "The rubber hasn't hit the road yet, so we'll have to see whether the reality matches the rhetoric."

Wind, and renewables in general, have garnered some powerful allies outside government. The Clean Air Renewable Energy Coalition (CARE) -- an alliance of big oil companies like Shell, Suncor and BP Canada, big utilities like Hydro-Quebec, Ontario Power Generation and BC Hydro, major environmental groups and the Federation of Canadian Municipalities -- recently called for 7% of Canada's electricity production to come from renewable energy by 2010, increasing to at least 15% by 2020.

"The window for Canada to be a market leader in the development of renewable technologies and in the production of renewable energies is narrow. Other countries are already seizing the opportunities, armed with comprehensive government strategies to support renewable power. Canada now has an excellent opportunity to do this as well," says Mike Crawley of Toronto-based AIM PowerGen Corporation, a CARE member.

adopting new standards

The comprehensive strategy CARE wants Canadian governments to adopt includes increasing the WPPI to match the US production tax credit, about C$0.027/kWh and extending it to other technologies. It also calls on the provinces, which have jurisdiction over energy markets, to adopt minimum standards for the volume of renewables in supply portfolios.

Governments should also invest in the market side of the equation by providing rebates for consumers buying green power, expanding a program already in place that gives financial incentives to electricity distributors interested in experimenting with the marketing of green power, and buying renewable power for their own operations, a minimum of 30% by 2010 and 80% by 2020.

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