Canada

Canada

Now is the time to stop navel gazing

To reach its target for Canada of 10,000 MW by 2010 the wind industry needs a swift and decisive policy commitment from government. This year's CanWEA conference focused on finding a way to put wind on Canada's political agenda

For Canada's wind power proponents, October's 17th annual Canadian Wind Energy Association (CanWEA) conference offered a sense of both optimism and urgency. With close to 60 MW of new wind projects installed this year and more than 250 MW under development, the event's record 227 delegates revelled in the opportunity to discuss the real challenges faced by real projects in almost every region of the country. The conference venue, just blocks from Parliament Hill in the nation's capital, attracted unprecedented political interest. At the trade show, the presence of major international turbine manufacturers and developers underscored a growing recognition of Canada's immense wind power potential. But underlying it all was an obvious frustration that Canada still lacks the kind of concrete political support needed to move the industry, quickly and decisively, toward its goal of 10,000 MW of installed capacity by 2010.

"We need policy. We needed it 15 years ago, ten years ago, five years ago and we need it today. What kind of policy? Any kind of policy," said Wind Power Incorporated's Dale Johnson. "Canada has been navel gazing for so long, we have to start to move."

CanWEA president Fred Gallagher agreed the time for decision has come. Electricity demand is outstripping supply in some provinces and with many generation facilities due for retirement over the next few years, significant new investment is already being made in power industry infrastructure. In Alberta, for example, where some of Canada's best wind resources are located, the Energy and Utilities Board is currently considering applications for 2300 MW of new coal fired generating plants.

"If we're going to make a change to something cleaner, now is the time," said Gallagher. "If you reinvest in a coal plant, it's going to be around for the next 50 years. The big question that's out there is, how can we capture this window in time?"

Gaining a foothold

In fact, much of this year's conference focused on developing an answer to that question. The association outlined its strategic plan -- Wind Vision for Canada -- designed to give wind energy development a foothold. At the core of the plan is a C$0.025/kWh federal production-based revenue incentive, which could be applied as a credit against a company's taxable income or taken as a cash payment.

While the incentive would be similar in magnitude to the US production tax credit, said Gallagher, it would avoid some of the pitfalls. One of the biggest, the American Wind Energy Association's Randy Swisher told delegates, is that only a small number of equity investors in the US wind industry have a large enough tax appetite to take full advantage of the credit. The on again, off again nature of the PTC, added NEG Micon's Leif Andersen, led to a development roller coaster instead of a sustainable industry.

CanWEA's proposal would allow the benefit to flow directly to producers, said Gallagher, whether they are small or large and whether or not they have taxable income. "We want to make sure the instruments we choose get money to the industry where it can be employed to get hardware in the ground," he said. The incentive would be available for the first ten years of a project's life, but would only be offered to developers for the period from 2002-2006. After that, it would be replaced by "some kind of pre-Kyoto emissions trading program," he explained. "We need a bridge to that point. Then during the Kyoto period we should get a full suite of trading mechanisms that will carry forward into the future. If we're not economic by that time, guess what, we don't deserve to be in business."

CanWEA's Wind Vision also calls on the provinces, which have the greatest control over energy policy in Canada, to implement renewables portfolio standards in their electricity markets. "Just to introduce a revenue incentive alone will not necessitate large scale development of wind. We need to create demand," said Andrew Pape-Salmon, CanWEA's director of government relations. Ontario, which is in the process of deregulating its power industry, is an obvious target for CanWEA's lobbying efforts, said Pape-Salmon. British Columbia, where the newly elected Liberal government has launched an energy policy review, is another. "We believe that in the short term we should focus on those provinces and territories where there is an opportunity to influence policy."

WINNING INCENTIVES

CanWEA's efforts to win incentives for wind power have an ally in the Clean Air Renewable Energy coalition, an alliance of oil companies, environmental groups and municipalities lobbying for tax breaks for green power producers and consumers. "There's this wealth of resource out there waiting to be tapped, waiting to be brought into productive capacity, and yet very little has been done," said Gerry Manwell of oil company Suncor Energy, one of the driving forces behind the coalition. "There aren't many jurisdictions, or industries, in the world where you have an opportunity like that."

But, Manwell warned, Canada will not be able to fully develop that opportunity if it continues to rely on mechanisms like green marketing and government green power purchases to drive the market. "You aren't going to get there from here with modest steps. We've learned that time and time again in the oil industry."

In the early 1990s, he said, the petroleum sector set out to change the tax system to stimulate investment in emerging oil-sands technology. The resulting incentives attracted tens of billions of dollars that would otherwise not have been invested -- and the oil-sands now supply one-third of Canada's petroleum needs. The same thing has to happen with wind because until it has a level playing field from which to compete for investment, companies like Suncor will do little more than "go after the niches."

Delegates did see signs that political interest in wind is on the rise. CanWEA, which has failed to attract a federal cabinet minister to its conference since 1987, played host to two this year. Natural Resources Minister Ralph Goodale delivered the keynote address, while Environment Minister David Anderson dropped in for a surprise tour of the trade show on his way to work. In addition, representatives of all major political parties attended a breakfast with the CanWEA board. "We're obviously on the radar screen, and that's very important," said Gallagher.

Kyoto commitment

In his speech, Goodale tied the development of wind power to Canada's Kyoto response, saying the country's commitment to reducing carbon dioxide emissions by 200 megatonnes by 2012 will "most certainly" require an increased emphasis on renewable energy. "Canadians have never paid as much attention to the environmental dimension of energy use as we do today. This is why your association's long term vision for wind energy is so timely and will be given very careful consideration," he told delegates.

Goodale, however, left little hope that CanWEA's recommendations will be dealt with in the next federal budget, due this month. September's terrorist attack on the US has increased both economic uncertainty and national security expenses, limiting the government's "fiscal room to manoeuvre." He did promise that Canada's next Kyoto business plan, currently under preparation, would focus on measures to provide long term emission reduction benefits. "I think you'll see there are further additional measures in that plan that show we are serious."

The Pembina Institute's Robert Hornung was not convinced. While there are positive signals that Canada intends to ratify the Kyoto Protocol, "It's a long way from a slam dunk." Even if ratification goes ahead, there are some unknowns that could impact wind power. The effectiveness of emissions trading is one, said Hornung.

"Right now, with the United States outside the Kyoto agreement, one of the key countries that would be demanding emission credits is out of the game. That could very well lead to a situation where we have an overwhelming surplus of credits, supply significantly outstripping demand, which doesn't do good things to the price. And if the price signal isn't very strong internationally, the price signal isn't going to be very strong domestically, and that might mean not a very strong push for renewables."

Despite the political uncertainty, Canada's enviable wind resources and huge land mass is increasingly capturing the attention of global players. "There is a very good foundation to build on. It is going to happen, there's no doubt about it. It's just going to take time," said NEG Micon's Andersen. John Fedorko of Nordex USA agreed. "I think that in five to ten years the Canadian market can be just as big and just as dynamic as the US market."

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