Canada

Canada

Unlocking new green markets

Canadian power producers are turning to green tags as a way to access new customers across Canada and tap into much larger -- and more established -- markets in the United States. Calgary's Vision Quest Windelectric has just begun offering green tags generated by its wind power facilities in southern Alberta. At the same time, giant utility BC Hydro and its trading subsidiary, Powerex, launched a pilot project to sell green certificates to commercial customers in British Columbia and export markets.

A market for tradable renewable energy certificates, or green tags, is emerging in Canada as power producers and marketers look for ways to satisfy customer expectations and open up new avenues for growth

Canadian power producers are turning to green tags as a way to access new customers across Canada and tap into much larger -- and more established -- markets in the United States. Calgary's Vision Quest Windelectric has just begun offering green tags -- representing the extra environmental value of clean electricity -- generated by its wind power facilities in southern Alberta. At the same time, giant utility BC Hydro and its trading subsidiary, Powerex, launched a pilot project to sell green certificates to commercial customers in British Columbia and export markets.

The only other green tags available for sale in Canada are offered by an Ontario energy co-op trying to aggregate demand for wind power in the province. But despite the modest number of green tag traders so far, Vision Quest's Jason Edworthy believes the country's power producers and marketers will increasingly adopt the green tags approach. "That's what we've observed in the US," he says.

Green power, available to consumers in several Canadian provinces, requires a transmission path, limiting producers to regional markets. With green tags, however, the environmental attributes of renewable energy are split off from the electricity and sold separately to whoever wants to buy them. The transportability and flexibility of the tags is a huge advantage in Canada, where only two provinces have opened their electricity marketplaces to retail competition. The remaining markets are organised around regulated monopolies, which makes it difficult, if not impossible, for small wind producers like Vision Quest to directly access customers.

Potential buyers

With green tags, says Edworthy, consumers who cannot buy wind energy from their own utility can still support its development and capture its environmental value. "Maybe they're in a regulated market or maybe their jurisdiction doesn't have any wind resources," he explains. The market for Vision Quest's green tags is not limited to Canada, continues Edworthy. In fact, it was inquiries from potential buyers in the US Pacific Northwest that helped prompt the company to develop a green tag product. "We see the US as potentially a pretty big market."

Edworthy would not reveal how many tags, which cost $35/MWh, Vision Quest has sold so far. But while there is "definitely interest" in the product, he says, there is also a bit of a learning curve, particularly for Canadian consumers unfamiliar with the concept of green tags. "In mature markets like Oregon, Washington or Iowa or Wyoming, it is no big deal," he says. "But it's a novel product for people who are still getting used to green power. We're embarked on some pretty significant educational activities on a one-to-one basis with potential customers." BC Hydro launched its pilot with 20 customers who together have bought 4000 green power certificates. With no wind power expected to come online in British Columbia until next year, the program will initially offer a blend of small hydro, landfill gas and biomass at a certificate price of $20/MWh. Powerex also made its first sale of green certificates earlier this year to the Los Angeles Department of Water and Power, but will reveal neither the price nor the quantity.

"The pilot is an opportunity for BC Hydro to learn how to structure, price and promote green electricity and to learn about the market potential, which we hope leads to a more permanent offering to our customers," says Brenda Goehring, who manages BC's green division.

Consumer confidence

Although several Canadian utilities sell green power, so far BC Hydro is the only one to offer tradable certificates. Goehring says their research convinced it that certificates are a more tangible product. "Having people get green power at their house is impossible," explains Goehring. "You can't say your computer is powered by it. You can't say that if you make a direct green electricity purchase, it actually gets to your home. So, it is not creating proper consumer awareness and confidence in the product."

Tags and certificates, on the other hand, can be matched to the actual output of a generating facility and audited by a third party, giving the customer assurance they are getting what they paid for. In fact, Goehring and Edworthy agree that independent verification is critical to developing a certificates market in Canada. So far, however, they have taken different approaches.

When Vision Quest first began getting requests from US buyers for green tags, says Edworthy, they came with the proviso that the product be certified. Canada, however, had no program in place to do that. The company asked Terrachoice Environmental Services, which administers the federal government's Ecologo program, to develop a standard. Terrachoice launched its Green Leaf Tradable Renewable Electricity Certificate Program in September with Vision Quest as the first company to be certified.

BC Hydro has hired an independent auditor, KPMG LLP, to audit its tracking system, facilities and marketing claims. But Goehring believes a standard that harmonises certificates across jurisdictions is essential to the growth of the market.

"I think standardisation is really going to be fundamental to this product in the future, so that people see that one certificate is the same in Alberta as it is Newfoundland. That's when I think you are going to see more liquidity in the market."

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