Thinking big about workable wind policy

A huge increase in delegates, some giant steps forward in provincial policy development and growing investor and utility interest are all signs that Canada's wind market is on the move. But for the delegates at September's Canadian Wind Energy Association (CanWEA) conference, the pace and degree of change is not nearly enough

Buoyed by a record-shattering attendance, up nearly 50% over last year, a chance to see more than half of Canada's installed wind power capacity within an easy drive of the conference venue, a list of publicly proposed projects that would see wind's contribution to the country's energy supply increase more than thirteen-fold, and unmistakable signs that political interest is on the rise, the 468 delegates to the Canadian Wind Energy Association's 19th annual conference readily accepted the message that the time has come to "think big." But as always, much of the debate during the four-day event, held September 21-24 in the southern Alberta town of Pincher Creek, centred on how to get federal and provincial policy makers to do the same.

In an intense schedule of two-track concurrent sessions, delegates tackled many of the practical issues facing wind development, from resource assessment and project financing to grid interconnection and transmission planning. But it was during the policy discussions that they began to map out what will become CanWEA's new wind strategy for Canada, building on the industry's current goal of 10,000 MW by 2010. Longer term targets and a mix of measures that includes coast-to-coast renewables portfolio standards, a national renewable energy certificate trading system and an expanded federal incentive program were some of the building blocks.

"Every other major energy initiative that has ever been undertaken in this country has had major government support. We need to feel no shame in going to the government to ask for the same," said CanWEA chair Glen Estill. "We can ask for big numbers because we can deliver big energy and we can do it in a very clean and sustainable way."

Perception problem

To the frustration of many industry participants, the message is one that does not seem to be getting through to decision makers. "Unfortunately for some unknown reason, and I think we have to get to the bottom of what that reason is, the federal government sees this as a small industry," said Fred Gallagher, CEO of Vision Quest Windelectric. "It is not. It is clearly a mature industry throughout the world and I don't understand why, in Canada, we have the view that wind is in its infancy."

A case in point, said Estill, is the government's climate change strategy. To meet its Kyoto commitment, Canada will have to reduce greenhouse gas emissions by 240 megatonnes (Mt) a year. The plan unveiled so far calls on the renewable energy sector as a whole to contribute 3.9 Mt of that total, while clean coal technologies are expected to contribute 5.3 Mt in annual reductions.

"In the wind industry we look at ourselves as a proven technology that is being deployed on a massive scale worldwide, and we look at clean coal technology as a myth people are still working on, and we have no idea if they will ever get there," Estill told a panel of federal government officials. "How is it clean coal can have a goal that is 33% higher?"

Fundamental disconnect

The question, one of many the panel was peppered with throughout the session, helped illustrate what Gallagher called a "fundamental disconnect" between the industry's vision and government action. Central to both is the federal government's wind power production incentive (WPPI). But while developers planning more than 4200 MW of projects have registered their interest in WPPI, less than 100 MW of new wind has been employed at a point almost a third of the way through the five year program.

"The policies are not working on a large scale," said Estill. Part of the problem with WPPI 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. CanWEA has lobbied intensively to have the incentive payment doubled to C$0.02/kWh, but a recent infusion of C$1 billion in climate change spending included no new money for wind.

"There was a view that WPPI is still being rolled out and that it was appropriate at this point in time, with this particular round of funding, to implement some actions in other sectors," explained Patrick O'Neill, the head of climate change policy development at Natural Resources Canada. The government, he added, is also concerned that emissions reductions from wind are too expensive. "The current focus is on cost-effective mitigation measures and generally this is perceived as what the international price of carbon is likely to be. At this point in time most people would agree it is probably in the $10 a tonne range," he said. The government's analysis shows that an incentive payment of more than C$0.01/kWh would push the cost of wind reductions over that limit, said O'Neill. "There has been no policy decision to exceed that threshold except where there are significant co-benefits," he told delegates.

Gallagher, however, was quick to point out that the government calculates the cost of reductions only over the ten years the WPPI payments are made. "If you took it over the life of the facility, clearly you have a much lower cost per tonne," he said. It is a difference that needs to be reconciled, said Gallagher. "The sooner we can harmonise how we think about this and start to work together, we'll have some success."

Provincial progress

One arena where the wind industry is starting to find success is in the equally crucial area of province policy. During the past five months, Quebec released a call for 1000 MW of wind by 2012 while neighbouring Ontario, Canada's largest power market, announced plans to implement a green power standard that would add 8% new renewables to the province's electricity system by 2014. While the political party promising the standard was defeated in an election just two weeks after the CanWEA conference ended, the winning Liberals had campaigned on an even more aggressive target of 10% by 2010.

Even though the actual implementation of Ontario's green power standard will likely be delayed as the new government gets oriented, said Superior Wind Energy's David Boileau, the groundwork the wind industry has laid over the past few years should help smooth the transition. "The bureaucracy is now knowledgeable about the wind business with an institutional memory that we think, we hope, helps bridge political changes," he explained.

Although the steps are not as bold, progress is being achieved in the other eight provinces as well. British Columbia wants electricity distributors to voluntarily buy at least half of all new power from clean sources over the next decade and is currently examining "fiscal and other types of incentives" to promote wind development, says the energy ministry's Janice Larson. SaskPower, Saskatchewan's government owned utility, is adding 155 MW of wind to the 5.9 MW it already owns, while Manitoba Hydro, also government owned, has allocated 250 MW to wind farm development, about 5% of its current generating capacity, and is undertaking studies to determine how much additional wind capacity can feasibly be added to its hydro-dominated grid. Nova Scotia, New Brunswick, Prince Edward Island and Alberta are adopting renewable energy targets in their electricity markets, while in Newfoundland, the government has given final approval for a 25 MW wind demonstration project.

"I think you can say that even though the pace of change might not be what we would like to see and there is a lot of work we still need to do to help accelerate that, I think we can also say that when we look back over a period of three years, the world is moving," Robert Hornung, CanWEA's newly hired executive director, whose title has since been changed to president, told delegates.

Picking up the pace

The world will have to move much faster if Canada is to reap the full range of economic benefits wind can deliver, speakers warned. Right now, said Shell's Paula McGarrigle, Canadians investors are putting more money into US wind farms than in projects at home. Turbine manufacturers looking to build production facilities in North America will pass this country by if a vibrant market is not created soon, said Estill. "When the US gets its wind policy act together," he warned, "the opportunity is going to be over for Canada to attract manufacturing."

CanWEA should take a page from the oil industry's script in moving its agenda forward, said Hornung. To get the government support needed to develop the Alberta oil sands, the industry created a high-powered task force of company CEOs to deliver its arguments. Today, the oil sands are poised to supply nearly half of Canada's petroleum needs. Notably, two of the leading oil sands players, Shell and Suncor Energy, were major sponsors of this year's CanWEA conference. "We need to do the same thing now for wind. We need to make that case. We need to get more people at that level standing behind it," said Hornung.

Barriers persist

Although workable wind policy remains the industry's biggest stumbling block, the list of challenges does not end there, and improved transmission access is near the top. In Alberta, Canada's most active wind market, but still with only 170 MW of installed capacity, industry expansion is already being stalled by transmission shortages that will not be solved until at least mid-2005. The province, however, is in the process of finalising a policy that will see consumers pay for upgrades when and where they are needed. It is an approach the industry would like to emulate elsewhere.

"I am enthused to hear what is happening here in Alberta, the recognition that the rate base benefits from addition of new renewables and the rate base should pay for reasonable extension of lines to where the resources are," said Boileau, who sits on an Ontario task force looking at grid connection concerns.

Wind's price and its intermittent supply are also proving to be a barrier to wind development. Although BC Hydro is in the market for renewables, said Steve Davis of the Independent Power Producers Association of BC, the contract it offers is based on an "arbitrary and low" avoided cost and penalises resources that are not firm. "The prices BC Hydro is offering to the green sector are in fact anti-green, so we're struggling with where they are going in practicality," he said.

Across the country, in fact, the wind industry is struggling to overcome the inertia of a relatively cheap, relatively abundant conventional energy supply. Wind is competing against ageing, depreciated power plants, operating largely in monopoly markets. Only in Alberta, said Gallagher, where electric industry competition and growing demand have sparked the addition of about 3000 MW of new generation in recent years, is there any sense of "what electricity really costs."

Investor awakening

While facing financiers unfamiliar with the technology has long been a hurdle for Canadian wind developers, there are signs that a "sea change in investor sentiment" is underway, said John Douglas of Toronto's Douglas Capital. "I'll even go so far as to suggest that it is an institutional investor awakening to wind energy in Canada. We have people calling us looking for projects and we now have an investor that has agreed to partner with our firm to put together a development fund to invest exclusively in early stage wind projects."

Borealis Capital Corporation, a Toronto-based merchant bank with a C$9 billion portfolio that includes a one-third interest in Ontario's 6200 MW Bruce Power nuclear facility, is also looking seriously at wind energy, said the bank's Andrew Lin. "It is a growth area and we know we need to be there from an investment point of view."

Making progress

Despite the ongoing challenges, the Pincher Creek conference helped underscore the fact that wind energy in Canada is moving forward. But there was also a sense that the industry will no longer be content with small steps along the way. "We need to convince the policy makers and the people that we can think big with wind energy," said Estill. "We all know we can do it. We need to convince the rest of Canadians."

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