Goverment orders green power supplies, in a major step in the right direction the Canadian government announced at last month's Ottawa renewables conference that it will be ordering green power for a

The Canadian government announced at last month's Ottawa renewables conference that it will be ordering green power for a number of its buildings, power that will have to be supplied by new generating facilities such as wind plant. The announcement broke the public silence of several years of behind the scenes negotiations between the federal government, the provinces and other interested participants.

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A dramatic Canadian government commitment to renewable energy was made at a major gathering of the renewables business in Ottawa last month. More than three hundred people heard Anne McLellan, the federal minister of natural resources (NRCan), announce at the event's banquet that the Canadian government will start buying green power from the City of Calgary Electric System (CCES). The first federal procurement of its kind in Canada, CCES was chosen to acquire and distribute green power to certain federal buildings in Alberta.

NRCan will receive up to 10 gigawatt-hours a year of renewables electricity generated for NRCan buildings, while up to 3.1 GWh will go to Environment Canada buildings in Alberta. The announcement was made jointly at the second Canadian Renewable Energy Markets Conference and Trade Show, held April 14-15 at the Chateau Laurier, by NRCan and federal environment minister Sergio Marchi. Some 70 exhibitors attended the trade show and the conference theme was "Renewable energy: Releasing Canada's stranded opportunities."

Details of the green power procurement are already being decided. It will be the job of CCES to ensure enough renewables electricity is generated to meet the needs of NRCan and Environment Canada buildings in Alberta. These include NRCan's Forestry Research Station in Edmonton, the Western Research Centre in Devon, and a geology research lab in Calgary. CCES will also supply Environment Canada's regional headquarters in Edmonton and offices in Calgary, as well as its other buildings throughout Alberta.

The announcement broke the public silence of several years of behind the scenes negotiations between the federal government, the provinces and other interested participants. CCES is a municipally owned distribution utility which supplies power to about 295,000 customer accounts in Calgary, which has a population of over 750,000. While no further details of the actual sources of supply were available at the conference, sources indicated that wind power was among the supply options under consideration.

CCES manager of business development, Leon Burns, said after the conference that two requests for proposals for renewable electricity were issued by the federal government in March, but only to the seven public and investor owned electric utilities in Alberta. CCES is now negotiating with potential suppliers of green power who could be other utilities or non utility independent developers. CCES would buy the power through the Alberta Power Pool in "contracts for differences" and then deliver it to the federal buildings.

The pool began on January 1, 1996 as a competitive wholesale pool supplying the lowest cost power from competing suppliers. It is the most progressive and deregulated system in Canada. Now with an apparent mechanism to deliver green power, the pool could be a model for further green power procurement.

Prospects for wind

According to McLellan, the announcement demonstrates federal leadership to encourage job creation in Canada's growing renewable energy sector and to meet Canada's international climate change commitments. "We are creating opportunities for this environmental sector and demonstrating leadership for other power consumers in Canada," she said. In November McLellan released the country's Renewable Energy Strategy in which green power procurement was a major component (Windpower Monthly, December 1996).

Prospects are excellent for further procurements of new green power by the federal government, implied McLellan. She has approached nine fellow ministers in the federal cabinet urging them to acquire green power and all have replied showing interest, including the designation of a responsible official.

Government purchase of green power is also spreading outside Alberta to Ontario, said McLellan. Letters of intent have been signed with Ontario Hydro to supply 12.5 GWh of green power annually, even though the utility has cancelled its request for proposals for up to 120 MW of wind power under its renewable energy technologies (RETs) programme.

Indeed, the federal procurement and the emergence of CCES suggest there may soon be an upsurge of green power procurement activity in Alberta in a free-for-all competition which could spread across Canada. Already one company has set its sights on the upcoming market for green power players -- Vision Quest Windelectric which intends to market "unbundled green energy products." The company's Fred Gallagher says such products will be available through the Alberta Power Pool and will allow "energy hedging or meeting environmental emissions reductions goals or targets."

Vision Quest is a joint venture by The Chinook Project Inc -- an Alberta wind developer which built the 9.9 MW Pe-Kun-Nee Project and half of the 18.9 MW Cowley Ridge wind project -- and Canadian Enhanced Energy Development Ltd. The company has been active since 1994, and has established site control (leased, optioned or under negotiation) of over 50,000 acres of prime Canadian wind basins in Alberta, Saskatchewan and Ontario, with a potential for more than 1000 MW of wind power capacity.

NRCan current spending on renewables R&D is now running at C$8 million a year and McLellan asserted that her department was significantly increasing this support, even during a time of government downsizing and budget cutbacks. In the 1997 federal budget delivered by Canadian finance minister Paul Martin in March, the government announced it will set aside $60 million in 1998-2000 to promote investments in energy efficiency in new and existing commercial buildings and renewable energy projects. By 1997-98, some three-quarters of NRCan's energy R&D budget will go to alternative energy and energy efficiency, compared to two-thirds in 1994-95.

budget tax breaks

The budget also eased restrictions on capital cost allowances for renewable energy and conservation equipment as well as extending the Canadian Renewable and Conservation Expense (CRCE) category to include the cost of wind turbine pilot projects. CRCE expenditures are 100% deductible and available for flow-through share financing. "These changes will give the renewable energy and conservation industries greater access to accelerated write-offs for qualifying equipment and, in so doing, will enhance the ability of these sectors to attract investment capital," stated NRCan.

Jay Shepherd, a tax lawyer with Shepherd, Grenville-Wood and a member of the Independent Power Stakeholder Task Force, which liaised with NRCan to help obtain the tax breaks, said the concessions are no "Santa Claus" but will promote the development of projects which would otherwise not have left the drawing board. Gallagher of Vision Quest and chair of the task force, praised the tax changes as now allowing a better project reinvestment cycle and better access to investors.

Paul McKay, a director of the Independent Power Producers' Society of Ontario (IPPSO), said "Finance Minister Paul Martin deserves a round of applause for recent tax changes which take us halfway to parity with our Oil Patch competitors." He urged that "Ottawa must finish what it started on tax reform."

Despite the new federal initiatives and McLellan's conclusion that "We are making good progress in addressing climate change," Canada's poor showing in reducing greenhouse gas emissions and its long history of preferentially supporting and subsidising fossil fuels and the nuclear industry were condemned by McKay, Louise Comeau of the Sierra Club of Canada, and others. Comeau said Canada is 9.5% over its 1990 levels of greenhouse gas emissions and its national plan is "completely inadequate." The country is projected to be 20% above its 1990 levels in 2010.

Like many other speakers, McKay argued that pollution costs have to be accounted for in pricing, in a fair competition issue. This could be done "quickly and simply, with minimum regulatory effortÉwe need Ottawa to instruct all utilities to purchase future renewables at 80% of the retail price of power. Otherwise utilities should be subject to anti-competitive trade practice orders, penalties and lawsuitsÉ In all energy sectors, renewable developers need to get monetary credit for being clean, or polluters need to be penalised," she said. Several speakers dealt with the possible economic instruments which could achieve these goals.

Insurance industry fears

Driving the concern about Canada's need to reduce greenhouse gas emissions is growing data on the likely effects of global warming in Canada, which the insurance industry believes may be causing unprecedented multi-million dollar losses throughout the country.

For the first time at a Canadian green power conference, the Canadian insurance industry was represented in the person of Angus H. Ross of the Canadian branch of Sorema (Societe de reassurance des assurances mutuelles agricoles), a Paris based reinsurer. "One of the concerns we have as an industry is the increasing frequency and severity of severe atmospheric events," he said.

In 1995 alone, Ross stated that major weather related disasters in Canada and their insured property losses amounted to C$376 million. Such losses have increased from the late 1980s through the 1990s, and surpass losses of the 1970s, he said. Ross expects continued extreme weather related events, particularly more frequent and severe convective storms; more frequent and severe heat waves; less frequent cold waves, and more frequent floods.

"We cannot prove conclusively that the changes in climate and higher frequency of natural disasters that we are experiencing are influenced by greenhouse gas emissions and human activity. We do not need that absolute proof -- we believe that on a precautionary basis we have to recognise what the numbers are telling us very clearly: that the sums we are expending in Canada and worldwide on atmospheric related events are growing exponentially. It should be no small wonder that the insurance industry on a worldwide basis is a strong supporter of the findings of the inter-governmental panel on climate change."

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