Call for production incentive for Canada -- With Kyoto in danger CanWEA seeks tax break support

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The Canadian Wind Energy Association has launched a major push towards its goal of 10,000 MW of installed capacity by 2010 by calling for a federal price incentive for wind power. The recommendation is just one of ten initiatives outlined in the association's newly released Wind Vision for Canada. With a strong policy commitment wind energy could provide 5% of Canada's electricity needs by 2010, says the CanWEA report.

"Canada must embrace change and innovation in public policy and energy market reform or risk loss of competitiveness in this global industry." A key step would be the implementation of a C$0.020-0.025/kWh refundable production tax credit which could be applied against a company's taxable income or taken as a cash payment, says CanWEA president Fred Gallagher. The incentive would be similar in magnitude to wind power's production tax credit (PTC) in the United States, but avoid some of its drawbacks. Smaller US wind power developers, without substantial tax liability, cannot take advantage of the PTC, forcing them to seek out large, tax-paying equity partners who can. CanWEA's proposal allows the benefit to flow directly to producers, says Gallagher, whether they have taxable income or not. "If you really want to build this sector you have to build healthy energy companies, not a bunch of tax-motivated investors."

The association's 10x10 goal, launched at its annual conference in October, had its underpinnings in Canada's Kyoto commitment to reduce its greenhouse gas emissions 6% below 1990 levels by 2012. Gallagher admits US President George Bush's decision to abandon the treaty injects a note of uncertainty into the industry's plans. "The challenge for the wind industry today is to maintain the momentum that we have, and to convince the government that this is a significant industry that has value outside Kyoto," he says.

CanWEA's Wind Vision points to rising energy costs, electricity shortages and volatile fossil fuel prices, and argues that wind energy can provide a reliable source of power within short, flexible timeframes and at stable long term costs. "There is a lot of value we can demonstrate now that we couldn't demonstrate two years ago," says Gallagher. "Two years ago everybody thought natural gas was the answer to our greenhouse gas emissions problem. It was supposed to be a cheap source of electricity and it's not."

Emissions driver

Even with the future of the Kyoto Protocol in doubt, Gallagher believes emissions reduction will be an important driver for wind development in Canada. "I don't think there is any question we will have to do something about reducing emissions. The implications are far too great, and the scientific evidence continues to be more and more compelling. Now, just because an international agreement has fallen apart, does that mean the world is any less dedicated to this issue?"

In Canada, in fact, the federal government recently unveiled a C$44.2 million plan to reduce emissions from its own operations by 31% from 1990 levels by 2010. "As the country's single largest enterprise we have an obligation to show strong, visible leadership," said Natural Resources Minister Ralph Goodale.

Part of the government's strategy is a commitment to buy 20% of its electricity from renewable sources. CanWEA's Wind Vision calls on provincial governments to follow that lead, as well as implement renewables portfolio standards and net metering policies to allow owners of home power systems to offset their consumption with their own generation.

The association is also seeking removal of tax barriers for small power producers, establishment of national greenhouse gas emission trading, development of a wind energy atlas for Canada, stepped up R&D, electricity product labelling and consumer education.

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