Canada

Canada

Seeking a way to ten thousand megawatt

The Canadian Wind Energy Association launched a call for 10,000 MW by 2010 at its annual conference in October. The "10x10" goal might be achievable if the right regulative framework is put in place, but to achieve that the call for new legislation needs to be clear, concise and consistent. At the conference it was anything but, as this report reveals.

Canada's wind lobby launched a call for 10,000 MW by 2010 at its annual conference. The "10x10" goal might be achievable if the right regulative framework is put in place, but to achieve that the call for new legislation needs to be clear, concise and consistent. At the conference it was anything but

This year's Canadian Wind Energy Association conference was as much a rallying cry as a review of the state of the industry. The association used the 16th annual event, held October 23 to 25 in Vancouver, to launch its ambitious new target of 10,000 MW of installed wind capacity by 2010. For the 194 delegates who spent three days contemplating how to get to "10x10," the message was clear. Canada needs a clear, consistent set of policy signals from all levels of government to successfully develop the country's wind power potential.

"Right now, we don't have electricity feed laws, we don't have a Renewables Portfolio Standard (RPS), we don't have tax credits and we don't have consumer incentives. So no wonder we're not getting anywhere," Jeff Passmore, a past CanWEA president and long-time renewable energy advocate, told conference delegates. "If we continue on the path we're on now, we will not meet ten by ten. It's very clear to me."

Canadian governments, said Passmore, lack the "political will" to create a regulatory environment favourable to wind. For current CanWEA president Fred Gallagher the setting of the 10x10 goal is a fundamental step in getting politicians to sit up and take notice. "What we're talking about here," Gallagher said, "is creating something that is massive enough that people can't ignore it anymore. I think what we've found is that it's easy for people to brush us off because we don't have a consistent message."

The prevailing attitude among government and utility officials, he continued, is that wind energy generation is a technology of the future that can only ever supply a small portion of Canada's energy needs. The assumption, he added, is that natural gas-fired generation will always be the lower-cost option.

The conference's panel of international wind energy experts, however, convincingly dispelled these misconceptions, offering detailed analyses of the forces underlying the explosion of wind power development around the world. Even excluding the so-called external costs of thermal generation sources, argued British energy consultant David Milborrow, the price of wind power today is "within the range" of its fossil fuel competitors. And with costs continuing to drop, he said, the price gap should disappear within the next four years. Wind energy financier Stephen Probyn, of Toronto-based Probyn and Company, told delegates that with the US government's $0.017/kWh Production Tax Credit, wind is now the "cheapest energy, all in" in California and Texas, where he does much of his business. "We are financing two-point-five cent wind power today in the United States. There is nothing that even comes close."

California wind energy expert Paul Gipe, however, urged delegates not to get too centred on the issue of cost. "This industry has unfortunately focussed too much of its efforts on lowering its costs, to be cheaper than coal, to be cheaper than natural gas. I find encouraging what I see here in Canada, with companies like Vision Quest emphasising the revenue side, the value side. This electricity is worth more. It's better than coal, it's better than oil, it's better than gas, and we should be paying for it."

The dramatic growth of the wind industry in Germany, Spain and Denmark demonstrates that the most effective way to capture the value of wind power, argued Gipe, is through feed-in tariffs that offer a "fair price" for renewables. Unlike Probyn, Gipe is not a fan of the American Production Tax Credit, arguing that it leads to boom and bust cycles. "It's not sustainable."

The tax tool

In Canada, however, the tax system is one of the few tools the federal government has available to encourage the development of renewables, said Philipp Andres, who is sales manager for Vestas-American Wind Technology, working out of Ontario. Canada's decentralised political structure places the greatest control over natural resources and energy policy in the hands of the provinces, making it virtually impossible for the federal government to impose a single mechanism, like a feed-in tariff, that cuts across jurisdictional boundaries. And while the provinces could do it on their own, the only two that have restructured their electricity markets, Alberta and Ontario, have made no special provisions for renewable energy.

Still, many speakers found reason for cautious optimism. BC Hydro, the monopoly, government-owned utility in the province of British Columbia, announced earlier this year that 10% of new supply would come from green sources. The utility, says supply engineer Andrea Estergaard, is already considering boosting this "voluntary RPS" to 20% or 30%, a strategy that has the unqualified support of BC's environment minister, Joan Sawicki. Targets like BC Hydro's RPS and CanWEA's 10x10, are a "necessary and achievable" part of the transition to a sustainable energy future, Sawicki told delegates. "In my mind, if anything, they are more modest than we can afford."

OIL AND GAS INTEREST

The wind industry is also beginning to attract the attention of Canada's oil and gas heavyweights. Suncor Energy and Shell Canada are already buying wind power and, said Deryck Evans of Calgary-based Husky Oil, further investment is likely as more companies get on the learning curve. "Can the oil and gas business play a role in making ten by ten? Well, certainly. They are in the energy business too," Evans said. Oil companies, he continued, have access to "massive amounts" of cash flow and invest C$20 billion a year in their core business, which is shrinking. It's not unrealistic to suggest that 5%, or C$1 billion a year, might be directed towards wind development, he added.

Wind power is also positioned to play a strategic role in the North American marketplace. If the US implements a federal RPS, large Canadian utilities like BC Hydro and Hydro-Quebec, which export large amounts of power south, could be forced to add renewables to their mix just to maintain access to American markets. "I would say the Federal Energy Regulatory Commission in the United States could have quite a bit to do with how much wind energy is installed in Canada," says Andres.

Canada's proximity to the massive American market also opens up export opportunities in turbine manufacturing, particularly considering the Canadian dollar's exchange rate advantage. But before the world's major wind turbine makers will even consider setting up manufacturing here, said both Andres and NEG Micon's Jesper Michaelsen, they need evidence of a strong, sustainable domestic market.

Creating that kind of stability and building a manufacturing base, said Gallagher, is a key element of CanWEA's 10x10 target. The 10,000 MW figure comes from research done for a stakeholder committee examining greenhouse gas reduction options in Canada's electricity sector. Computer modelling of the most cost-effective scenarios found that with natural gas prices at C$4 per gigajoule, below what they are today, demand rising at current rates and electricity exports increasing significantly from today's levels, Canada could see the addition of more than 10,000 MW of new wind by 2010. To get there with an industry that "has some strength and legs" means that Canada has to start laying the foundation now, said Gallagher.

Still, as one delegate put it, going from Canada's current installed capacity of 137 MW to 10,000 MW over the span of a decade is "pretty overwhelming." In his 1999 World Market Update, Birger Madsen of BTM Consult of Denmark forecast Canada's installed capacity would reach 500 MW by 2004. To significantly alter that outlook, he told delegates, significant changes in energy policy are essential. If fixed tariffs are not viable in Canada's political system, he said, some type of long term mechanism that will have the "same impact" needs to be considered. "Penetration of wind energy into a country's energy system can work very fast if an appropriate framework is in place." Marketing premium-priced green power to end-use customers, which has emerged as the mechanism of choice within some government circles in Canada, won't do the job. "You cannot leave such an important matter as sustainable energy development to voluntary charity," Madsen warned.

Planned or panic?

Some policy clarity about how Canada intends to meet its Kyoto commitment would help provide the necessary framework, says Warren Bell, who manages Canada's Greenhouse Gas Emissions Trading Pilot. "That could unlock a great deal of investment that's out there that's being held back from the market because of policy uncertainty about what the future might look like." Rob Macintosh, of the Alberta-based Pembina Institute for Appropriate Development, recommended ecological tax reform, based on the polluter pays principle, as "by far the most effective broad brush approach for delivering environmental value to the bottom line."

Whatever the preferred mechanism, several speakers advised, Canada's wind industry needs to work on refining its message. "One of the things I'm hearing as an outsider is that there seems to be some confusion in the room as to what you really want. What is it you are really asking the government for? Somebody over here will ask for a tax credit, somebody over there will ask for something else," says Evans. "I think a strong, consistent message repeated over and over again will go a long way."

Despite the many challenges, says Gallagher, he and his partners are putting their money on 10x10. "We believe wind has proven it's a worldwide performer. It's a factor in the Kyoto commitments of a number of other countries. We don't see why it should be any different in Canada. We're seeing electricity demand outstripping supply in many provinces, and we're also seeing conventional fuel costs rising. The question in my mind is how do we get from here to there? A planned mode, or a panic mode?"

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