Canada market secured once again -- Wind not expected to lose ground under new program

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Canada's Conservative government has reinstated the federal production incentive for wind power, re-branding it as part of a new package of environmental initiatives but essentially bringing the industry back to where it was before funding was frozen last year.

The new EcoENERGY for Renewable Power (ERP) program will run from April 2007 to the end of March 2011 and target installation of 4000 MW of new capacity from renewable energy sources like wind, biomass, small hydro, geothermal, tidal and wave energy. It will pay C$0.01/kWh for the first ten years of a project's life, at a cost of C$1.48 billion over the next 14 years. "There is no end to the potential of alternative, non-polluting energy sources," Prime Minister Stephen Harper said in making the announcement at a January 19 news conference in Victoria.

The ERP incentive (ERPI) replaces the existing wind power production incentive (WPPI) program. The new program's funding is less overall than a plan outlined by the previous Liberal government in its 2005 budget, which set aside C$920 million for an expansion of WPPI that was designed to stimulate development of another 3000 MW of wind, as well as C$886 million to provide a production incentive for the development of 1500 MW of other renewable energy technologies. Wind power, however, is not expected to lose any ground. A discussion paper to be released following the announcement was expected to recommend that of the ERPI target, 3000 MW be allocated to wind power projects.

Happy industry

The country's wind power market has been in limbo since last spring when the Harper government, elected in January 2006, froze funding for the planned WPPI expansion and a number of other renewable energy initiatives as part of a program review. Not surprisingly, the wind industry is happy to see the funding lull end. "Uncertainty is never good for business, and we are pleased to see that it has been resolved and that we have a solid foundation going forward," says Robert Hornung, president of the Canadian Wind Energy Association (CanWEA).

The delay had real world consequences for wind power developers, who had signed contracts for C$2 billion worth of projects on the assumption the production incentive was going to be there. "There was one project that was cancelled that made reference to this issue in particular, and there have been a number of projects that have had to manage the risk associated with not knowing whether or not these funds would be available when they had counted on them," says Hornung. Canada's reputation for having a stable policy framework for wind also took a bit of hit, he adds. "But the announcement does now provide a stable policy framework through March 2011, which is very positive."

At the same time, Hornung says, ERP is only part of what is needed to build a sustainable wind industry in Canada. "We continue to believe that this initiative, although it is a cornerstone of any efforts to deploy wind energy in Canada, does not, on its own, represent a comprehensive strategy."

Terms and conditions

The Canadian provinces already have procurements targets in place totalling nearly 10,000 MW by 2015, says Hornung, more than three times the ERP target. "We think there may be ways the federal government can help to facilitate and support. We don't have a preconception as to what that would look like, but we hope the federal government does not see this initiative as the end of its commitment to wind energy."

The government announcement offered few details of how the ERP program would be implemented. The discussion paper will lay out proposed terms and conditions for the ERP program, and Hornung expects those to be finalised relatively quickly. Before ERP funds can be made available, a submission must be made to the federal Treasury Board to formally approve their allocation. While that is normally a routine step, the fact that the Conservatives hold a minority of the seats in parliament also makes it a crucial one. The opposition parties could defeat the government at any time, and election speculation in Canada is rife.

"There is strong interest among all parties to see if we can try and reach an understanding on some of these terms and conditions as quickly as possible to ensure that a submission to the Treasury Board can be made as quickly as possible," says Hornung.

In addition to ERPI, the Harper government promised C$230 million over four years for the research, development and demonstration of clean energy technologies, including carbon dioxide sequestration, clean coal, clean oil sands production, next-generation nuclear and renewable energy. It has also pledged C$36 million in incentives and industry support for the adoption of renewable thermal technologies for water and space heating in buildings.

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