The dominance of monopoly, provincially-owned utilities, restricted access to grids and higher cost of green energy products makes market entry difficult for renewable developers, while lower rates of return and longer payback periods also tend to make renewable projects less attractive to investors.
However, the study argues, government can play a role in eliminating those hurdles. A survey of 45 investors "confirmed that the tax system can play a role in influencing their investment decisions," it says. "Tax incentives can sometimes improve the rate of return or reduce the payback period on an investment to make it more appealing."
Barriers to investment
Over the past 30 years, the report points out, governments have provide billions of dollars to the fossil fuel and nuclear energy sectors through direct spending, regulations and tax incentives. "Sometimes this was to encourage investments in certain forms of energy and at other times it was to achieve specific policy objectives," the study says. Given Canada's Kyoto commitment to reduce emissions of greenhouse gases to 6% below 1990 levels, it says, support for the renewable sector makes sense.
"The federal government needs to find innovative solutions to help overcome the barriers to investing in renewable energy," says acting commissioner Richard Smith. "The use of renewable energy has a positive impact on climate change and smog. It just cannot be ignored." The commissioner's report echoes many of the arguments put forward by Canada's renewable energy industry. Fred Gallagher of the Canadian Wind Energy Association hopes the fact that the message is now coming from one of the government's own agencies will have an impact. "I think what the commissioner is trying to do is provide the government not with a bashing, but with an excuse to do something," he says.
Gallagher, however, is disappointed the report was released too late to influence the government's year 2000 budget, which was released in February. Canadians could now be facing a fall election, which Gallagher predicts will delay action on climate change and renewables even further.
The Commissioner of the Environment and Sustainable Development is part of the Auditor General's office, a watchdog agency that performs audits of government operations and provides advice to parliament.