Incentives - Lack of support will slow growth in Canada

CANADA: The Canadian government's failure to extend the federal incentive for wind energy development will slow the industry's growth in Canada, say experts.

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The Canadian Wind Energy Association (CANWEA) believes the decision not to renew the EcoEnergy for Renewable Power (ERP) programme next year will force investors to look for more attractive markets in which to deploy their capital.

The ERP programme, which pays a C$0.01/kWh production incentive for the first ten years of a project's life, is scheduled to run until March 2011. But it has already allocated its entire C$1.48 billion budget with more than 6GW of projects still looking for support.

The wind industry has been lobbying the government for more than two years either to put more money into the programme or come up with an alternative. It was "shocked and disappointed" to see no funding at all when finance minister Jim Flaherty unveiled his spending plans on March 4, says CANWEA president Robert Hornung.

"It's going to make it much more difficult for Canada to compete with the United States for wind energy investment," he says. "In essence, what the federal government has done is (shunt) the responsibility for creating an attractive investment environment to the provinces. EcoEnergy was important because it helped reduce the impact of bringing wind online for ratepayers. In its absence, I think the question in many jurisdictions will be whether they should scale down their ambitions with respect to wind energy development, as it will now be more costly. The issue will be to see how the provinces react at this point."

The decision is difficult to understand in light of the government's own Throne Speech, says Mark Rudolph, co-ordinator of the Clean Air Renewable Energy Coalition, a body set up to accelerate the growth of Canada's renewables sector.

The speech, delivered the day before the budget was tabled, laid out the government's legislative priorities for the coming session. In it, the ruling Conservatives said they wanted to focus on making Canada a clean-energy superpower and a leader in green job creation. But the budget "signalled the death knell" to the very programme that would have helped meet those goals, says Rudolph. "We're perplexed," he says.

The C$300 million the budget invests in Atomic Energy Canada for the development of nuclear reactor technology won't achieve either objective in the near term, adds Rudolph, pointing to the federal government's target of supplying 90% of the nation's electricity needs from non-emitting sources by 2020.

"There is nothing shovel-ready about investing in nuclear technology," he says. "You can't build a nuclear reactor in ten years given the required approvals and construction timeframes."

The only renewable energy spending in the budget is C$100 million over four years to spur development of technologies like biomass and cellulose ethanol in the forestry sector. Tim Weis, director of the renewable energy and efficiency programme at the Pembina Institute, a Canadian sustainable-energy think tank, calls the money a token allocation that shows the government "sees renewable energy technologies as boutique experiments, not the mainstream solutions that they are in other parts of the world".

Hornung says CANWEA will continue to press the government to renew its support for wind, but expects the Canadian government will have limited financial flexibility to take action in a serious way until the 2011 budget. "It will be up to us, and hopefully the federal government, to use that time constructively to identify potential actions and options that can help improve our competitive position and facilitate the attraction of new investment into the sector," he says.

A potential stumbling block is Flaherty's plan to curb spending to get back to balanced budgets within five years, after heading into the red with a series of economic stimulus initiatives last year. "We've just had a budget that is signalling a strong desire not to proceed with much in the way of new expenditures for an extended period, so it's unclear from what fiscal basis the federal government might choose to pursue this," he says.

At the same, though, Hornung believes that there is a compelling case for federal investment in renewable energy, even in times of restraint.

He says: "We feel the industry has demonstrated really quite significant value to the government in terms of the amount of private funding leveraged through EcoEnergy, the fact there has been record investment in the wind energy sector in the midst of a global recession, and the fact that a recent study by GE Energy Financial Services found that EcoEnergy investments actually have a 5% rate of return for the government."

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