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Recommendations
for Budget 2005 National Green Power Strategy Summary
Investment
Benefits for Canadians
Background
and Rationale At the end of 2003, worldwide wind generation capacity was more than 39,000 MW, with more than 90 per cent of wind capacity located in Europe and the United States. This expansion is occurring because governments of many industrialized and developing countries recognize the central role of green power, and are taking aggressive steps to position themselves advantageously with respect to growing environmental requirements while benefiting from the rapidly expanding market. Substantial market-based policy mechanisms to support the implementation of low-impact renewable energy are already in place in the United States, United Kingdom, Germany, Denmark, Spain, Japan, France, Brazil, China and India. In
comparison to these efforts, Canada is doing little to develop its green
power resources, with the result that it is failing to position itself
adequately to address climate change over the long term and, in this
important area of technological innovation, abandoning leadership to
others. For example, Canada has access to one of the largest wind energy
resources in the world, yet most other industrialized countries produce
more wind power than Canada. Denmark generates more than 16 per cent
of its annual electricity needs with wind power while other European
countries have similar targets. In contrast, wind contributes only 0.2
per cent of Canada’s current electricity needs with just 439 MW
of capacity. The Canadian Wind Energy Association has targeted the development
of 10,000 MW of wind power by 2010 — a modest five per cent of
Canada also needs to make a serious commitment to the development of other green power sources such as solar, biomass, wave, tidal and run-of-river hydropower, all of which offer considerable economic and environmental benefits and opportunities in a world seeking cleaner energy sources. The federal government already recognizes the benefits of low-impact renewable technologies as a category through the EcoLogo (Environmental Choice) program and Market Incentive Program. Canada now requires a concerted, effective Green Power Strategy to support this full range of relevant technologies. Such a strategy is essential to meet the broadly recognized need to strengthen the current federal plan for implementation of the Kyoto Protocol. The federal government is ideally positioned to play a leadership role in establishing a strong renewable energy presence in Canada, and leverage the engagement of provincial governments. This proposed strategy would build on and extend the federal government’s existing mechanisms. Over the past decades, billions of dollars have been spent to develop fossil fuel technologies and nuclear power. It is now time for the federal government to invest in green power in the same way. A half-hearted effort will only increase the percentage of green power in the electricity portfolio by a fraction of its potential. A serious effort to develop green power in Canada, with long-term commitment, offers progress towards the Kyoto target, more smog-free days with related reductions in hospital admissions, a Made-in-Canada manufacturing base, a skilled labour force and export opportunities. The window of opportunity for Canada to join world leaders in green power development is open now. Recommendation The WPPI, introduced in the December 2001 federal budget, targeted the development of 1,000 MW of wind power capacity by 2007. The WPPI is providing 20-60 per cent of the “producer gap” for developing wind power in Canadian provinces. This gap refers to the difference between wholesale electricity prices and the cost of developing a wind farm by the private sector.43 These wind subsidies are critical to level the playing field with conventional energy sources that are well subsidized and that externalize their human health and environmental costs. The federal government should support a long-term commitment to wind power at a level that will attract domestic manufacturing and help Canada develop expertise in this field. The government should operationalize its strong commitment in the Throne Speech by expanding the WPPI from 1,000 MW to 4,000 MW, increasing the incentive to $0.01/kWh, and maintaining the program until 2010. The federal government should also use its commitment to wind energy to leverage provincial and territorial governments into strengthening their commitment to advancing wind energy development. Expanding the existing target will not require new funding initially, as WPPI still has existing resources available. Initial program costs would be incurred in 2006, increase until 2010, then decline from 2016 to 2020. 2)
Green Power Production Incentive The federal government should develop new fiscal incentives, similar to the existing Wind Power Production Incentive (WPPI), that would encourage the development of other green power technologies at a pre-commercial level, including solar, wave energy, tidal, hydro, and biogas energy.44 These incentives should be structured in a similar fashion to the WPPI with electricity production incentive levels that reflect the marginal development costs of each technology. The incentive for solar and other smaller-scale technologies could be structured as a capital cost rebate for ease of administration. 3)
Market Incentive Program (MIP) To attain expanded use of green power in Canada, the government has already recognized, through its establishment of the MIP, the critical importance of providing an incentive for retailers to undertake consumer education programs. As the federal government takes on a stronger leadership role through aggressive green power procurement and interest in green power purchasing increases, the MIP will play an important role in leading to incremental reductions in greenhouse gas emissions. The MIP should be extended to 2012 and the incentives should be tied to actual sales volume, rewarding those retailers who do adequate marketing and education such that actual, additional sales over and above existing sales volumes are realized. 4)
Comprehensive program to engage Canadians If Canada is to take full advantage of its tremendous resources for low-impact renewable energy, it will require a comprehensive public education and outreach program. This is needed to do market research, produce public education and outreach materials for targeted constituencies, including the building sector, planners and community leaders, on the benefits that low-impact renewable energy sources offer and to show them how they can become engaged in supporting, investing in and purchasing green power. 5)
Investment in R&D There is an opportunity for Canada to be among world leaders in the development of innovative technologies for green power, particularly in such areas as solar, biomass and ocean-based technologies. These are the technologies that will be increasingly required to meet the needs of a world moving toward cleaner energy sources at a rapid pace. To develop a competitive edge, however, Canada, will have to provide substantive investments in research and development, at levels comparable to some of the leading European countries. Annual investments of $50 million, with long-term commitment, could put Canada among the world leaders. Some of this could be achieved by refocusing current R&D programs away from conventional sources of energy. 6)
Federal procurement of green power The
federal government should play a leadership role by setting aggressive
long-term targets for green power procurement to help support the development
of domestic markets for green power and related technologies. The current
government target is 20 per cent for 2006. In contrast, the Alberta
government has committed to meeting 90 per cent of its electricity needs
through green power starting in 2005. The federal government should
increase its commitment to 30 per cent by 2020 and 80 per cent by 2020.
In addition to aggressive targets, the program needs to offer ten-year
contracts to build confidence in the green power sector. This program
would help bring down green power costs through economies of scale.
Over the longer term, as 7)
Solar Roof Program In the past, green power programs often overlooked distributed generation (that is green power generation units located where the electricity will be used), such as solar PV. However, this is changing. Japan established a program and set a target to install 70,000 solar roofs in 1994 and installed 168,000 by 2003. Germany has a target of 100,000 solar roofs. Canada has the same opportunity to support its solar industry. The approach needed is different from the WPPI. Canada will need to introduce a buy-down program that restores 30 per cent of the purchasing costs to support the development of a viable solar PV industry in Canada. The recommendation is for the program to be established in 2005 and run until 2015, at which time it is expected that solar PV will be more cost competitive. Alternative
and Complementary Policies Also, with the sale of Petro-Canada planned for this fiscal year, there is a unique opportunity to create a secure, long-term source of funding to help with the transition towards a 21st century economy that genuinely protects human health and ecological sustainability. Proceeds from the Petro-Canada sale should be placed in a permanent trust from which proceeds generated would be limited to those that move us toward a low-carbon economy, including substantive support for the development and deployment of low-impact renewable energy. While this set of recommendations is focused predominantly on low-impact renewable energy for electricity generation, there is tremendous potential for low-impact renewable energy in heating and cooling as well as distributed (at source) electricity use. Such systems include combusting agricultural and wood residues for heat and power, using biogas (manure) digesters for heat and power, heating and cooling buildings with ground source heat pumps and solar thermal systems. Some of these technologies are very inexpensive sources of energy but there are significant barriers to their deployment including consumer and builder knowledge gaps, as well as larger upfront capital costs. To deploy these technologies, federal support is essential and will help meet numerous national priorities, e.g.: climate protection; improved air quality; electricity system resilience; economic development in rural areas and agriculture and forestry sectors; support innovative forward-looking industries. Contact Alex
Boston Matthew
Bramley
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