Enhancing Sustainable Economic Development

with Low-Impact Renewable Energy

Clean Air Renewable Energy Coalition

Andrew Pape-Salmon, Pembina InstituteMark Rudolph, Rudolph and Associateshttp://www.cleanairrenewableenergycoalition.com

Enhancing Sustainable Economic Development

with Low-Impact Renewable Energy

Clean Air Renewable Energy Coalition

Andrew Pape-Salmon, Pembina InstituteMark Rudolph, Rudolph and Associateshttp://www.cleanairrenewableenergycoalition.com

Why Renewable Energy Makes SenseWhy Renewable Energy Makes Sense

• Energy source diversification• Energy source diversification

• Technology advancement of renewables

• Technology advancement of renewables• New capital investment• New capital investment

• Regional creation of jobs• Regional creation of jobs• Improved air quality and related benefits• Improved air quality and related benefits

• Greenhouse gas reductions• Greenhouse gas reductions

enhance Canada’s efforts to participate in the 21st century global energy economy

enhance Canada’s efforts to participate in the 21st century global energy economy

• Massive energy resource potential in Canada

• Massive energy resource potential in Canada

• Explosive growth in investment in low-impact renewables (30%/yr+ for wind and solar PV)

• Strong commitment from governments to growth

Denmark: 20% of electricity by 2003, 50% in 2020

Spain: 12% of electricity by 2010

Germany, UK, Netherlands: 10% of energy by 2010

• International competitors ahead of Canada in terms of policy, production and export of technology and services

• Investors targeting leading policy regimes

• Explosive growth in investment in low-impact renewables (30%/yr+ for wind and solar PV)

• Strong commitment from governments to growth

Denmark: 20% of electricity by 2003, 50% in 2020

Spain: 12% of electricity by 2010

Germany, UK, Netherlands: 10% of energy by 2010

• International competitors ahead of Canada in terms of policy, production and export of technology and services

• Investors targeting leading policy regimes

Renewable Energy WorldwideRenewable Energy Worldwide

9 18 125344

1081

17711539

2251

4445

73 85 218485

1507

2417

3335

4245

8753

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

Australia France Canada UK India Denmark Spain USA Germany

Ca

pa

cit

y (

MW

)

1999 Installed Capacity

2001 Installed Capacity

Wind Energy CapacityWind Energy Capacity

Barriers to Renewable Energy Investment in Canada

Barriers to Renewable Energy Investment in Canada• Low electricity prices

• Little market recognition of environmental and social benefits of renewables

financial “gap” on supply side

• Low consumer engagement and awareness

financial “gap” for retail and marketing

• Canadian incentives significantly lower than U.S. and other trade partners

• Low electricity prices

• Little market recognition of environmental and social benefits of renewables

financial “gap” on supply side

• Low consumer engagement and awareness

financial “gap” for retail and marketing

• Canadian incentives significantly lower than U.S. and other trade partners

Regional Wholesale Premium (Retail premium - add’l 2-4 ¢/kwh for utility

admin, load balancing and return)

Province

(A) Est. Avg Cost of Base Power

Green Cost (B) Premium/Gap 30% WCF (1)

(10.28 ¢/kWh-col A)

Green Cost (C) Premium/Gap 40% WCF (1)

(8.06 ¢/kWh-col A)

Estimated Provincial Wind Capacity Factor (WCF)

AB 3.5 6.8 4.6 37% Ont 4.0 6.3 4.1 26%

Que 3.4 6.9 4.7 38%

PEI 6.9 3.4 1.2 38%

NS 4.5 5.8 3.6 38%

Nfld 5.9 4.4 2.2 46%

NB 6.3 4.0 1.8 32%

Man 3.8 6.5 4.3 38%

BC 4.7 5.6 3.4 34%

Sask 2.5 7.8 5.6 39%

Total Green Cost Premium / Gap

3.4 - 7.8 ¢/kWh

1.2 – 5.6 ¢/kWh

Green Premium is based on the difference between the estimated Base power price and the green power price/kwh required to break even at an 11% discount factor $1,650/MW capital cost; $14/MWH operating costs; 33% tax rate experienced in some recent wind farms

Response to Barriers:Business - NGO partnerships

Response to Barriers:Business - NGO partnerships• Growing convergence of interests• Growing convergence of interests

•Aligned concept of sustainable development

•Aligned concept of sustainable development• Collaborative approaches to

environmental, economic and social issues

• Collaborative approaches to environmental, economic and social issues• Opportunity for new partnerships between business and NGOs

• Clean Air Renewable Energy Coalition formed December, 2002

• Opportunity for new partnerships between business and NGOs

• Clean Air Renewable Energy Coalition formed December, 2002

Members:

Axor

BC Hydro

BP Canada Energy Company

Benign Energy Canada Inc.

Dofasco

Enbridge

Federation of Canadian Municipalities

Friends of the Earth

Members:

Axor

BC Hydro

BP Canada Energy Company

Benign Energy Canada Inc.

Dofasco

Enbridge

Federation of Canadian Municipalities

Friends of the Earth

Clean Air Renewable Energy CoalitionClean Air Renewable Energy CoalitionWho we areWho we are

International Institute for Sustainable Development

Ontario Power Generation Inc.

Pembina Institute

Pollution Probe

Shell Canada Limited

Suncor Energy

Toronto Environmental Alliance

Toronto Hydro

International Institute for Sustainable Development

Ontario Power Generation Inc.

Pembina Institute

Pollution Probe

Shell Canada Limited

Suncor Energy

Toronto Environmental Alliance

Toronto Hydro

• Jointly identified desired policy changes: 2000/01: new tax incentives for renewable energy supply and demand

2001/02: comprehensive package of measures to compliment the WPPI, CRCE, MIP

• Tested proposed changes with prospective partners to ensure alignment between energy companies and environmental NGOs

• Pursued active dialogue with all levels of government, delivered coordinated messages to key government bodies

• Jointly identified desired policy changes: 2000/01: new tax incentives for renewable energy supply and demand

2001/02: comprehensive package of measures to compliment the WPPI, CRCE, MIP

• Tested proposed changes with prospective partners to ensure alignment between energy companies and environmental NGOs

• Pursued active dialogue with all levels of government, delivered coordinated messages to key government bodies

Developing and Implementing our StrategyDeveloping and Implementing our StrategyClean Air Renewable Energy CoalitionClean Air Renewable Energy Coalition

• Importance of the right partners

• Importance of broad-based advocacy

• Importance of targeted and focused messages

• Importance of evolutionary change

• Importance of the right partners

• Importance of broad-based advocacy

• Importance of targeted and focused messages

• Importance of evolutionary change

Multi-stakeholder partnerships – lessons learnedMulti-stakeholder partnerships – lessons learned

Sustainability is not a solitary pursuit – it’s a collaborative effort

Sustainability is not a solitary pursuit – it’s a collaborative effort

Clean Air Renewable Energy CoalitionClean Air Renewable Energy Coalition

• Establish Renewable Energy Target for Canada Establish national “certificates” trading system to equalize costs across Canada and provide flexibility

Example: 10% target by 2012 would result in emission reductions of 32 Mt, or 13% of Canada’s Kyoto gap

• Increase the Wind Power Production Incentive to be competitive with US levels Level the playing field in North America – currently U.S. Production Tax Credit worth 2.7¢/kWh after tax, WPPI only $0.67 ¢/kWh, assuming 33% marginal tax rate

• Establish Renewable Energy Target for Canada Establish national “certificates” trading system to equalize costs across Canada and provide flexibility

Example: 10% target by 2012 would result in emission reductions of 32 Mt, or 13% of Canada’s Kyoto gap

• Increase the Wind Power Production Incentive to be competitive with US levels Level the playing field in North America – currently U.S. Production Tax Credit worth 2.7¢/kWh after tax, WPPI only $0.67 ¢/kWh, assuming 33% marginal tax rate

Recommendations to GovernmentRecommendations to GovernmentClean Air Renewable Energy CoalitionClean Air Renewable Energy Coalition

• Establish Production Incentives for other Resources (solar PV, low-impact hydropower, low-emission biomass, tidal and wave power)

• Work with Provinces and Territories to Establish Complimentary Mechanisms to Support Target Renewable portfolio standards

System benefits charges and investment programs

• Establish Production Incentives for other Resources (solar PV, low-impact hydropower, low-emission biomass, tidal and wave power)

• Work with Provinces and Territories to Establish Complimentary Mechanisms to Support Target Renewable portfolio standards

System benefits charges and investment programs

Recommendations to GovernmentRecommendations to GovernmentClean Air Renewable Energy CoalitionClean Air Renewable Energy Coalition

• Expand Market Incentive Program to $30m/yr to support broader-based consumer rebate and education plans Expand beyond pilot project status

Extend deadline to 2012

• Identify a Meaningful Role for Renewable Energy in Canada’s Climate Change Strategy

• Develop Wind Energy Resource Mapping and Measurement Program across Canada

• Expand Market Incentive Program to $30m/yr to support broader-based consumer rebate and education plans Expand beyond pilot project status

Extend deadline to 2012

• Identify a Meaningful Role for Renewable Energy in Canada’s Climate Change Strategy

• Develop Wind Energy Resource Mapping and Measurement Program across Canada

Recommendations to GovernmentRecommendations to GovernmentClean Air Renewable Energy CoalitionClean Air Renewable Energy Coalition