"When you think about just the difference in how wind energy is being considered in Canada today versus five years ago, you see the discussion has changed quite considerably, primarily because there is a discussion," says Robert Hornung, president of the Canadian Wind Energy Association (CanWEA). "Five years ago, wind wasn't talked about at all. Now all governments and all utilities are moving forward with it. But it still has to take another step.
"We need to start thinking bigger about wind energy," he adds. "We can't see it as a niche or marginal or limited in scope. We need to think about what is actually possible, and then look at the development of a comprehensive strategy to get there." CanWEA is hoping to spark that process at the 2008 edition of its annual conference, which is being held in Vancouver during October 19-22. Here it will release a new wind energy vision, proposing a long term target for installed wind capacity and outlining the steps that need to be taken to meet it.
Trillion dollars
The overarching challenge, according to Hornung, is creating a market that will attract the investment that is required. "Canada has a tremendous amount of potential, and we're well positioned to take advantage of it. But we have to realise that there is a very competitive global marketplace for wind energy," he says, referring to an industry in which demand for technology is outstripping supply - and is expected to do so for several years.
"We're in a situation where the amount of investment foreseen for wind energy going forward is enormous, close to a trillion dollars between now and 2020. That money is going to be invested where it provides the best return for the investor. That means for Canada to succeed in capturing the economic benefits of wind, it has to be an economically attractive and economically competitive location for wind energy investment. At this point in time, it's clear we can do more in this regard."
The challenge
Canada's particular challenge is that it is located right next to the United States, by far the largest wind market in the world for three years running. "We are always going to be held up against the United States, and in the US you have got federal incentives that are twice as strong, you've got procurement processes that are more straightforward, you've got state governments that seem to be doing a lot more to try and attract manufacturing than what we have got going on at the provincial level in Canada," says Hornung.
The Canadian government's ecoEnergy for Renewable Power (ERP) program pays a C$0.01/kWh production incentive for the first ten years of a project's life, while the US federal incentive is double that. ERP is scheduled to run until the end of March 2011, but is expected to allocate all of its funds at least a year ahead of schedule. The first step in providing a stable market for investors going forward, explains Hornung, is to make sure federal support continues.
CanWEA has proposed a C$200 million a year expansion that will extend the program to March 31, 2014 and provide payments to support another 8000 MW of renewable energy projects. The Canadian wind lobby decided not to push for an incentive level comparable to that of its neighbour, US$0.021/kWh, in the belief that such a dramatic rise would not be politically acceptable. Just getting the expansion it is seeking is likely to be challenge enough. "As a result, our prime objective is to see the program extended and expanded, not to see it enriched," Hornung says.
Pricing carbon
One thing that could help narrow the competitive gap is the progress Canada is making when it comes to putting a price on carbon. The province of Alberta already has a system in place that allows industrial emitters to meet legislated greenhouse gas emission reduction targets by purchasing offsets from wind power producers in the province. The federal government is expected to introduce a similar system in 2009. But for now, both plans limit the market by placing an effective cap on the price emitters have to pay for reductions.
Getting to the point where the carbon price actually reflects the full value of wind's environmental benefits is one issue. Another is the plethora of climate change responses that are springing up across the country. In addition to the federal and Alberta systems, there are carbon taxes in place in British Columbia (BC) and Quebec. Ontario, Manitoba, Quebec and BC, along with seven US states, have joined the Western Climate Initiative, which is currently working to design a regional cap and trade program to help meet its goal of rolling back greenhouse gas emissions by 15% to below 2005 levels by 2020. "There will be challenges to ensure there is some commonality there," says Hornung.
The danger in relying on a high price for carbon is that policymakers will equate this with a renewable energy strategy. "If you get the market signals right, it will probably move you in the right direction in the greenhouse gas intensive portions of Canada's electricity system. If you want to optimise and maximise the potential benefits of wind energy in Canada, however, you also need to act to address other barriers," says Hornung. "Those barriers might be [lack of] access to transmission, or an extremely cumbersome regulatory process, or lack of familiarity with the technology. There is a whole range of different things."
Reaching the market
Ensuring that viable wind energy projects have a path to market is becoming one of the obstacles the industry has to overcome. Most wind power in Canada is procured through competitive requests for proposals (RFPs) issued by government controlled entities. These are invariably oversubscribed. Quebec's completed call for 2000 MW of wind elicited 7724 MW worth of bids, meaning that 5000 MW or so of projects were left on the table at the end of the selection process. Manitoba Hydro is currently in negotiations with the developer of one 300 MW project to fulfil its recent RFP after receiving 84 proposals. BC released a call in June for 5000 GWh of clean electricity a year, equivalent to about 1600 MW of wind. But the province already has 17 wind energy projects, totalling more than 5000 MW of capacity that have either completed or are in the process of going through its rigorous environmental assessment process; they represent only a fraction of all the investigative use permits taken out by wind project developers laying claim to potential sites on BC's vast publicly owned lands.
Great visibility
"Because of the nature of the electricity markets that many provinces have established, the Canadian wind market has been and continues to be largely determined by the wind demand of the major provincial utilities. The result is that you actually get a much greater level of visibility in Canada when compared to the US when it comes to exactly how much wind power the utilities are seeking - and the contracts for power delivery happen early and they happen at relatively larger scale," says Joshua Magee, a senior analyst with Emerging Energy Research, a global information provider. "But it also means that once those competitive tenders are completed, there are relatively few opportunities for developers that are not successful to find other solutions to develop their projects."
It is a problem, agrees Hornung. "What we have is a lot of good projects that aren't getting built, and a lot of good projects that invest a tremendous amount to participate in those processes, don't win a contract and now have to wait to see if there is another RFP. It produces a boom and bust cycle for wind energy development," he explains. "The absence of a long term and stable growth pattern in the Canadian market makes it a less competitive investment destination for both project developers and manufacturers. I think there are challenges here we need to think about."
Made in Canada
Bringing manufacturing to Canada is a key part of what needs to be achieved. Turbine makers and component suppliers are setting up shop in Quebec, mainly because the government contracts require that a high proportion of equipment is made locally. Outside Quebec, very little is happening. "We need to find a way to bring more manufacturing and more supply chain to Canada," says Hornung. "At some point political support for the industry will decline if that doesn't happen."
Although the Canadian market sometimes sits in the shadow of the behemoth to the south, some observers expect that living next to the US could ultimately become an important factor in the industry's growth. "One of the things, and this is a much longer term play, that we expect will materialise is that Canada will become an increasingly important source of clean energy supply for US load," says Magee. "Many of the areas of the United States that are in relatively close proximity to Canada will find it increasingly difficult to meet their clean energy demands without the ability to have some sort of import relationship with the substantial hydro and wind resources in places like British Columbia and Quebec."
Until the US wakes up to its reliance on clean energy from Canada, there is a lot to do. In addition to the just short of 2000 MW of wind power installed, another 5800 MW is either under construction or has power purchase agreements with utilities. RFPs now underway in BC and Ontario will add to that total, as will Quebec's plan to issue two more RFPs this year seeking 500 MW of smaller-scale wind power projects from municipalities and First Nations groups. A significant milestone in 2008 is that, by the end of the year, there will be utility-scale wind turbines up and operating in all ten provinces.
Although only 30 MW of new projects had been commissioned by mid-year, Hornung expects 2500 MW of wind plant will be operating across Canada by the end of 2008 (see page 12). Turbines are expected to come online in Newfoundland and Labrador, Prince Edward Island, New Brunswick, Quebec, Ontario, Alberta and BC. "It will be close to a record year. For sure, it will be our second best year ever," he says. Canada's best year so far for new wind power installations was 2006, when 775 MW came online.
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