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"Renewable Energy in Canada Final Report Submitted by: The Conference Board of Canada September 24, 2003 1 Table of Contents Executive Summary ........................................................................................................................ 3 Introduction..................................................................................................................................... 7 Figure 1: Canada Total Installed Capacity by Province (2001).......................................... 7 Figure 2: Percentage of Canada Total Installed Capacity by Province (2001)................... 8 Figure 3: Canada Total Installed Capacity by Fuel Type (2001)........................................ 9 Figure 4: Percentage of Canada Installed Capacity by Fuel Type (2001) .......................... 9 The Current Situation With Respect to Renewable Energy in Canada ........................................ 10 The Status of Wind Power .................................................................................................... 10 Figure 5: Provincial Wind Capacity (Active July 2003) .................................................. 13 Figure 6: Canadian Wind Capacity Additions (Active July 2003) ................................... 13 The Status of Biomass .......................................................................................................... 14 Figure 7: Biomass Capacity Additions ............................................................................. 14 Figure 8: Provincial Biomass Capacity (2001)................................................................. 17 The Status of Photovoltaics .................................................................................................. 17 The Status of Hydrogen ........................................................................................................ 19 The Status of Hydro .............................................................................................................. 21 The Status of Wave Power.................................................................................................... 23 The Status of Tidal Power..................................................................................................... 23 Current Policies and Programs to Promote Renewable Energy in Canada .................................. 25 Federal....................................................................................................................................... 25 British Columbia....................................................................................................................... 25 Alberta....................................................................................................................................... 25 Saskatchewan............................................................................................................................ 26 Manitoba ................................................................................................................................... 26 Ontario ...................................................................................................................................... 26 Quebec ...................................................................................................................................... 27 New Brunswick......................................................................................................................... 27 Nova Scotia............................................................................................................................... 27 Prince Edward Island ................................................................................................................ 28 Newfoundland and Labrador .................................................................................................... 28 Yukon Territory ........................................................................................................................ 28 Northwest Territories ................................................................................................................ 28 Nunavut..................................................................................................................................... 29 Table 1: Promoting Renewable Energy in Canada ............................................................... 30 Jurisdiction: Federal......................................................................................................... 30 Jurisdiction: British Columbia ......................................................................................... 34 Jurisdiction: Alberta......................................................................................................... 35 Jurisdiction: Saskatchewan .............................................................................................. 36 Jurisdiction: Manitoba ..................................................................................................... 38 Jurisdiction: Ontario......................................................................................................... 40 Jurisdiction: Quebec......................................................................................................... 42 Jurisdiction: New Brunswick........................................................................................... 45 Jurisdiction: Nova Scotia ................................................................................................. 48 Jurisdiction: Prince Edward Island .................................................................................. 49 The Conference Board of Canada 2 Jurisdiction: Newfoundland and Labrador....................................................................... 50 Jurisdiction: Yukon.......................................................................................................... 52 Jurisdiction: Northwest Territories .................................................................................. 54 Jurisdiction: Nunavut ....................................................................................................... 55 Alternative Approaches for Promoting Renewable Energy.......................................................... 56 A compendium of approaches .............................................................................................. 56 Early success in Texas ...................................................................................................... 59 Design problems elsewhere .............................................................................................. 60 Renewable energy certificates (green tags) .......................................................................... 61 International trade implications ............................................................................................ 62 Policy ends and means .......................................................................................................... 63 Table 2: Renewable Portfolio Standards............................................................................... 64 U.S. states.......................................................................................................................... 64 Other countries ................................................................................................................. 65 Moving Forward and Identifying the Need for Consultations...................................................... 70 Terminology and definitions................................................................................................. 70 Status of large hydro ............................................................................................................. 70 Barriers.................................................................................................................................. 70 Renewable Portfolio Standards and existing renewable energy policies.............................. 71 Potential of trading Renewable Energy Certificates across provinces ................................. 71 Renewable Energy Certificates and compatibility with climate change mechanisms.......... 71 Conclusion ............................................................................................................................ 71 Appendices The Conference Board of Canada 3 Executive Summary Purpose of Report This report provides an overview of the state of renewable energy in Canada. The document's three objectives are: • first, to identify, examine and comment on currently available and emerging renewable energy sources in the country; • second, to review existing federal, provincial and territorial policies and programs concerning renewable energy; and • third, to review and comment on alternative approaches for greater deployment of marketready renewable energy facilities in Canada. Background At the meeting of the Council of Energy Ministers (CEM) in September 2002, Canada’s federal, provincial and territorial ministers of energy discussed the issue of renewable portfolio standards (RPS) in the Canadian context. As a result of this discussion, Ministers created a new working group (WG) to examine options for increasing the deployment of currently available and emerging renewable technologies. The WG will have an opportunity to report on such initiatives at the next meeting of the CEM, scheduled to take place in Fall 2003. Accordingly, this research report will help the CEM to gain a better understanding of the state of renewable energy in Canada, thereby assisting it in its efforts to support climate change initiatives. Key Findings The Current Situation With Respect to Renewable Energy in Canada • • Canada, like most industrialized countries, currently uses only a small amount of nonhydroelectric renewable energy. Renewable energy remains a growth market, with installed capacity expected to double over the next decade in the United States and Canada. Most renewable options are expected to be competitive with grid power in Canada by 2013, especially if supported with effective incentives. Wind energy has found a place in Canada’s electricity markets. With the current government subsidization programs, construction of new wind-powered electricity generation facilities has flourished. Wind effectively competes for investment capital in Alberta’s restructured market, and crown utilities nation-wide are also actively investing in wind power. In all, 7 of 13 provinces and territories presently have some level of wind generation. • The Conference Board of Canada 4 • • Biomass is another renewable energy source with the potential to provide cost-effective electricity in the near term. Hydro development provides an opportunity to generate electricity with no GHG emissions, but electricity from "large hydro" has typically not been eligible under renewable portfolio standards established in U.S. states. Significant cost reductions and technological improvements for photovoltaics, tidal, wave, and fuel cells must be made in order for these technologies to be adopted for use on a widespread basis. Canada’s North and other remote areas with no electrical grid connection can provide ideal conditions for first applications of proven, but not yet commercial, renewable technologies. Programs and policies to foster renewable energy development vary widely across the country. This is a function of differences in industry structure, ownership of generation assets, market size, and political leadership. • • • Alternative Approaches for Promoting Renewable Energy • Incentives used to increase the deployment of renewable energy (RE) technologies vary widely across jurisdictions and technologies in OECD countries and regions. Some jurisdictions use several instruments, alone or in combination. Resource considerations, such as prevailing wind or geothermal reservoirs, also influence the incentives that jurisdictions choose. Incentives also vary with the stage of RE technology development. For example, grants and R&D incentives are used in the early stages of research, or prototype development. This report focuses on direct approaches and instruments that may be used to induce the production of RE. Major approaches may be grouped as follows: 1. 2. 3. 4. • Preferred treatment approaches Tax credits and exemptions Green marketing and procurement Renewable portfolio standards • • Renewable portfolio standards (RPS) are means of ensuring that a minimum specified amount of renewable energy is included in the electricity sources serving a region. RPS can be designed to encourage renewable energy development, with targets being met at least cost and minimal administrative involvement by governments. They will probably be the most important policy tool, used in complement with other instruments, to promote RE development in North America over the next 5-10 years. The Conference Board of Canada 5 • As in most areas of public policy, the relative success of RPS programs depends upon program design. Experience in several U. S. states indicates that a poorly designed RPS does little to increase output from renewable generation. However, early results from states such as Texas show that a well-designed program can deliver strong support for RE. Renewable energy certificates (RECs) are also called green certificates or green tags. They represent the environmental attributes of the renewable energy for which they are issued. Tradeable RECs are a key tool for advancing RPS, green power programs, and emissions performance standards. It is desirable that the design of RECs should be compatible with international and domestic climate change mechanisms. This issue of desired fungibility could be integrated into upcoming “next steps” consultations. The Australian REC program, in which RECs may be traded across the country, may be of particular interest to Canada. As for any other area of public policy, it is critical to clarify ends and carefully match ends with means. For example, a RPS may be used to reach a certain target for RE in a jurisdiction. But if the RPS target is itself a means to a further goal - such as reduction of greenhouse gases or air contaminants - then the RPS must be evaluated against other instruments for achieving that goal (such as broad-based emissions trading). RPS may displace the use of alternative, more cost-effective methods to reduce GHGs, such as investment in energy efficiency and carbon sequestration. Different jurisdictions within North America refer to renewable energy in different ways; the terminology is confusing and inconsistently applied. In an integrating continental energy market, this could create international trade problems. There needs to be greater clarity of definitions such as “alternative energy”, “green power” and “clean power”. There must be some discussion on this issue to improve the effectiveness of desired targets and objectives. For example, if one goal is to use power sources that are less environmentally damaging, this does not necessarily imply that the energy must be renewable. Achieving precision and agreement on terms, as means toward policy goals (ends) is required as policy discussions proceed. In some U.S. states, Renewable Portfolio Standards exclude "large" hydro. This has become a point of contention for larger Canadian hydro producers exporting power to the U.S. A topic for consultation, therefore, would be seeking a definition of environmentally preferred power. Life Cycle Analysis offers one possible basis for such a definition. • • • • The Conference Board of Canada 6 Moving Forward • There are opportunities and challenges in moving forward and defining a Canadian strategy for renewables. Strategic thinking must continue to address the trends in development and costs of various technologies and evaluate the stage of commercialization in a comprehensive manner. There are opportunities for increased inter-governmental coordination and cooperation in order to develop and promote renewable energy. Specifically, incentives and partnerships to bring renewable energy technologies to self-sufficiency and commercialization must be supported, and mechanisms must be established to recognize the environmental, economic and competitiveness attributes of renewable energy. The growth of renewable energy is also dependent upon favourable market conditions for renewable energy technologies. Renewable energy still supplies a very small share of power generation. This is largely due to a concurrent decline over the past decade in the cost of conventional power. There is a need, therefore, for leadership in purchasing green energy and stimulating market demand for it. Incentives, as drivers of growth, remain critical for improving the economics of renewable energy versus conventional energy options. • The Conference Board of Canada 7 Introduction At the meeting of the Council of Energy Ministers (CEM) in September 2002, Canada’s federal, provincial and territorial ministers of energy discussed the issue of renewable portfolio standards (RPS) in the Canadian context. As a result of this discussion, Ministers created a new working group (WG) to examine options for increasing the deployment of currently available and emerging renewable technologies. The WG will have an opportunity to report on such initiatives at the next meeting of the CEM, scheduled to take place in Fall 2003. Accordingly, this research report will help the CEM to gain a better understanding of the state of renewable energy in Canada, thereby assisting it in its efforts to support climate change initiatives. This report focuses on currently available and emerging renewable energy sources that could be used to generate electricity in Canada. It considers renewable sources that are plentiful and of high quality, and technologies that currently exist or could be developed rapidly to facilitate the cost-effective provision of electrical energy. Canada has a diverse electricity industry that benefits from tremendous regional variation in natural resources. The Canadian Electricity Association reported that Canadians consumed 585 TWh of electricity in 2000, 61% of which was generated by hydro, 19% from coal, 12% from nuclear, 5% from natural gas, 2% from oil, and only 1% from other sources. These numbers, however, hide distinct regional differences in electrical generation, as most jurisdictions, with the two exceptions of New Brunswick and Ontario, rely heavily on one type of fuel. Figures 1 to 4 present a snapshot of Canada's installed capacity but conceal these considerable regional disparities. Figure 1: Canada Total Installed Capacity by Province (2001) Source: Statistics Canada catalogue 57-206-XIB 40,000 35,000 30,000 Installed Capacity (Megawatts) 25,000 20,000 15,000 10,000 5,000 0 NF NV QC YU BC SK MB Prov ince s NT ON PE AB NB NS The Conference Board of Canada 8 Figure 2: Percentage of Canada Total Installed Capacity by Province (2001) Source: Statistics Canada catalogue 57-206-XIB 0% 12% 3% New f oundland 5% 0% Nunav ut Quebec Y ukon Br itis h Columbia 27% Sas katc hew an Manitoba Nor thw es t Ter r itor ies Ontar io Pr inc e Edw ar d Is land 0% A lber ta New Bruns w ic k Nov a Sc otia 31% 0% 7% 2% 4% 9% The Conference Board of Canada 9 Figure 3: Canada Total Installed Capacity by Fuel Type (2001) Statistics Canada catalogue 57-206-XIB 7 0 ,0 0 0 6 0 ,0 0 0 Installed Capacity (Megawatts) 5 0 ,0 0 0 4 0 ,0 0 0 3 0 ,0 0 0 2 0 ,0 0 0 1 0 ,0 0 0 0 yd ro St ea m uc le ar C on ve nt io na l 59% bu st io n om In te rn al C bu s tio n Tu rb in e H N om Fu e l T yp e Figure 4: Percentage of Canada Installed Capacity ..."

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