Promoting Green Power in Canada - Centre for Human Settlements

Promoting Green Power in Canada Pollution Probe“The most important aspect of a subsidymay not be its specific elementsor amounts, but its certainty.”REPP 1999scheduled to rise from currently (US) 1.7 to1.8¢/kWh as of 2003, whereas the Canadianincentive will be reduced to 0.8¢/kWh afterfive years [NRE 2002, p. 21] (see Figure 4.8).As discussed in chapter 4.4, it is important tocreate long-term financial security for anygiven project, including renewable powerprojects, to attract investors. Ten years is seenas the minimum necessary duration ofgovernment support in the renewable powersector [REPP 1999, p. 23]. A comparison ofCalifornia and the U.S. with Denmark andGermany shows that wind power generationrose steadily in the European countries,whereas it grew and shrunk in a boom-andbustmanner in the U.S. Figure 4.9 showsthat not only was the growth in the USirregular, but also it was much smaller intotal. The busts can easily be explained byinsecurity created by unstable policies, suchas expiration of investment tax credits,production tax credits and long-termcontract provisions [JLS 2001, pp. 355f.].This tendency can still be observed today inthe US, where a boom of wind powerinstallations took place in 2001, as manydevelopers tried to capture the tax credit,which was going to expire that year.Although the tax credit was then extendedfor another two years, predictions indicatethat new installations in 2002 will be muchlower only to increase again for the year2003, after which the tax credit will expireonce again. Such irregular funding can leadto a sudden halt in investments and it couldtake a long time before activity starts againwhen support mechanisms are reactivated,leading to inefficiencies and losses ofmillions of dollars compared to stablepolicies that tend to be more effective even ifthe overall budget is lower [ibid., p. 363]. Itis therefore crucial to maintain predictabilityand consistency in all policies supportingrenewable power sources. Denmark; forexample, is using a 30 year time horizon forAdded Capacity in MW0 500 1000 1500 2000 2500 3000199019911992199319941995Electric Power Act passedProduction Tax Credit beganStart of power market deregulation19961997199819992000200120022003Production Tax Credit expiredProduction Tax Credit extendedProduction Tax Credit expiredProduction Tax Credit extendedProduction Tax Credit expiresUSA GermanyFigure 4.9 — Comparison of Wind Generation Capacity Growth and Related Policies inGermany and the US (based on [JLS 2001, p. 356f.])92