Promoting Green Power in Canada - Centre for Human Settlements

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Promoting Green Power in Canada Pollution ProbeBox 4.10 — Government SupportPays in the Long RunEuropean governments have givenstrong supported for wind, PV andbiomass over the past two decades,including funding for R&D, pilotprojects, and the creation ofmanufacturing capacity. As aconsequence:· biomass industries in Finland andSweden are among the mostsuccessful in the EU;· Denmark is the world leader inwind turbine manufacturing (morethan 50% of the world exportmarket in 1999);· Germany has a strong indigenousbiomass technology industry toservice the emerging domesticmarket; and,· Germany and the Netherlands areleading solar photovoltaic systemmanufacturers.[EEA 2001, p. 58]development of renewable power and energyefficiency [OAG 2000, p. 29f.]. TheSustainable Development Technology Fund,with $100 million over five years, might playan important role in the emerging renewablessector, but is limited since it does not onlysupport renewable energy technologies.Looking at past successes, it becomes apparentthat the dollar amount of support cannotexplain the differences in renewable powerdeployment among industrialized countries.In terms of per capita spending, Denmark hasfavoured wind energy more than any othercountry. Overall, the U.S. spent more thanthree times the total amount of money onwind power R&D between 1973 and 2000 thanwas spent by the most successful countries,Germany and Denmark, and U.S. researchbudgets were the highest throughout the1990’s [JLS 2001, p. 334]. Still, Danish windturbine manufacturers now hold 65% of theworld market, whereas the U.S. only has onemajor turbine manufacturer and accounts foronly 9.2% of the world market [ibid., p. 369].The reasons for these differences lie in highlyinconsistent funding in the U.S., whileEuropean funding programs have been farmore stable, research results were shared,and decision-making was decentralized, asopposed to the U.S., where decisions weremade centrally and inefficient designs weresupported. Utilities and small manufacturingcompanies were closely involved in Denmark’sresearch program, participating in funding,whereas large aerospace corporations thatlater abandoned the wind energy sector weresupported in Germany. The focus in Denmarkwas on small incremental improvements andsmall-scale demonstration projects, ratherthan radical changes in the technology, aswas the case in the U.S. [p. 332]. The Danishexperience indicates that a bottom-upapproach in research can be far moreefficient than a top-down system in whichresearch is carried out without the closeparticipation of utilities and manufacturers.Government purchasing may be the mostneutral “subsidy” to renewable power. It hasbeen very effective in creating demand forrenewable power throughout Europe and, forexample, in Pennsylvania, where newly builtwind capacities have been quickly bought upby governmental and institutional buyers[PA 2002d]. The Government of Canada hascommitted to purchasing 20% of its electricityconsumption from emerging renewable lowimpactelectricity by March 31, 2006, underAction Plan 2000 on Climate Change.Whereas subsidies are often seen as unfairwith respect to competition, they continueto be paid to conventional energy sources infar greater amounts than to renewable power(see e.g., [CEC 2001, p. 36]). To put things inperspective, conventional sources of energycontinue to receive the vast bulk ofgovernment subsidies. In the EU, total96
Promoting Green Power in Canada Pollution Probeannual subsidies for fossil fuels and nuclearenergy have accounted for more than €15billion so far, compared to €1.5 billion insupport to renewable energy. From 1948 to1998, the US provided $111.5 billion in federalsubsidies to energy research and developmentprograms. Of that $111.5 billion, $66 billionwent to nuclear energy and $26 billion wentto fossil fuels. Less than $5 billion has goneto non-hydro renewables, such as solar, windand geothermal. Additionally, there has beenmore than $14.7 billion in federal tax creditsBox 4.11 — Investment orProduction Subsidies?A subsidy linked to electricityproduction, such as the CanadianWind Power Production Incentive, willprovide a much better motivation tobring a renewable power project tofruition, and to focus on the reliabilityand performance of the technologypurchased. However, emergingtechnologies, such as wave and tidalpower, offshore wind and energycrops, will need investment subsidiesto encourage deployment and toreduce the financial risk and burden forinvestors engaging in such projects.This can be achieved through directsubsidies, low-interest loans, taxcredits on investment, and sales orproperty tax exemptions. Distributedpower systems can be supportedthrough buy-back schemes in a similarmanner. Investment-based subsidiesshould be paired with performancestandards (e.g., noise or other impactsin the case of wind turbines) and/orcertification to warrant the quality ofinstalled equipment [JLS 2001, p. 382].More mature technologies, such asonshore wind, require less capitalinvestment and could better besupported by subsidies linked to actualpower production.that benefit the production of fossil fuelsand nuclear fuel, while renewable credits arenegligible in comparison [FOE 2001].In Canada, federal and provincialgovernments have intervened in energymarkets almost since their beginning. Thegovernment has influenced the energy sectorthrough direct spending and other measuresto provide Canadians with a secure supply ofenergy, to develop regional economies andto address environmental concerns. So far,much of this spending has been focussed onnon-renewable resources, the predominantsource of energy in Canada [OAG 2000, p.10]. The Canadian nuclear energy sectorreceives annual subsidies, which totalled$156.5 million for the year 2000. AtomicEnergy of Canada Ltd. has received $16.6billion in subsidies since it was founded in1952 [OC 2001]. Figure 4.10 shows thatwhile federal government spending on fossiland nuclear energy has decreased, renewablepower still gets the smallest share.Beginning in 1998, the federal governmentprovided $4 million annually for three yearsto promote investments in renewable powersources for heating and cooling purposes. Alsostarting in 1998, the government provided$50 million a year over three years for climatechange initiatives to build momentum towardconcrete action and results for investmentsin renewable power and energy efficiency.The February 2000 Budget extended thissupport for another three years at $70million each year 30 [OAG 2000, p. 29].“If renewables are to flourish, we mustlook at methods of financing the highup-front cost of green energy.Governments from Northern countriesneed to remove inappropriatesubsidies and switch to supportingrenewable energy.”Mark Moody-Steward, former CEO ofShell [CH 2002]97
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