Promoting Green Power in Canada - Centre for Human Settlements

Promoting Green Power in Canada Pollution ProbeOn the other hand, feed-in tariffs as beingcriticized for being a form of subsidy and forruling out competition, and thereforeincreasing the macroeconomic cost ofrenewable power generation. Whereastendering can deploy new capacities at lowerprices, it results in higher administrative costsand is ineffective if it fails to incorporate keyconcerns, such as permitting and worst caseplanning. Furthermore, feed-in tariffs createartificial markets that could collapse oncethe tariffs cease to be paid. Germany ispreparing for that case with its ecological taxreform, effectively making renewable powercheaper and conventional electricity moreexpensive. A phase-out of feed-in tariffsseems possible in a few years in Europe, asthe European Union tries to harmonizesupport structures. Britain and someScandinavian countries have seen that apurchase obligation (RPS) offers a betterchance to become a European-wide system.Renewable Portfolio Standards (RPS) arebeing used in Britain, Australia and the UnitedStates. Like feed-in tariffs, they can create asubstantial and long-term market pull forrenewable electricity. Texas utilities often optfor 10-year contracts that lock in renewableenergy generation and the Renewable EnergyCertificates that come with it at fixed prices.While RPS’ are economically efficient, theyautomatically favour the cheapest form ofenergy which, in most cases, is wind power.But, as feed-in tariffs can be designed to paydifferent tariffs for different forms ofelectricity generation, an RPS could alsocontain different technology bands, such asthe Arizona requirement of 50% solar power.Alternatively, subsidies can be used to assistemerging technologies to obtain marketshare, as is being done in the U.K. An RPSneeds to be set at a challenging level to bemeaningful. Examples, such as Texas, showthat sometimes goals are set lower than whatis feasible, which has the potential tohamper renewables deployment instead offostering it. If tradable certificates are used toimplement an RPS, financial institutionsshould be allowed to use the certificates assecurity against loans; otherwise, thisadditional source of income to renewablepower generators may not be recognized ifsuch institutions view the certificates withskepticism and favour larger generators thatcan finance projects though equityinvestment [HCEAC 2002, p. 35].Providing priority transmission access torenewable power would ensure that theseprojects can be integrated into the existingelectricity grid. Provisions that require gridstrengthening and link-ups to be paid by allpower consumers, instead of by the projectowner, would greatly reduce the cost ofrenewable power. Other options would be tolet all energy providers bid for transmissionaccess in case capacities are restricted (openbidding), similarly to the U.S. RegionalTransmission Organization approach, inwhich intermittent sources can bid fortransmission access together with othersources in day-ahead and real-time markets[FERC 2002, p. 20]. The “pancaking” oftransmission fees (for transactions crossingseveral service territories) can create adisadvantage for remotely located renewablepower plants and should be avoided.Transmission access has been identified as alikely barrier in Ontario since energyproviders with larger capacity factors willreceive priority treatment in case oftransmission constraint situations undercurrent rules. Where renewable powergeneration is close to existing grid structures,such grid-embedded power plants canactually improve the security of the overalltransmission system, as opposed to remotegeneration stations [WPTF 2002, p. 10]. Theintermittency and unpredictability of somerenewable power systems can become amajor disadvantage, but innovativemechanisms, such as real-time balancingmarkets, allow renewable power producersto obtain the best value for power thatdeviates from the amounts reserved inadvance [REPP 2002, p. 27].103