Promoting Green Power in Canada - Centre for Human Settlements

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Promoting Green Power in Canada Pollution ProbeSupport with permitting procedures iscrucial to overcome local resistance to somerenewable power projects. In Britain, bothEngland and Wales have seen only 25% ofprojects succeed in gaining permits, whereasScotland has achieved a 70% rate. This wasmainly due to the Scottish Executive issuingstrategic and technical planning guidance forrenewables in 2000 and in 2002. A 2000survey in Scotland showed that local publicopinion became far more favourable to windfarms after they were built, demonstratingthat initial worries and concerns were notborn out in practice [HCEAC 2002, p. 28]. InDenmark, local support has largely beengained through allowing the public tobenefit financially and to influence thedecision-making process for wind farmprojects (see Chapter 3.3.3). Denmark andGermany have standardized nationalpermitting procedures for wind and requiredmunicipalities to set aside areas where winddevelopment is encouraged [JLS 2001, p. 340].The Dutch federal government workstogether with the provinces to identifysuitable places for wind development (seeChapter 3.3.4). In Scotland, it has now beenproposed to reduce electricity prices forhomes close to wind power developments inorder to increase their acceptance among thepopulation [REF 2002d].Emissions trading has been described as apotentially important source of income forrenewable power generators (see section5.7.1 for a discussion of the interface betweengreen power, certificates and emissioncredits). However, this can only be the case ifmultiple pollutant trading takes place thatfully includes renewable power generators inmarkets for at least the three main airemissions: NOx, SO2 and CO2. Even if thesecircumstances prevail, renewable powergenerators may have to rely on brokers, andwould have to pay tax on the revenues,which considerably reduces the potentialincome from trading. In addition, the pricevolatility of emission reduction certificates,and uncertainty about the rules governingthese markets in the future, can reduceinvestor confidence with respect to longtermfinancial planning concerningrenewable power plants.4.7.2 Looking at Canadian ScenariosCanadian Wholesale Prices andRenewablesTable 4.14 shows that Canadian wholesaleelectricity prices are among the lowest of thecountries examined. This poses additionalproblems for alternative power sources, asthe market barrier for them is usually higherin Canada than elsewhere, suggesting thatmarket incentives to support this sector mustalso be higher than those in other countries.On the other hand, Figure 4.14, based ondata already discussed in chapter 2.2.6, andusing electricity wholesale prices as given bythe Canadian Clean Air and RenewableEnergy Coalition [CARE 2002b], shows thattechnologies, such as wind, biomass co-firing,wave energy and tidal energy, can undercertain circumstances already be pricecompetitivewith fossil fuels. The largestpotential small hydro projects are closest tobeing financially viable throughout Canadaand could thrive at a wholesale price of 5¢/Table 4.14 — Canadian Wholesale Pricesin International ComparisonCountry/ StateCanadaCaliforniaPennsylvaniaWholesale Price*4.66¢/kWh6.4¢/kWh (~4¢/kWhUS)4.8¢/kWh (~3¢/kWhUS)U.K. 4.5–6.75¢/kWh (2–3p/kWh)The Netherlands 6.16¢/kWh(4.4 €cent/kWh)* Based on information in chapter 3104
Promoting Green Power in Canada Pollution ProbeFigure 4.14 — Comparison of CanadianWholesale Electricity Prices and EnergyGeneration CostkWh, which is paid to independent powerproducers by BC Hydro and has led a largenumber of small hydro projects in responseto BC Hydro’s RFP for greenenergy projects [BCH 2002b].9The federal government recentlyimplemented wind energyproduction tax credits forprojects commissionedbetween March 31, 2002 andApril 1, 2007. The incentives,which are paid for 10 years,start at 1.2¢/kWh and declineto 1.0¢/kWh in the second yearand to 0.8¢/kWh in the fifthyear [NREL 2002, p. 21]. Aftertax, these incentives contributean average of 0.6¢/kWhWholesale Electricity Price in ¢/kWh876543210towards wind energy production. Figure 4.15shows the current situation with respect towind power in Canada. According to theClean Air and Renewable Energy Coalition,wind energy generation costs in Canada liebetween 6.91¢/kWh (40% capacity factor)and 8.91¢/kWh (30% capacity factor). Apartfrom Ontario, wind capacity factors areestimated to be higher than 30%, so thisthreshold can safely be taken as a worst casescenario for wind development. Withelectricity wholesale prices in Canadaranging from 2.5¢/kWh (SK) to 6.9¢/kWh(PEI), and including the productionincentive, wind can be competitive atoptimum sites only in Prince Edward Island,where default prices are the highest inCanada. This means the extra premium forwind power currently must be paid by greenpower customers, and can reach up to 5.8¢/kWh. An increased production incentive of3.0¢/kWh, proposed by the Clean Air andRenewable Energy Coalition, which is similarto that of other countries (see Chapter 4.6.1),would yield a price reduction of about 1.5¢/kWh after tax and could make wind powercompetitive in three Provinces. However, noextra margin for green power marketing andcustomer education, back-up powerCapacity factor 30%Capacity factor 40%Wind gener. cost, reducedby prod. incentive of (net)0.6¢/kWhIncreased incentiveof (net) 1.5¢/kWhAB ON QC PEI NS NF NB MB BC SKFigure 4.15 — Influence of the Production Incentiveon Price-Competitiveness of Wind Power105
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