Promoting Green Power in Canada - Centre for Human Settlements

Promoting Green Power in Canada Pollution Probe28This can be confirmed with experience from other countries: for example, with the Danishpension funds, important long-term investors were found to avoid renewable energy projects dueto the lower rates of return [FIRE 1998, p. 27].29Flow-through shares are equity shares issued to new investors. Investors receive an equityinterest in the company and income tax deductions associated with new expenditures incurredby the company on exploration and development. Flow-through shares can be issued by publiccompanies, but are of greater benefit to non-taxpaying junior companies.30Most Government of Canada expenditures in support of renewable energy occurred in the early1980s, when it allocated about $100 million per year to expedite the development oftechnologies and encourage their market penetration [NRCan 2002e, p. 4].31For updates, see www.eren.doe.gov/greenpower/netmetering/nmtable.shtml.32In some provinces, such as Québec, the “avoided cost” of adding on additional conventionalpower generation capacity cannot be based on natural gas only as there are cheaper large hydroresources. Quebec’s grid operator only pays 3¢/kWh to landfill gas projects, far below the price ofnatural gas-based electricity [EHI 2002]. On the other hand, Hydro Québec pays 5.8¢/kWh towind power projects, and is launching additional RFPs for different technologies, which mayobtain higher prices than the actual avoided cost [HQ 2002a].33Many Canadian utilities are Crown Corporations, and therefore exempt from this tax — thisshould be noted in the context of emission allowance trading and RECs trading as well.34Some existing schemes are not as generous: BC Hydro, for example, pays 4.9¢/kWh to manysmall hydro projects, which is a premium of about 0.5¢/kWh over natural gas. The crowncorporation indicates it is ready to pay more for electricity from different renewable technologies.35Although a tax effect would occur in the case of a higher premium, even in such a casecompanies would usually not allocate the power price between the wholesale power value andgreen power attributes unless there is a value for rights or entitlements coming with the powerpurchase that is separate from the power itself. These rights would have a determinable value fortax purposes at the time of acquisition.36A government task force report for British Columbia projects electricity prices to go up to 5¢/kWh due to the higher cost of electricity from combined cycle power plants. This report assumesslightly higher current prices for natural gas-based electricity than above, between 4.8 and 5.2¢/kWh [BC 2001, p. 21].37As Australia’s energy consumption is growing by 2.4% a year [AGO 2002b], the target of 2%added renewable generation by 2010 is actually more important than it seems in a Canadiancontext (1.2% annual growth).38As the response to BC Hydro’s RFP has been overwhelming, the company is now consideringraising the requirement to 30% [PEM 2002, p. 22].39See greenprices news item of April 23, 2002 at: www.greenprices.nl/nl/newsitem.asp?lid=en&nid=329.184