Promoting Green Power in Canada - Centre for Human Settlements

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Promoting Green Power in Canada Pollution Probe(including large hydro resources) will not bereached (see Figure 3.21). Another criticismof the NFFO was that the tendering processfavoured large companies that were able toachieve economies of scale, disallowingsmall investors, independent developers andthe domestic renewable powermanufacturing industry to benefit from thescheme [REPP 1999, p. 14] — in starkcontrast to Denmark, for example, whereindividual inventors are encouraged toparticipate and where the locals are involvedin many of the renewable power projects.The replacement of the electricity wholesalemarket (The “Pool”) by a commodity typemarket under the “New Electricity TradingArrangements” (NETA), together with thelimited success of the NFFO, has led the UKgovernment to choose a different approachto deploy renewable power. Althoughexisting NFFO schemes will continue toreceive their contract prices through the NFPA,no new renewable schemes will be subsidizedunder the NFFO. A new Renewables Orderhas been written into section 62 of theUtilities Act 2000. Scotland has a separateRenewables Obligation for power providersactive in its territory [RT 2002].3.4.2 The Renewables Obligation OrderThe Renewables Obligation Order (ROO)replaced the NFFO, with renewable powerportfolio targets applicable as of April 1, 2002.The main features distinguishing it from theNFFO are the introduction of a certificatetrading system instead of the NFFO tenderingprocess, and obligatory renewable portfoliotargets applied to electricity suppliers, similarto RPS obligations in North America.For 2002, the ROO requires 3% of electricityto be purchased from renewable sources,which would be matched by a marketdemand of 675,000 households [FOE 2002].The Obligation increases in several steps to10.4% in 2010 and stays at that level untilthe year 2027 [UK 2002]. These targetsrequire a build rate of slightly less than1,000 MW per annum over the nine-yearperiod 2002–11. Assuming the technologymix suggested by the regional assessmentsunder the high scenario, this number breaksdown to 470 MW/yr for onshore wind and165 MW/yr for offshore wind, shown inFigure 3.22. These wind build rates can becompared with recent rates of wind build inContinental Europe of 300–350 MW/yr inGermany and Denmark,50 MW/yr in theNetherlands, and 400–700 MW/yr in Spain. Thebiomass contributiontranslates into an averageannual build rate of 90MW/yr. Build rates forother technologies totalabout 100 MW/yr.Energy producers mustprove for each fiscal yearthat they have created orpurchased enoughFigure 3.22 — Expected Annual Split Between TechnologyBands Under the New Renewables Obligation [DTI 2002a, p. 13]52
Promoting Green Power in Canada Pollution ProbeRenewables Obligation Certificates (ROCs,issued for each unit of eligible renewablepower production), or pay a penalty of £30per MWh (6.75¢ CDN per kWh) [UK 2002].The NFFO Fossil Fuel Levy could no longerbe raised due to electricity restructuring[CMUR 2000, p. 307]. The Finance Act 2000introduced the Climate Change Levy (CCL),which only has to be paid by non-domesticelectricity customers at a rate of 0.43p/kWh(about 1¢ CDN/kWh) since April 1, 2001.The Government is returning the revenuesfrom the CCL to the non-residential sector,principally through a cut in the rate ofemployers’ National Insurance Contributionsof 0.3 percentage points. Businesses will alsobenefit from schemes aimed at promotingenergy efficiency and stimulating the take-upof renewable sources of energy (e.g., solarand wind power). £50 million per annum ofrevenue will be allocated to these schemes —a major increase from current levels of funding.There is also a scheme of 100% first yearcapital allowances for certain energy savinginvestments, which is expected to be worthup to £70 million in 2001/02 [DEFRA 2001].Electricity from qualifying renewable sourcesis exempt from the levy [OFREG 2001], andrenewable power producers can trade theirLevy Exemption Certificates (LECs, see Box3.5), together with the electricity produced,to suppliers with industrial consumerswanting to save on the CCL. This creates asecond source of income on top of the ROCtrading scheme. Contrary to the taxes appliedto electricity in Sweden and the Netherlands,this levy has a more limited approach as itdoes not apply to residential customers.Moreover, its impact has been furtherdiminished by the fact that many industryassociations have already entered intovoluntary agreements to reduce CO 2andhave negotiated tax reductions of up to 80%[NREL 2002, p. 48].Box 3.5 — Levy Exemption CertificatesLevy Exemption Certificates (LECs) are evidence of CCL exempt electricity supplygenerated from qualifying renewable sources, including large hydro and wasteincineration. Accredited generators may need to provide monthly meter information toOFGEM (possibly electronically by an outside agent). Generators will also need to providedetails of the supplier(s) contracted to purchase the generator’s output. Suppliers will needto provide OFGEM with a declaration that none of the qualifying renewable electricity hasbeen exported outside the UK. OFGEM will also require confirmation of the sale from thesupplier. This will enable OFGEM to be satisfied that the qualifying renewable generationhas been supplied to customers in the UK. OFGEM will then electronically issue LECs toeither the generating station for the corresponding amount of electricity generated or, inthe case of NFFO generating stations, LECs will be issued to the supplier who bought theoutput through the auction held by NFPA. The LECs will be traded from the generator tothe contracted supplier. LECs cannot be separated from the electricity and thereforecannot be traded separately. LECs will be redeemed by suppliers to Customs and Excise(HMCE) to demonstrate the amount of non-climate change leviable electricity that hadbeen supplied to non-domestic customers in the given period.OFGEM will record the trade of each certificate from the generator to the supplier whopurchased the electricity. This enables OFGEM to report to HMCE the amount of levyexempt renewable electricity supplied at the end of each period. Suppliers will redeemLECs to HMCE as evidence of this supply [RT 2002].53
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