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Is It Crunch Time for Canada's Wind Sector?

For Canadian wind, the last few years have been pretty good. Growth has accelerated and by the end of 2011 its generating capacity totalled 5265 MW – of which 1969 MW were in Ontario – accounting for about 2.3% of Canada's total electricity demand.

The next few years are also expected to see rapid growth. On current forecasts of projected plants and those under construction, Canada will top 10 GW of wind energy by 2015. And the Canadian Wind Energy Association (CanWEA) has felt confident enough to outline a strategy in which wind energy hits 55 GW by 2025, meeting 20% of the country’s energy needs.

On current trends, this seems only slightly optimistic. More than 1300 MW of wind will be built this year, a modest rise from 1267 MW in 2011. Three provinces have reached major wind milestones: Ontario has broken 2 GW while Alberta and Quebec have each arrived at 1 GW of installed capacity. In Quebec, in fact, the 80 MW Saint-Robert-Bellarmin wind project means EDF EN Canada, a unit of French renewable energy group EDF Energies Nouvelles, will alone have more than 1 GW installed in the province by 2015.

New onshore projects are also being commissioned in British Columbia, Manitoba, Nova Scotia, Prince Edward Island and the Northwest Territories. In offshore wind, several potential sites have been identified on the north coast of British Columbia. Meanwhile, the boom in mining, gas and oil extraction in British Columbia, Alberta and Saskatchewan is expected to fuel demand for new sources of power generation. On the east coast, community wind programmes in Nova Scotia and New Brunswick are attracting attention.

The town of Pincher Creek, Alberta, known as the wind capital of
Canada due to its Chinook winds, has taken on a key role in the
rapidly growing wind power industry (Vestas Wind Systems A/S)

But the long-term view is less rosy. Several provincial electricity grids are reaching their limits for wind power integration. Low gas prices continue to erode opportunities in Alberta and are making wind less competitive in other markets. In addition, mounting public hostility to wind farms has brought extensive permitting delays and aggravated legal and regulatory challenges.

Ontario’s Backing for Wind

At a federal level, Canada lacks a comprehensive clean energy policy. But provincial support – in Ontario – has driven the country’s wind boom.

Ontario is currently the only province with a fixed feed-in tariff (FiT) for wind, launched in 2009 to encourage the development of renewable energy technology, attract investment and create new jobs as part of a plan to phase out the province’s coal-fired generation by the end of 2014. Ontario’s FiT programme foresees 7 GW of wind power projects by 2018. By most measures the programme has been a great success, exceeding the expectations of its backers. A scheduled two-year review of the FiT programme in October 2011 found that more than 2500 small and large FiT projects had been approved.

By the end of 2011, contracts for over 4750 MW of new renewable power had been offered and another 16 GW of applications were pending. Of the contracts offered, 3165 MW were for wind, with just 1332 MW for solar, 193 MW for hydro, and 63 MW for bioenergy. These contracts leveraged more than $10 billion in private investment and brought significant new wind manufacturing capacity. On the basis of this progress, Ontario expects to hit its target of 10,700 MW of non-hydro renewable energy generation by 2015, with 2900 MW of FiT projects currently moving through the Renewable Energy Approval (REA) process.

Yet the review also brought a 15% reduction in wind FiTs. The guaranteed rate for wind power from any source dropped from 13.5 Canadian cents per kWh to 11.5 cents, while prices for biomass, biogas, water and landfill mass were unchanged. Although the drop was less than some had anticipated, it provoked a mixed reaction from the renewables sector. Robert Hornung, CanWEA president, said the new price would prove ‘extremely challenging for many projects and could prevent a number of them from proceeding’.

‘This is particularly true for smaller projects and new entrants to the industry, reducing the number of communities and the diversity of players able to contribute to and benefit from the government’s ambitious objectives,’ he added.

The review also recommended a further study of Ontario’s supply and demand forecast through to the end of 2013 to determine whether an increase in the state’s renewable energy targets would be justified. ‘We made every effort to develop final recommendations that would balance the interests of all Ontarians, recognising ratepayers, community participants and the renewable energy sector,’ said Ontario’s deputy energy minister, Fareed Amin, who carried out the two-year FiT review.

While the cuts will lower the high returns investors have so far achieved from Ontario renewable energy investment, the government’s action has brought clarity to the sector, unblocking stalled projects, if they can overcome bureaucratic inertia. But regulatory uncertainty has clearly hit renewable energy project financing in Ontario. According to Clean Energy pipeline data, the volume of completed renewable energy project finance raised in the province fell to $1 billion in 2011, down from $1.2 billion in 2010. And while many FiT contracts have been approved, the province’s permitting process forms a bottleneck. The review suggests approval timelines could be cut by up to 25% if regulating ministries ‘better align approvals with the size and characteristics of a project, reduce duplication, improve service standards and streamline the process’.

Despite these niggles, and largely thanks to the FiT programme, Ontario has been able to close eight of its 19 coal-fired plants, and the rest are scheduled to shut by the end of 2014. Renewable technologies will have to make up the difference, throwing the spotlight back on wind, particularly offshore wind.

Ontario could develop 2000 MW of offshore wind power over the next 15 years, according to a report issued in late 2010 by the Conference Board of Canada, a non-profit research group. This would add between $4.8 billion and $5.5 billion to the province’s economy between 2013 and 2026, it concluded.

A Gathering Backlash

Unfortunately, prospects for offshore wind have faded in recent months after Ontario’s McGuinty administration put all plans for offshore wind power on hold in early 2011. The province also cancelled a contract with Windstream Energy for a wind farm on Lake Ontario and said it would not approve the four other projects on deck until it knows more about the impact of wind power within freshwater environments.

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CanWEA is, unsurprisingly, up in arms about this latest development. Hornung sounded off in a statement about the ‘unfortunate decision. ‘Ontario lifted a ban on offshore wind development about two years ago, only to now resurrect it. Ontario is proving itself a leader in driving a new clean energy future that delivers emission-free power and new jobs for our skilled trade workers. This is an unfortunate decision that surrenders the province’s leadership role in exploring the potential for offshore wind energy in the Great Lakes and creates significant uncertainty for investors.’

Concern over the shore-side visual impact of turbines poses another challenge for developers. In many locations, particularly the Great Lakes, water depths plunge steeply. Taller turbines, while feasible, would be far more expensive than conventional devices. Then there is political opposition to wind turbines, which in Ontario is substantial. McGuinty’s green energy initiatives have often been attacked by local residents, many of whom see wind turbines as harmful both to human health and the environment.

In 2011, the province announced a moratorium on offshore wind power until at least 2014, when the results of a Health Canada study into possible ill effects from low-frequency noise will be released. This has sparked lawsuits by wind energy developers, which claim their projects were already in the works. Meanwhile, some members of the Progressive Conservative Party are calling for a moratorium on all wind energy development in the province.

Health Canada announced in July that it would conduct a study exploring the relationship between wind turbine noise and the negative health effects such as sleeplessness, inner ear problems and depression reported by nearby residents. ‘The McGuinty Liberals did not conduct an in-depth study into the health effects surrounding wind turbines before they invaded rural Ontario with their big green energy dreams,’ said opposition MPP Lisa Thompson. ‘And we have heard from many throughout the years that that dream has turned into a nightmare.’

By the end of 2011, wind power generating capacity in Canada
was 5265 MW, of which 1969 MW were in Ontario, accounting for
around 2.3% of Canada’s total electricity demand (GWEC)

The wind industry appears to be increasingly aware that its continued growth depends on countering these claims. Considering the multitude of projects scheduled to come on line next year – and over coming years – the wind industry needs to work harder on ‘social acceptance’, said Hornung recently.

‘We need to do a better job in telling our story,’ he stressed. ‘To realise our full potential, we need to work together. We need to roll up our sleeves and do the hard work.’ Educating the public and working with stakeholders is CanWEA’s top strategic priority for the next three years, he added.

Ontario’s unwillingness to proceed with offshore wind is particularly galling to wind energy proponents in light of developments south of the border. The US has pipelined a plethora of offshore wind projects in the Great Lakes region, where the Department of Energy rates the wind as ‘outstanding’ in some locations.

‘You will never find a better spot than the Great Lakes,’ said John Kourtoff, CEO of Trillium Power Wind Corp, a Toronto company that plans to begin erecting turbines in Lake Ontario in 2013.

Meanwhile, in August 2012, The New York Power Authority began considering four proposals for its GLOW (Great Lakes Offshore Wind) Project. The project aims to construct wind farms in either Lake Erie or Lake Ontario, or both, totalling from 120 MW to 500 MW. Further along are Scandia Wind Offshore’s 500 MW project for Lake Michigan and Ohio’s plans for a 20 MW farm near Cleveland about six miles into Lake Erie.

Aside from the environmental challenges, the cause of wind power in Ontario received a serious setback in October 2012 when provincial premier Dalton McGuinty resigned. McGuinty was one of the chief architects of the province’s Green Energy Act (GEA), which established the FiT, and he has been a strong, powerful and vocal advocate for wind energy in the province over the past few years.

Indeed, only last October, Ontario’s wind energy industry was extremely relieved when pro-renewables McGuinty defeated Progressive Conservative Party candidate Tim Hudak, who had promised to repeal many of the GEA’s core tenets and terminate a host of wind and solar energy initiatives that were already underway in the province. A successor to McGuinty has not yet been named, but industry experts believe the GEA will remain in place, at least for now.

‘As one of Canada’s foremost champions of wind, McGuinty’s leadership and support has been critical to Ontario’s success,’ said Hornung. ‘The [Green Energy] Act is a policy of the Liberal government, and we expect that to continue.’ CanWEA will reach out to the provincial government to ensure it continues its renewable energy leadership and its efforts to increase Ontario’s wind energy capacity, he added.

WTO Delivers Another Setback

Also in October, Ontario’s wind energy policies received another serious setback, this time from the World Trade Organization (WTO) over policies that force companies to buy equipment from local manufacturers.

The WTO has issued a preliminary report that agrees with Japan and the EU in their complaint about Ontario’s support for its renewable energy industry. If the preliminary report stands, Ontario might have to dismantle parts of its FiT programme, which prompts producers of wind (and solar) to buy a proportion of their equipment in the province.

A final ruling is expected in November, but the WTO seldom backtracks on its preliminary reports. The WTO says the local content rules break non-discrimination rules in the General Agreement on Tariffs and Trade. Japan initially filed its complaint with the WTO two years ago, saying that Ontario’s green-energy plan unfairly pressures producers of clean energy to buy hardware from manufacturers in the province. The EU joined in the complaint in 2011, saying European exports of wind and solar equipment to Canada would be higher without the local content rules.

Complaints at the WTO are lodged against countries rather than provinces, so the filings were against Canada rather than Ontario. The Ontario energy ministry says it believes that the FiT programme is consistent with Canada’s WTO obligations. ‘Should the panel disagree, we are ready to pursue all options with the federal government, including an appeal of the decision.’

Stuart Trew, who works as a trade campaigner for the Council of Canadians, said the ruling, if it stands, will be ‘a terrible loss, not just for Canada, but also for countries globally who are looking for ways to make their economies more dynamic.’

Trew believes Ontario will likely put pressure on the federal government to appeal the final decision, if it goes against them. Ontario might also be given the option to amend the problematic portions of its energy policy to bring them on side. ‘It is going to be a long process,’ he said.

If Canada is to continue to grow its wind industry, then there are clearly issues that need to be addressed. These will involve allowing more overseas companies to compete for contracts and giving foreign investors a greater role in the industry. This may, however, have the side effect of making wind energy less politically acceptable to voters.

There is also a growing need for a political consensus, particularly in Ontario, where in the absence of a strong wind advocate to replace McGuinty, the long-term growth of the wind industry now appears less certain than at any time in recent memory. 

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