Eco ENERGY for Renewable Power Program

The Federal government has announced its “Eco ENERGY Renewable Initiative.”  The program is essentially a re-work of the Wind Power Production Incentive (WPPI) that was in place under the previous government.

WPPI paid .8 cents per kWh for qualified wind farms, for 10 years.  The WPPI program had some very good principles.

First, it only paid for production.  Other incentive programs in the past, especially in the US, rewarded building turbines, but not production.  The result was that many of the early wind farms built in the 1980’s didn’t work very well.  The program got the wind farms built, but they didn’t produce much power, and had high failure rates, because the incentives were wrong.  It is important to reward production, not construction.
Second, the program was designed on the principal that funds would be awarded based on completed projects.  You don’t want to have a program that signs lots of agreements, and ties up all of the funds, so that those who actually build don’t get anything.  The WPPI program required fairly short timelines to complete construction, so you only tied up government funds for about 15 months.  If you weren’t completed by then, the next in line was funded, and you lost your spot.  This was a good design.

Third, the program was to have stable funding over a long period.  This worked for the first few years – the program provided a stable investment climate.  In 2005, the program ran out of funds.  The Liberal budget of 2005, which passed parliament, had a three fold increase in funding for WPPI.  The proposal went to Treasury Board for review.  It was still there when parliament fell, and an election was held.  The program has been out of funds for new projects since then.  Stable funding was the only real advantage the Canadian program had over the US program.  In the US, wind get 1.9 cents/kWh US$ for 10 years as a tax credit.  The credit is non taxable.  WPPI is taxable.  So the US program is almost 3 times as generous.  But it didn’t have stability.  Canada’s WPPI program no longer has stability either.

The purpose of the ecoENERGY Renewable Power Program is to increase the deployment of renewable energy, especially for relatively new technologies that need a boost to get to widespread deployment.  Unsaid, but equally important, is to level the playing field with other technologies, and their existing government support.

The ecoENERGY program differs from the WPPI program in several ways.  First, it supports a broader array of renewable technologies, not just wind.  It will likely be helpful to geothermal developers, as well as run of river low impact hydraulic, and biomass.  Wave and tidal is also supported.  So is solar, but 1 cent doesn’t help much for solar.  There are some tight restrictions on the type of power that will be supported – it must meet strict ecological guidelines.  Biomass and Hydraulic must be certified under the Environmental Choice Program.  Second, it pays 1 cent/kWh for 10 years instead of .8 cents.  Third, it is proposing to apply only to wind turbines > 1 MW, up from 500 KW.  Finally, they are proposing a fairly complex limitation program, whereby if you produce less than anticipate over a 6 quarter period, the maximum amount you will receive will be reduced in the future.  This is done to liberate funds for other projects, but it does increase the risk of obtaining funds, if the timeframe in question has technical problems, or a lack of wind.

It is good to see the program finally out.  It has been in limbo for over a year, waiting for Treasury Board, election, new government to move on it etc.  The climate hasn’t waited, and the industry pipeline has been hurt by the program’s delay.  But it is back.  Hopefully, we can move forward to deploy the renewable energy projects that we know we desparately need.

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