Canada offers attractive renewable energy outlook

By Michael Barrett, Bennett Jones LLP
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Canada is a world leader in the production and use of energy from renewable sources. Over 60% of electricity generated in Canada is currently sourced from renewable energy facilities. Canada has the third largest renewable power capacity globally, after the US and China, and ranks third after Norway and New Zealand for the percentage of total electricity produced from renewable sources.

Michael Barrett
Michael Barrett

India is also bullish on renewable power. Approximately 12% of India’s energy production is from renewable sources with an aggressive plan to push this to 35% by 2050 – largely by realizing vast untapped solar and wind potential in the northern and western parts of the country.

The growth and development of renewable energy resources and associated clean technologies remains a priority for all levels of government in Canada. The federal government has set a goal of generating over 90% of Canada’s electricity from zero-emitting sources by 2020. Over 130 foreign companies have already established greenfield projects in Canada’s renewable energy sector.

Canada’s many competitive advantages for the development of renewable energy are outlined below.

Natural resources

Wind: Canada has significant wind resources. Installed capacity is projected to reach 12,500 megawatts by 2015. Many of the largest global wind energy developers and suppliers are present in Canada, and opportunities continue to grow.

Solar: Canada also has strong solar resources. Large parts of Canada have a higher level of insolation than Germany, the global leader for solar photovoltaic (PV) installations. Over 350 solar companies are operating in Canada, including over 40 manufacturers of solar PV components.

Hydroelectricity: Over 90% of Canada’s total renewable electricity generation is produced by hydroelectric facilities. Canada is the third largest producer of hydroelectricity in the world and is estimated to have the potential for 29,000 megawatts of additional hydroelectricity capacity.

Due to its significant landmass and ocean shores, Canada also has the capacity to generate large amounts of bioenergy and tidal power although both industries are in the nascent stages of development.

Huge energy market

Canada is the sixth largest consumer of electricity in the world, and the largest trading partner of the US, the world’s largest consumer of electricity. Renewable energy developers and suppliers with a Canadian base are positioned to take advantage of renewable energy opportunities in the US.

Government support

Under Canada’s federal/provincial division of powers, jurisdiction over electricity generation and distribution rests largely with the provinces and territories. Many of Canada’s provincial and territorial governments have implemented programmes to support renewable energy generation. For example, Ontario – Canada’s most populous province – with the passage of the Green Energy and Green Economy Act (GEA) in 2009, initiated North America’s most comprehensive renewable energy development programme.

The GEA includes a feed-in tariff (FIT) structure whereby successful applicants can enter into 20-40 year power purchase agreements with the provincial power authority as the electricity offtaker. Ontario has committed to procuring 10,500 megawatts of renewable electricity generation by 2015 and the FIT programme is a major catalyst to help drive that outcome.

Ontario also has two current procurement programmes (totalling 50 megawatts) for energy storage technologies with the express mandate to help commercialize viable energy storage technologies. A major focus of clean technology investment is in the area of energy storage technologies.

Stable investment platform

Canada is a relatively low risk jurisdiction for foreign direct investment. Many of the planet’s leading renewable power developers and suppliers, including Suzlon, have established Canadian operations due to its stable legal regime, low counterparty risk and strong returns.

A recent World Trade Organization (WTO) ruling has further opened the door to renewable energy-based foreign investment in Ontario. The original GEA package of policies included a domestic content requirement which mandated that projects being developed under the FIT programme had to have a certain percentage (30-60% depending on the fuel type) of the project inputs sourced within Ontario. The WTO ruled this requirement violated international trade laws, which has resulted in Ontario lowering its domestic content percentage requirements with the expectation they may fall altogether by the end of 2014.

Michael Barrett is a partner and co-head of the Power and Energy Group at Bennett Jones LLP, a law firm with offices in Calgary, Toronto, Edmonton, Ottawa, Vancouver, Washington DC, Dubai and Doha, and a representative office in Beijing.

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