Wind Energy- Diversifying Canada’s Electricity Market
Speaker: Robert Hornung, President of Canadian Wind Energy Association (CanWEA)
September 30, 2014.
About the Speaker
The speaker for this lecture is Robert Hornung, President of the Canadian Wind Energy Association (CanWEA) since August of 2003. CanWEA works to represent the interests of both domestic and international companies with a stake in the Canadian wind sector. Mr. Hornung is a Board Member of the Global Wind Energy Council. He has an extensive background in environmental work with the Pembina Institute, as Policy and Communications Director and Climate Change Director, and previous to that with the Organization for Economic Co-operation and Development, Environment Canada, and Friends of the Earth Canada. Mr. Hornung was named as an Honourable Member of the Royal Canadian Geographical Society in 2009.
An Update on Wind Energy in Canada Today
The Canadian Wind Industry has come a long way from a total national capacity of 137 MW in the year 2000 to become the ninth largest wind producer globally. The 8,517 MW of installed capacity continues to expand with average yearly installations of 1,100 MW (over the past five years). In 2013, 1600 MW of developed resulted in an annual record of new wind generated capacity. Additional projects already under construction or contracted to be built will result in installed Canadian capacity reaching 12,000 MW by the end of 2016.
Within Canada there is no single wind energy market, as individual provinces have different policy frameworks and related challenges. Through regulatory innovations Ontario has become the leading wind energy market in Canada, followed by Quebec, Alberta and the Maritimes. Contributions to provincial electricity supply range from British Columbia’s 1.51% to Prince Edward Island’s 37.01%, with wind energy meeting roughly 4% of overall national electricity demand.
The Central Role of Wind Energy in Canada’s Future Electricity Supply
Each and every potential source of energy provides a mixture of benefits and drawbacks, relating to economic costs, environmental impacts, reliability and social license. New generating and management technology combined with massive distributed electricity generation growth has created the need for innovation to facilitate smooth transitions to new electricity systems. The addition of variable electrical production sources like wind and solar are buoyed by smart tools to manage demand-side electricity consumption.
Over the last few decades improvements in wind energy technology have resulted in a path towards cost competitiveness. Current estimates place wind energy as the second cheapest source of electricity generation at $89 Cdn/MWh. It is important to note that debate on the rising cost of generating renewable energy in Canada does not adequately take into account the basic requirement for new generating capacity. An unspoken truism is that every source of new electricity generation is more expensive than current generating capacity.
Taking into account a lifecycle analysis of wind energy is important due to various cradle-to-grave impacts of the technology and certain environmental concerns. The mitigation of environmental impacts of producing wind power occurs in roughly two years of operation. Debate and discussion on these, and other, impacts (such as bird deaths) unfortunately do not occur with the proper comparisons to alternative technology.
The economic benefit of wind energy is uniquely positioned to help communities through the technology’s distributed nature. Rural communities have traditionally thrived from natural resource based economies, and as a relatively newly minted natural resource wind is poised to continue this tradition. While the wind industry cannot assume public support, increased community engagement and public consultation can produce a host of economic benefits, including:
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Lease income to land owners
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Benefit agreements with neighbouring land owners
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Municipal tax collection revenue streams
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Community benefit agreements
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Peak job creation during construction
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Supply chain manufacturing jobs
Integrating variable energy sources is a complex and evolving practice. North American innovation has come in the form of partnerships and groups such as the Utility Variable-Generation Integration Group (http://variablegen.org/), which share best practices and experiences. Conclusions that most grids are able to integrate ~10% wind capacity without significant changes to the system take advantage of grid redundancy and reserve potential.
Barriers to Capturing Canada’s Wind Energy Potential
It is a common sentiment in the industry that it is ten times easier to work in the EU than Canada due to regulatory uncertainty, a byproduct of the separation of markets into provincial jurisdictions. The electricity sector is a policy driven sector; forward progress depends on legislature and regulatory decisions.
Ontario has chosen to focus on renewables to provide future electrical supply, though no new generation requirements are likely in the near term. Quebec’s policy decisions rest on its electricity forecast and surplus requirements. The partnership of wind and hydro is naturally beneficial due to the ability to create storage opportunities for intermittent wind through hydro, yet the province has decisions to make concerning exportation and industrial energy supply needs over the next decades. In Alberta there is no crown utility, rather a free market exists whereby demand-side market trends dictate the need for new supply. While wind resources in the province are the richest in Canada, questions of market design and an over-abundance of energy options have led to potential doubt about the future direction of Alberta’s electricity sector.
Discussion
The discussion between Robert Hornung and Sustainable Energy lecture participants encompassed a wide range of topics. Questions ranged from the position of Canadian market expertise as it relates to global innovation, to the impact and relationship between solar and wind technology, domestic content requirements, energy storage options, community consultation and opposition, tariffs versus tendering processes, regional competitive advantages, competing industries, foreign investment and trade agreements.
It is widely accepted that the European Union has a competitive advantage in technological innovation and related wind expertise. In Canada, the policy framework is different in each province (some have FIT, some have CT, while others have different regulatory approaches) making it difficult for companies to transition between jurisdictions. Canadian companies face a relatively mature global competition, though there is an understanding of the potential opportunity to focus on R&D in cold climates. In remote communities, the challenges often include temperatures so cold they affect lubrication, and the more general challenges of general maintenance and servicing. One major issue is how do you transport replacement parts to a community that can only be accessed by plane for much of the year?
While the cost curve for solar energy technology is roughly where wind was eight years ago the trend is one of steep decline. It is understood that solar will continue to grow and gain a share of the production mix, though a strong compatibility exists between the two technologies during their related peak productions (solar in the summer and wind in the winter, solar during the day and wind at night). This allows for a modest balance of variable resources.
The domestic content requirements incorporated into Ontario’s FIT program were struck down by the WTO, but not before a supply chain was developed within the province. In Gaspe, Quebec wind manufacturing capacity has led to the economic revitalization of the region, yet difficulties from the remote location of the process has led to competition issues.
While it is true that energy storage is an enabler of renewables there is a more general misconception that storage is required.
Investment is, and will continue to be, key, especially as markets are not particularly designed to compensate the evolution of energy storage technology. If wind is to reach a 20% market share energy storage will be a necessary part of the picture. However, current storage above and beyond hydroelectric partnership is not cost competitive.
With the scalability of wind energy there are a wide range of potential local ownership structures to empower and improve local involvement. International leadership from places such as Germany and Denmark showcase industry best practices. It is the policy of CanWEA to provide capacity and examples of best practices to members to encourage and catalyze efforts to incorporate local participation.
When addressing community concerns members are provided the tools to answer questions, relying on best practices. At the community level, arguments can become emotionally charged, rather than information based. Successfully engaging opposition at the community level and helping these communities examine the issues from a different perspective are key components of CanWEA’s strategy moving forward.
When comparing FIT with competitive tendering it is important to understand that there is no perfect procurement model. The strength of FIT is that the developer knows the price. The challenge with the model is cost determination. The strength of competitive tendering is that you get the lowest cost. The risk is that you award contracts to projects that may not get built and that lowest cost does not always mean best project.
When working in opposition of large power groups, such as nuclear or fossil fuel, CanWEA attempts to ensure that electricity policy debate is truthful and responsive to misinformation about wind power. Government decision-making is political but should be based on facts and evidence. In Canada, there is an inherent conflict between large established utilities and new players in the industry.
The majority of turbines in Canada are relatively new. In some areas, the wind turbines can be dismantled then replaced with a wind farm with only half as many turbines that produce three times the power. This is called “re-powering” and is an economically friendly investment for wind farms that reach the end of their 20-25 year lives. Future recycling endeavors will allow for the repurposing of reusable materials in existing turbines.
Foreign investment in the Canadian wind industry is on the rise. Over half of all wind farms proposed and in-development are foreign-owned. While anxiety exists over the underlying focus of large multinational corporations and their potential impact on local communities, it has been shown that increased investment from such companies will only catalyze the growth in the industry.
Completed by: Laura Jamieson, Matthew Ladd and Matthew Brady, Sustainable Energy Policy graduate students
To view the poster for this event, click here: Wind Energy – Diversifying Canada’s Electricity Markets
To view the lecture slides from the presentation, click here: