Renewable Energy Exports



Paul Cassidy & Angela Stolz for The Lawyers Weekly

Canada faces leadership challenges in the new green economy

January 15, 2010

When oil is priced at $70 per barrel during a world-wide recession, it is safe to say the demand for renewable energy, particularly in North America, is here to stay. When such non-market forces as carbon regulation and other state-mandated requirements are added to the mix, there is little doubt that "green power" has a bright future.

Canada is in many ways as well endowed with renewable resources as it is with conventional energy sources. For example, it is estimated to have the second-highest potential for wind energy development in the world, exceeded only by Russia. And notwithstanding Canadians' much discussed and lamented high per capita energy consumption, Canada's renewable energy resources far outstrip its domestic load (demand). Fortunately, there is a vast renewable energy market demand south of the border, creating a truly massive opportunity to be met by virtually all parts of the country.

Moreover, politicians across the country routinely trumpet their desire for their province to become an energy leader in green power and technology. 2010 will, in many ways, be a pivotal year for policy makers to step up to the plate to make those words a reality. Given our comparatively small population, and the head start enjoyed by others (such as Denmark, Germany and Spain) true leadership in green energy can only be marked by our ability to export this energy.

Merely serving our local demand will make no one but ourselves characterize us as leaders. But the non-exhaustive list of challenges discussed below must be overcome if Canada is to assume a leadership position in the new green economy through its export of its renewable energy.

Transmission

Developing renewable energy for export will be a pointless exercise if there is an insufficient transmission grid resource to get it to market. While there is a long history of transmission between Canada and the U.S., the grid is configured for existing, conventional energy sources, such as large-scale hydro dams and coal fired generation plants.

The green energy resource will require adjustments in addition to the grid to accommodate its more dispersed format. In some cases, expensive new transmission interties will be required, which will involve the construction of grid additions to infrastructure on both sides of the border. If one believes in the development of renewable energy, one must also believe in transmission expansion.

Export policy

Even if the renewable energy resource exists and the transmission grid is sufficient to get it to the market, an export policy must be designed to make it a reality. Many provincial governments are wrestling with their export policies. This is primarily because of concerns related to meeting domestic demand first, and other, more political concerns, such as whether private developers should play a role.

At bottom, an energy export policy must be clear, coherent and stable, or else the required public and private investment will be in jeopardy or unattainable.

Export licensing

A rational export policy also requires a rational export licensing scheme. The current licensing regime under the National Energy Board Act has been designed primarily with conventional energy sources in mind, and may not be sufficient for green energy.

For example, requirements in the licensing regime that local demand be offered the power in potential priority to export demand may have the effect of unduly restricting the export market because, as noted above, the local load (expressed on a national scale) will never be sufficient to maximize all of Canada's energy production potential.

Environmental permits

Green energy projects, whether for domestic or export use, have been and continue to be hindered by environmental permit processes designed for the conventional energy world. Some provinces, notably Ontario and B.C., are taking steps to remove some of the impediments created by NIMBYs and others to renewable energy projects. However, permit constraints remain a persistent issue that will, if not remedied, undermine an effective export market.

First Nations concerns

The fulfillment of Canada's potential to be a renewable energy export powerhouse is inextricably tied to the successful resolution of the many First Nations concerns that exist across the country with regard to resource development in their traditional territories. The success or failure of the resolution of these concerns will go a long way to determining the outcome of the promises made by Canada's politicians and policy makers to make Canada a leader in the green energy world.

The simple reality is that in most parts of the country, many renewable energy projects of any significance inevitably occur in traditional territories. First Nations, therefore, need to be consulted and, if necessary, successfully accommodated in these projects. Some projects currently underway, such as wind farms and small hydro "run of river" facilities, already show the value of partnering with First Nations to make these projects a reality.

Eligibility

One of the principle drivers of the green energy market in the U.S. are "renewable portfolio standards" (RPS) imposed by several states requiring that a significant percentage of power generation originate from renewable sources. For example, California has a requirement that 33 percent its of electrical generation meet eligibility to be considered as a green energy source by 2020. A federal RPS standard will also likely be imposed.

A major difficulty potentially arises if the eligibility requirements cannot be met by Canadian exporters. For example, small hydro projects may not qualify in some states for the RPS criteria.

These artificial constraints may challenge the ability of a green energy export market to thrive in Canada.

Paul Cassidy and Angela Stolz practise environmental and energy law at Blake, Cassels and Graydon LLP in Vancouver. The views expressed in this article are solely their own.

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