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Table of Contents


EXECUTIVE SUMMARY

Introduction

This is an evaluation of Natural Resources Canada’s (NRCan) renewable energy programs that are intended to increase Canada’s smaller emerging renewable energy supplies and make clean, renewable electricity and heat more available and less expensive for Canadians.  

The evaluation covers NRCan expenditures of approximately $190.3 million during a six-year period (2003-04 to 2008-09) for four programs:

  • ecoENERGY for Renewable Power and its predecessor, the Wind Power Production Incentive (WPPI) ($154.2 million; 81.0% of the $190.3 million total); and
  • ecoENERGY for Renewable Heat and its predecessor, the Renewable Energy Deployment Initiative (REDI) ($36.1 million; 19.0% of the $190.3 million total).

The ecoENERGY for Renewable Heat Program and the ecoENERGY for Renewable Power Program investments (and their predecessors REDI and WPPI) support emerging renewable technologies rather than mature technologies such as large scale hydro.  The ecoENERGY Renewable Initiative programs have only been in operation since April 2007.  While some early results are available from these programs, most of the evaluation findings are derived from the two predecessor programs: REDI that began in 1998; and WPPI that began in 2002.

WPPI provided a long-term production incentive for the producers of wind power.  The long-term incentive approach for wind power was extended under the ecoENERGY for Renewable Power Program (one cent per kilowatt hour over 10 years) and expanded to include other forms of renewable power in addition to wind (e.g., low impact hydro; biomass; solar photovoltaic).  Of the four-fifths of the total funding that has gone to WPPI and ecoENERGY for Renewable Power Program contributions, the vast majority has been for wind power projects; it is expected that wind will receive about 80% of the $1.46 billion total that will be spent over the life span of the renewable power incentive by March 31, 2021. 

REDI provided short-term project support to building owners for certain types of heating and cooling equipment in the commercial sector. REDI also provided financial support to industry associations for marketing strategies and campaigns, marketing incentives and industry infrastructure initiatives.  The ecoENERGY for Renewable Heat Program provided a short-term capital incentive for the installation of solar thermal units as well as residential pilots for solar water heating, and industrial capacity development.  It should be noted that federal tax policy also plays an important role in supporting renewable power and heat projects.  

Evaluation Issues and Methodologies

This evaluation examined issues related to relevance and rationale, results and success, and cost effectiveness and alternatives.  Five methodologies were used: a document review; a literature review; 45 interviews with key stakeholders; 12 case studies; and a quantitative analysis of renewable energy in Canada.

Relevance and Rationale

  • The ecoENERGY for Renewable Heat Program and ecoENERGY for Renewable Power Program are aligned with government priorities and are consistent with federal roles and responsibilities.  The programs are part of the Government of Canada’s Clean Air Agenda and are consistent with NRCan’s mandate. 

Announced on January 17, 2007, the ecoENERGY Renewable Initiative – consisting of the ecoENERGY for Renewable Heat Program and the ecoENERGY for Renewable Power Program – is part of the broader ecoACTION Clean Air Agenda. 

The Government of Canada has committed to reducing Canada’s total greenhouse gas emissions by 17% below the 2005 level by 2020 in respect of the Copenhagen Accord.  Over time, it is expected that the emerging technologies currently supported by the ecoENERGY Renewable Initiative programs will play a significant role in helping the Canadian and world economy reduce its use of fossil fuels and make the transition to a low-emission economy. 

The ecoENERGY for Renewable Heat and ecoENERGY for Renewable Power programs also fall within NRCan’s legislated mandate of promoting the sustainable development and responsible use of Canada’s mineral, energy and forestry resources.  The Department’s work is focused in areas of core federal jurisdiction as well as areas of shared responsibility, such as the environment. 

Results and Success

  • REDI, WPPI, and the ecoENERGY for Renewable Heat and ecoENERGY for Renewable Power programs have achieved, or are on track to achieve their stated objectives.  In addition, it appears that many of the programs’ long-term outcomes will also be achieved.  However, it is not possible to directly attribute the achievement of program objectives as being responsible for reaching these long-term outcomes due to a multitude of other, interacting factors and considerations. 

It is important to recognize that the four programs examined in this evaluation have had several objectives and outcomes that evolved over time.  These programs were intended to develop and increase the use of renewable technologies to address a multitude of issues: concerns about electricity supply and the need to diversify energy supply; energy costs; air quality; and climate change.  The programs were to contribute to reduced criteria air contaminants (CACs) and greenhouse gas (GHG) emissions through the displacement of fossil fuel-based energy. 

Evidence on the programs’ results and success demonstrates that the four programs (REDI; WPPI; ecoENERGY for Renewable Heat and ecoENERGY for Renewable Power) have achieved their objectives and many of their outcomes with the exceptions of a self-sufficient renewable heat industry and the capacity to manufacture wind turbines and related parts in Canada (details are found in Annex 1).  In summary:
 

  • REDI provided contributions toward the installation of 148 biomass, 282 solar air, and 136 solar hot water projects in the commercial sector and supported several marketing strategies and campaigns, marketing incentives and industry infrastructure initiatives.  In general, progress toward expected outcomes was made, but the cost difference between conventional and alternative energy remains too large to increase the adoption rate of renewable energy systems without the federal incentive, tax measures, as well as provincial/territorial programs and subsidies.
  • During its first two years, the ecoENERGY for Renewable Heat Program supported 334 solar thermal projects (target is 700 systems by March 31, 2011), 97 individual solar water pilots in residential buildings and several industrial capacity initiatives.  Although the program had only been operating for two years at the time of this evaluation, there is evidence that the program has achieved some of its objectives and expected outcomes.
  • For the ecoENERGY for Renewable Heat Program, industry and government representatives maintain that the number of firms and trained installers involved with solar thermal capacity has increased.  However, the industry remains small (less than 100 firms and a few hundred full time equivalent staff) without many of the attributes of a mature industrial sector. 
  • WPPI supported 22 wind projects, totalling 924 megawatts of power by March 31, 2007 (its target was 1,000 megawatts).
  • By April 1, 2009, ecoENERGY for Renewable Power projects totalling a capacity of 1,300 megawatts had been commissioned and projects with 1,800 megawatts were under construction for a total of 3,100 megawatts (objective was 14.3 terawatt-hours of electricity which corresponds to approximately 4,000 megawatts by March 31, 2011).  ecoENERGY for Renewable Power is on track to reach its program targets for electrical generation by 2011.

The four federal programs are associated with an increased rate of installations.  The majority of the industry and government interviewees agreed that ecoENERGY for Renewable Power Program had increased the rate of renewable power installations in Canada and that the ecoENERGY for Renewable Heat Program had contributed to stimulating activity in the area of renewable heat.  However, attribution of the programs’ overall impacts on renewable power and heat are less clear. 

All of the case study interviewees who received support under the federal programs of the  ecoENERGY for Renewable Initiative indicated that the programs had a major influence on the decision for their projects to go forward.  About half of the case study contacts said that their projects would not have proceeded without the incentive from the federal government. 

For WPPI and the ecoENERGY for Renewable Power Program, in particular, direct attribution of the increased power installations to causal factors is not possible.  Many other factors have influenced the adoption of renewable energy.  It was not possible to quantitatively measure the relative impact of WPPI and the ecoENERGY for Renewable Power Program in comparison to the relative impact of the other factors.  The production of wind power has increased since the introduction of WPPI, but is still less than one percent of the electricity produced in Canada. 

All industry, all NRCan and a large majority of provincial government interviewees agreed that WPPI and the ecoENERGY for Renewable Power Program played a leadership role in the development of the provincial renewable power policies.  These interviewees noted that each province implemented a renewable policy following the introduction of WPPI.

The majority of the NRCan and heating industry interviewees agreed that REDI and the ecoENERGY for Renewable Heat Program played a leadership role in the development of provincial policies.  However, only a few of the provincial and utility interviewees agreed that the renewable heat programs had contributed to stimulating activity in the area of renewable heat and provided complementary support for the development of the provincial programs.  A few of the industry and government interviewees indicated that the impact of the programs had been minimal because the level of incentive had not been enough to have an impact on the industry.

On the other hand, most industry and program manager interviewees mentioned the drop-off in solar air and solar water installations during the transition from REDI to ecoENERGY for Renewable Heat (2007) and the periods of uncertainty during REDI renewal periods as indications of the stimulating effect of the federal programs.  These interviewees stated that the level of installations decreased “significantly” when the federal incentive was not available, although no reliable measure of the decline was offered.  

Cost Effectiveness and Alternatives Including Design and Delivery

  • The literature and document review, as well as interview and case study data, indicate that the existing incentive approach has been appropriate to encourage an increase in the supply of clean electricity (primarily wind power) and solar thermal renewable heat. 

At the time of the fieldwork for this evaluation (early 2009), the interview and literature review data indicated that there was little if any overlap among renewable energy programs at the federal/provincial/territorial level and that complementarity existed for both the ecoENERGY for Renewable Power Program and the ecoENERGY for Renewable Heat Program.  

The application and reporting process for ecoENERGY for Renewable Power Program and ecoENERGY for Renewable Heat Program are appropriate.  For the most part, the application and approval processes for the programs appeared to be clear although some interviewees would like further streamlining in the application processes. 

Interviewees provided a number of suggestions regarding ways to improve the effectiveness and efficiency of the design and delivery of the existing programs.  Many of these would increase the scope and costs of the programs. 

Conclusion

This evaluation found that the current ecoENERGY for Renewable Heat Program and ecoENERGY for Renewable Power Program are relevant and have rationales that are aligned with government priorities, consistent with federal roles and responsibilities and NRCan’s mandate. 

REDI, WPPI, ecoENERGY for Renewable Heat and ecoENERGY for Renewable Power Program have achieved, or are on track to achieve their stated objectives.  In addition, it appears that many of the programs’ long-term outcomes will also be achieved.  However, it is not possible to directly attribute the achievement of program objectives as being responsible for reaching these long-term outcomes due to a multitude of other, interacting factors and considerations. 

On the power side, WPPI and the ecoENERGY for Renewable Power Program have demonstrated leadership and have helped launch the renewable power industry, particularly wind power.  The ecoENERGY for Renewable Heat Program may have increased the capacity of the industry to deliver quality renewable heat systems into the Canadian market but the industry remains small, without many of the attributes of a mature industrial sector.

The evaluation also found that the renewables landscape is complex and has evolved considerably since REDI and WPPI were introduced.  The need to develop renewable technologies has become much more widely accepted.  Most provinces have specific procurement processes for renewable electricity and a range of programs to support various renewable energies.  The economics of some renewable projects (e.g., wind power projects and biomass for heating) have already become much more viable.

Recommendation and Management Response

Recommendation Management Response Responsible Official &
 Target Date
Recognizing the challenge in attributing results to the ecoENERGY for Renewable Power Program and the ecoENERGY for Renewable Heat Program, given the evolving context for renewable energy in Canada, it is recommended that NRCan review its performance indicators to ensure that they are measurable and attributable. NRCan will use lessons learned through the delivery of the ecoENERGY for Renewable Power Program and the ecoENERGY for Renewable Heat Program, and the evaluation findings, to review its performance indicators. ADM, Energy Sector

March 2011

1.0 INTRODUCTION

This is an evaluation of Natural Resources Canada’s (NRCan) renewable energy programs1  that are intended to increase Canada’s smaller emerging renewable energy supplies and make clean, renewable electricity and heat more available and less expensive for Canadians.2  

The evaluation covers NRCan expenditures of approximately $190.3 million during a six-year period (2003-04 to 2008-093) for four programs:

  • ecoENERGY for Renewable Power and its predecessor, the Wind Power Production Incentive (WPPI) ($154.2 million; 81.0% of the $190.3 million total); and
  • ecoENERGY for Renewable Heat and its predecessor, the Renewable Energy Deployment Initiative (REDI) ($36.1 million; 19.0% of the $190.3 million total).

The ecoENERGY for Renewable Power Program and the ecoENERGY for Renewable Heat Program have only been in operation since April 2007.  While some early results are available for these programs, most of the evaluation findings are derived from the two predecessor programs: REDI, that began in 1998; and WPPI that began in 2002.   

WPPI provided a long-term production incentive for the producers of wind power which was extended under the ecoENERGY for Renewable Power Program and expanded to other forms of renewable power (e.g., low impact hydro; biomass; solar photovoltaic). 

REDI provided short-term project support to building owners for heating and cooling equipment in the commercial sector, and provided financial support for marketing strategies and campaigns, marketing incentives and industry infrastructure initiatives.  The ecoENERGY for Renewable Heat Program provides a capital incentive for the installation of solar thermal units as well as residential pilots for solar water heating, and industrial capacity development. 

It is important to recognize that the four programs have had multiple short and longer-term objectives that evolved over time.  These programs were intended to develop and increase the use of renewable technologies to address a multitude of issues: concerns about electricity supply and the need to diversify energy supply; energy costs; air quality; and climate change. 

The programs were to contribute to reduced Criteria Air Contaminants (CACs)4 and greenhouse gas (GHG) emissions5 through the displacement of fossil fuel-based energy.6  The ecoENERGY documentation notes anticipated reductions in emissions for both the ecoENERGY for Renewable Power Program and the ecoENERGY for Renewable Heat Program.  However, the estimates were modest as they were based on assumptions and, according to program staff, indicative rather than precise targets. 

WPPI and Renewable Power project proponents are required to provide emission estimates after one year of operation, but estimates of GHG and CAC emissions reductions are based on emissions factors applied to production.7  Given the small anticipated emissions reductions from the renewable heat projects, and the cost of collecting emissions data, actual emission reductions data are not being collected. 

Renewable Energies

In Canada, large scale hydro is a renewable energy source that supplies over half of the country’s electricity.  However, this report deals primarily with smaller emerging technologies such as:

  • wind energy – wind turns the blades of a turbine operating an electrical generator; 
  • solar photovoltaic – this technology uses the electrical properties of semiconductors to produce electricity;
  • solar thermal – passive thermal systems include high-efficiency windows and heat absorbing materials; active systems may involve many complicated mechanical components to circulate either air, water, or another heat exchange medium;
  • low impact hydro (less than 50 megawatts) – small hydro that is often “run-of-the-river” meaning that the systems do not require dams or storage reservoirs;
  • bioenergy – bioenergy includes wood, crops and wastes that may be burned directly, converted into gas or oil to generate electricity and heat or converted into fuel for vehicles; methods used include direct combustion, co-firing with other fossil fuels, gasification, and anaerobic digestion;
  • ocean energy – includes wave, tidal, and ocean thermal energy conversion that uses the ocean’s different temperature layers to drive a power producing cycle;
  • geothermal – heat from the earth is pumped to the surface; higher-temperature geothermal resources can be used to produce high pressure steam for generating electricity; and
  • geoexchange8 – below ground temperature differentials are utilized for heating and cooling through the use of ground source heat pumps.

The Canadian Context

Within the Canadian federation, most natural resources belong to, or are the responsibility of, provinces and territories.  Section 92A of the Constitution Act clarifies provincial control over the field of natural resources.9

Canada’s federal government is responsible for interprovincial and international trade, resource-based science and technology, and resource management in the frontier regions.10  The federal government also has constitutional authority to exercise spending power for scientific research and development programs and other innovative programs.  In the electricity field, the federal government is responsible for: electricity exports, nuclear regulations, international and designated interprovincial power lines, research and development, and regulation of specific issues.  

NRCan’s mandate, derived mainly from the Department of Natural Resources Act of 1994,11 includes promoting the sustainable development and responsible use of Canada’s mineral, energy and forestry resources.  NRCan’s work is focused in areas of core federal jurisdiction as well as areas of shared responsibility, such as the environment.

Electricity

With regard to electricity, provinces and territories play dominant roles.  They are responsible for: generation; market structure; transmission and distribution within the jurisdiction; pricing; and site selection and permitting.  Electricity is most often generated and distributed by provincial crown corporations or public utilities, and is either sold directly to the public or through the private sector. 

The majority of provinces regulate their utilities to ensure that the lowest possible price is charged to consumers.  Provincial regulators typically compel electricity utilities to set domestic rates using a cost plus formula and not a market rate formula.  Those utilities that export to the United States set rates for these external users at a market level which is usually higher than the domestic rate.  Some provinces also maintain low electricity rates as an element of their economic and industrial policy.  The result is that renewable energy must compete with cheap conventional electricity.  This not only counters the cost-effectiveness of both the ecoENERGY for Renewable Power and ecoENERGY for Renewable Heat programs, it also affects the demand management (conservation) policies of provincial electricity utilities.

Most provinces have specific procurement processes for renewable electricity.  The majority of these are competitive request-for-proposal (RFP) processes where contracts are awarded on the basis of lowest cost, or standard offer contracts.  The Atlantic provinces have also introduced renewable portfolio standards that mandate the shares of renewable power generation from each utility’s portfolio mix.  Alberta has an offsets system which provides economic benefits to wind development.

In recent years, provinces, territories, municipalities and most provincial/territorial utilities have developed a large number of diverse “green” policies to support renewable heat and power as well as energy conservation.

Heating and Cooling

There is no single industry that can be defined as the renewable heat industry.  Renewable heat technologies range from the common fireplace or woodstove to high efficiency windows and ground source heat pumps.  Federal government support is targeted toward emerging technologies.  An industry analysis of the renewable heat sector is complicated by the fact that there is no North American Industrial Classification (NAIC) code for this sector, which means that it is not tracked by any of the ongoing Statistics Canada surveys.12  

The solar air and water systems (currently supported by the ecoENERGY for Renewable Heat Program), and geoexchange systems (previously supported by REDI) are non-emitting or low-emitting technologies, as they either do not consume fuel or additional energy, or produce three to four times as much energy as they consume.  These systems capture and redistribute energy from the sun (for solar) and from the ground (for geoexchange) to where it is useable inside structures.  In most cases, these technologies are used to increase or decrease water or air temperatures up to a certain point, after which other conventional technologies are employed.   

Canada’s Energy Supply and GHGs

Canada has a relatively high percentage of clean and renewable power in its generation mix (led by large-scale hydro) but a relatively low percentage of emerging renewable power.  In 2008, a total of 598.8 terawatt-hours of electricity was generated in Canada.  Of the total, hydroelectricity accounted for 61.7% of generation, nuclear for 14.8%, wind 0.3%, tidal was present but not significant, and the remainder was from other thermal sources including conventional steam, internal combustion, and combustion turbines.13

In 2008, over three-quarters of Canada’s electricity was derived from hydro, nuclear, wind, and tidal resources that are non-emitting.  Moreover, the electricity generation mix across the country is also important for a discussion of renewable energies.  Some provinces (i.e., British Columbia, Manitoba, Quebec, and Newfoundland and Labrador) already have as much as 90% renewable power while Nova Scotia and Alberta only have 10% renewable power.14   The greatest potential to reduce or avoid air emissions with emerging renewable technologies is in those provinces that currently have a relatively low level of non-emitting or renewable power. 

Announced on January 17, 2007, the Renewable Initiative,15 consisting of the ecoENERGY for Renewable Heat Program and the ecoENERGY for Renewable Power Program, is part of the broader ecoACTION Clean Air Agenda.  The Government of Canada has also committed to reducing Canada’s total GHG emissions by 17% below the 2005 level by 2020 in respect of the Copenhagen Accord.16 

NRCan Renewable Energy Initiative Programs

NRCan has been involved with renewable energies since the 1980s, initially because of energy supply and security issues.  Subsequently, the issues of air pollution and climate change have provided further impetus for renewable energy technologies.  NRCan continues to support a wide range of energy science and technology and energy efficiency work. 

Governments essentially have five policy options to limit the use of fossil fuels and/or promote the use of renewable energy:

  • promotion/advocacy in the form of education, training, advertising and other messaging;
  • standards that are voluntary or mandatory;
  • regulations limiting use, including quotas;
  • incentives to promote installation and use of renewable energy equipment and/or renewable power; and
  • penalties and taxes on fossil fuels to create incentives to reduce their use.

It is useful to keep these policy options in mind when considering the renewable energy programs that are described in the following sections.  The current ecoENERGY for Renewable Power Program uses a ten-year incentive paid to energy producers for the production of renewable power.  The ecoENERGY for Renewable Heat Program provides a short-term capital incentive for the installation of solar thermal units as well as residential pilots for solar water heating, and industrial capacity development.  These programs (and their predecessors REDI and WPPI) support emerging renewable technologies rather than mature technologies such as large scale hydro.

Graph 1 provides a summary of the histories of the ecoENERGY for Renewable Heat Program and the ecoENERGY for Renewable Power Program.

Graph 1: Evolution of the ecoENERGY for Renewable Heat Program and the ecoENERGY for Renewable Power Program

Graph 1: Evolution of the ecoENERGY for Renewable Heat Program and the ecoENERGY for Renewable Power Program<

Renewable Energy Deployment Initiative

Over its nine-year history (1998-2007), 17 REDI was designed to help industry overcome market barriers and develop a sustainable renewable energy industry.  REDI was first introduced as a three-year, $12-million program, but was extended for a second three-year $14 million cycle in 2001 and a third $25 million cycle in 2004. 

REDI’s objectives were to:

  1. assist in the development of a sustainable market in Canada for reliable and cost-effective renewable energy systems; the initiative aims to create market awareness and stimulate demand for these systems as well as to support the renewable energy industries with capacity building and infrastructure development efforts;
  2. stimulate market demand for commercially reliable, cost-effective renewable energy systems for space and water heating and cooling;
  3. develop a more dynamic and self-sustaining renewable energy industry in Canada;18
  4. increase the use of renewable thermal energy by industry, commercial businesses and institutions;
  5. boost the amount of renewable thermal energy created for these sectors; and
  6. contribute to cleaner air by helping Canadian businesses use less fossil fuel-based energy for space and water heating in buildings across the country.19

REDI focused mainly on encouraging the adoption of “green” heating and cooling technologies in the industrial, commercial, institutional (ICI) sector, with some pilot projects in the residential area.  Technologies supported by REDI included ground source heat pumps, biomass combustion systems, active solar water systems and active solar air systems.  REDI initially supported these technologies because they were relatively tax disadvantaged due to lower capital cost allowance rates, and had higher initial capital investment costs for equipment purchases, compared with other energy sources.

REDI provided contributions toward the installation of 148 biomass, 282 solar air, and 136 solar hot water projects in the commercial sector.  REDI also provided financial support for marketing strategies and campaigns, marketing incentives and industry infrastructure initiatives. 

ecoENERGY for Renewable Heat Program

The replacement for REDI is the ecoENERGY for Renewable Heat Program, a four-year, $36.1 million initiative which came into effect on April 1, 2007. 20  

The ecoENERGY for Renewable Heat Program uses contributions to commercial, industrial and institutional users to encourage the installation (retrofit and new construction) of solar water and solar air heating.  The program uses contributions to increase adoption, which will increase the capacity to design and install solar water and air systems.  As more solar water and air systems are installed, prices are expected to fall and the consumption of conventional electricity, natural gas and propane should decline.  In areas that are reliant on fossil fuels for electricity generation, GHG emissions should also decline.

The ecoENERGY for Renewable Heat Program’s objectives are to:

  1. increase the use of renewable thermal energy;
  2. help to develop renewable thermal energy industry capacity; and
  3. contribute to cleaner air through the displacement of fossil fuel-based energy use for space heating and cooling, and water heating in Canadian buildings.21

The ecoENERGY for Renewable Heat Program provides financial contributions for three main activities:

  • deployment of solar thermal units in the industrial, commercial, and institutional sector;
  • residential pilot projects to test a number of ways to increase the uptake of solar water units in the residential sector; and
  • industry capacity development (standards for renewable thermal energy units; certification for solar thermal units; human resource skills; design tools; public information).

As detailed in Table 1, during its first two years, the ecoENERGY for Renewable Heat Program supported 334 solar thermal projects, projects that provided 97 individual solar water pilots in residential buildings, and work on several industrial capacity initiatives.

Table 1: Number of ecoENERGY for Renewable Heat Projects and Contribution Expenditures, by Component, 2007-08 and 2008-09 ($ million)

 Component 2007-08 2008-09 Total
# $ # $ # $
Solar Thermal ICI 129 3.1 205 6.1 334 9.2
Residential Pilots of Solar Water -- -- 97 0.1 97 0.1
Industrial Capacity Development n/a 0.3 n/a 0.5 n/a 0.8
Total 129 3.4 302 6.6 431 10.1

Source: ecoENERGY for Renewable Heat Program, January 11, 2010.

Under the ecoENERGY for Renewable Heat Program, the expectation is that increased adoption will further develop the renewable thermal energy industry by creating a lower effective price for these technologies.  This is expected to lead to further price reductions.  Over time, it is anticipated that energy users will choose to install water and air heating technologies that will reduce the demand for electricity generated by fossil fuels, which will further reduce GHG emissions.

In terms of targets, the ecoENERGY for Renewable Heat Program is expected to achieve its targets of supporting 700 solar thermal units in the industrial, commercial and institutional sector by March 31, 2011.  The program will also establish up to eight residential pilots (representing approximately 2000 individual systems), as well as helping to address infrastructure barriers. 

At the outset of the program, it was estimated that by 2011, the ecoENERGY for Renewable Heat Program would result in emission reductions of about 20 kilotonnes of GHG, 9.8 kilotonnes of NOX, and 19 to 32 tonnes of SOX per year by displacing the fossil fuel-based energy used for space and water heating in Canada’s housing and building stock.  The actual emission reductions achieved will depend upon project specific parameters such as: efficiency of the heating equipment in use; type of fuel replaced; solar thermal unit output; and to some extent, on the thermal loads being applied. Given the small anticipated emissions reductions from the ecoENERGY for Renewable Heat projects and the cost of collecting emissions data, actual emission reductions are not being collected.

Unlike REDI, heat generated from biomass is not eligible for the incentive under the Industrial, Commercial, and Institutional Commercial Deployment component of Renewable Heat.  The decision to exclude biomass projects from ecoENERGY for Renewable Heat was based on NRCan’s analysis that the incentive was no longer required for biomass projects.

Initially, the Industrial, Commercial, and Institutional Deployment component maintained the same incentive structure as REDI.  However, in September 2008, the incentive for the deployment contribution component was changed from 25% of total costs (as it was for REDI) to a rate per square meter of collector area22 multiplied by a collector-specific performance factor and incentive rate.23  

Wind Power Production Incentive (WPPI)

The WPPI Program began in 2002 and was incorporated into the ecoENERGY for Renewable Power Program in 2007.  The original $260-million WPPI initiative was intended to provide incentives to support the generation of 1,000 megawatts (MW)24 of new wind power capacity and 2.6 terawatt-hours (TWh) of electricity over a 15-year period.  Qualifying wind projects received, on average, one cent per kilowatt hour (kWh) over a ten-year period.  

WPPI’s objectives were to:

  1. help Canada obtain its climate change goals by achieving direct emission reductions that will result from the production of emissions-free wind energy;
  2. reduce the cost of wind-generated electricity, thereby increasing its long-term competitiveness by providing short term market opportunities that will increase existing generating capacity from wind turbines;25 and
  3. encourage the production of electricity from large-scale wind turbines for sale in the electricity markets.26

In 2005, the federal government provided WPPI interim funding of $69.9 million, which brought the program’s budget to $329.9 million over 15 years.  A total of 22 wind projects, resulting in 924 megawatts of power were approved under WPPI by March 31, 2007.27 

ecoENERGY for Renewable Power Program

The ecoENERGY for Renewable Power Program came into effect on April 1, 2007.  All qualifying projects commissioned between April 1, 2007 and March 31, 2011 will receive an incentive of one cent per kilowatt for a ten-year period.  The objectives of ecoENERGY for Renewable Power are to:  

  1. help position low-impact renewable power technologies to make an increased contribution to Canada’s energy supply mix thereby contribute to a more sustainable and diversified energy mix; 
  2. take advantage of the current conditions in electricity markets and “kick-start” low-impact, renewable power technologies in advance of the Clean Air Regulations that will better address the cost of environmental impacts associated with conventional sources of electricity; and 
  3. enable the production of 14.3 terawatt-hours of electricity per year of new, low-impact renewable power to be generated from about 4,000 megawatts of new renewable energy capacity.28

The production incentive approach of WPPI for wind projects was extended under ecoENERGY for Renewable Power to include: biomass, low-impact hydro, geothermal, solar photovoltaic (PV), and ocean (tidal) energy.  Eligible projects are selected on a “first-in-construction first-served” basis.     

To illustrate the size of the ecoENERGY for Renewable Power Program target, 14.3 terawatt-hours of renewable generation represents approximately 2% of Canada’s yearly output for 2007 of 640 terawatt-hours (TWh).29

Tables 2 and 3 provide information on the number and type of renewable power projects commissioned and under construction as of April 1, 2009.  Forty-six of the 71 projects (64.7%) commissioned or under construction were wind; 20 (28.2%) were low-impact hydro; three (4.2%) were biomass; and two (2.8%) were solar photovoltaic.  These projects totalled 3,135.5 megawatts representing over three-quarters of the program’s 4,000 megawatt target.  (There is always a risk that some projects may not come on stream and or may not perform as expected.) Based on program data, it appears that wind will represent approximately 80% of the ecoENERGY for Renewable Power program’s 4,000 megawatt target.   

Estimated emission reductions under ecoENERGY for Renewable Power, based on the production target of 14.3 TWh and the emissions factors used by the program, were 6.0-6.7 megatonnes of GHG per year with small CAC reductions: NO2 2,086 – 3,009 tonnes; SO2 2,976 – 12,265 tonnes; PM10 688 – 4,069 tonnes; PM2.5 302-1,986 tonnes; VOCs 89-121 tonnes; and CO2 32-2,492 tonnes.  According to program officials, the annual expected GHG emission reduction from projects in operation is 1.14 megatonnes of CO2 equivalent based on the emission factor of 465.88 tonnes per gigawatt-hour.30  Projects are required to provide estimates of GHG and CAC reductions after one year of operation.  

As of January 2010, funding for the ecoENERGY for Renewable Power Program is close to being fully committed.  The program is significantly over-subscribed; currently registered projects could deliver over 10,000 megawatts of renewable power capacity. 

Table 2: Number of Renewable Power Projects Commissioned, by Technology, 2007-08 and 2008-09

Year Wind Low-Impact Hydro Total Number Megawatts
2007-08 8 2 10 756.8
2008-09 10 3 13 535.5
Total 18 5 23 1,292.3

Source: ecoENERGY for Renewable Power Program internal database.

Table 3: Number of ecoENERGY for Renewable Power Projects Under Construction, by Technology, as of April 1, 2009

Wind Low-Impact Hydro Biomass Solar Photovoltaic Total Number Megawatts
28 15 3 2 48 1,843.2

Source: ecoENERGY for Renewable Power Program internal database.

As of December 2009, 91 ecoENERGY for Renewable Power contribution agreements had been signed (62 wind; 22 hydro; 4 biomass; 3 solar).  Graph 2 provides information on the capacity of these projects and their distribution among provinces, and the predominance of wind projects, except for hydro in British Columbia.

Graph 2:   ecoENERGY for Renewable Power Signed Contribution Agreements by Technology; Capacity and Province, December 22, 2009

Graph 2: ecoENERGY for Renewable Power Signed Contribution Agreements by Technology; Capacity and Province, December 22, 2009

Source: ecoENERGY for Renewable Power Program, January 5, 2010.

Based on the experience of WPPI, the ecoENERGY for Renewable Power Program has capacity factor limits31 for each technology to ensure that proponents will not overestimate that technology’s capability and tie up dollars that could be used for other projects.  Table 4 displays the capacity factor limits.

Table 4: ecoENERGY for Renewable Power Program Capacity Factor Limits

Technology Capacity factor limit (%)
Biomass energy 80
Hydro energy 60
Wind energy (offshore) 42
Wind energy (onshore) 35
Photovoltaic energy 20

Source: NRCan (2008), ecoENERGY for Renewable Power Program, Terms and Conditions, as amended in August 2008, p 9.

Tax Incentives

It should be noted that federal tax policy also plays an important role in supporting renewable power and heat projects.  

Currently, the Income Tax Regulations, Class 43.1 and 43.2 (depending on dates of purchase) provide Accelerated Capital Cost Allowances (ACCA) for specific types of energy generation equipment.  Class 43.1, introduced in 1996, provides an ACCA rate of 30%.  Class 43.2, introduced in 2005, provides an accelerated ACCA rate of 50% for certain types of renewable energy and energy-efficiency equipment.  Eligible equipment under these clauses must generate either heat or electricity (by using a renewable energy source such as wind, solar or small hydro, or waste fuel, or making efficient use of fossil fuels).  Class 43.2 benefits are available to industry until 2020.

In addition, the Canadian Renewable and Conservation Expenses (CRCE) tax deduction provides a 100% tax deduction for intangible expenses incurred to set up a system eligible under sections 43.1 and 43.2 of the Income Tax Act Regulations.  Project developers can use CRCE eligible expenses to issue flow through shares, thus helping companies raise equity for renewable energy projects.

The federal tax incentives improve the rate of return for renewable energy projects. NRCan staff believe that the net present value of the tax measures (depending upon project factors) may exceed the ecoENERGY for Renewable Power Program incentive.32  During the evaluation, several NRCan and other key stakeholders cited the importance of the federal tax support in combination with the ecoENERGY for Renewable Power incentive.  They noted that the incentive on its own was not always enough to encourage independent power producers to invest in renewable energy sources.  These federal tax incentives, as well as provincial programs, are integral to the success of some ecoENERGY for Renewable Power and ecoENERGY for Renewable Heat projects.

Resources

Table 5 and Graphs 3 and 4 provide a summary of expenditures under the four programs from 2003-04 to 2008-09. 

The majority of funding during this six-year period – $154.2 million (81.0%) – has been for WPPI and the ecoENERGY for Renewable Power Program, while $36.1 million (19.0%) was for REDI and the ecoENERGY for Renewable Heat Program. 

Within the four-fifths of the funding that has gone to WPPI and ecoENERGY for Renewable Power contributions, the vast majority of funding to date has been for wind power projects and it is expected that wind will receive about 80% of the $1.46 billion total that will be spent over the life span of the Renewable Power incentive by March 31, 2021. 

As illustrated in Graph 4, contributions equaled $175.7 million (92.3%) under the four programs during the six-year evaluation period while other operating costs were $8.3 million (4.4%) and salaries were $6.3 million (3.3%). 

During the six-year period, salaries and benefits for WPPI and ecoENERGY for Renewable Power represented 1.9% of their expenditures.  Salaries for REDI and ecoENERGY for Renewable Heat equaled 9.4% of program expenditures reflecting the very different program structures and delivery models.  Similarly, the operating and maintenance costs (O&M) for REDI and ecoENERGY for Renewable Heat were higher than for WPPI and ecoENERGY for Renewable Power. 

Table 5: Renewable Energy Expenditures, by Program, 2003-04 to 2008-09 ($ million)

Program/
Expenditure
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Total
WPPI
- Salaries 0.2 0.2 0.4 0.4 0.1 0.1 1.4
- O&M 0.1 0.2 0.2 0.2 0.1 0.2 1.0
- Contributions 2.8 5.3 10.5 24.9 29.3 29.3 102.1
- Sub-total 3.1 5.7 11.1 25.5 29.5 29.6 104.5
Renewable Power
- Salaries - - - - 0.6 0.9 1.5
- O&M - - - - 0.9 1.2 2.1
- Contributions - - - - 15.9 30.2 46.1
- Sub-total - - - - 17.4 32.3 49.7
WPPI & RP
- Salaries 0.2 0.2 0.4 0.4 0.7 1.0 2.9
- O&M 0.1 0.2 0.2 0.2 1.0 1.4 3.1
- Contributions 2.8 5.3 10.5 24.9 45.2 59.5 148.2
- Sub-total 3.1 5.7 11.1 25.5 46.9 61.9 154.2
REDI
- Salaries 0.1 0.7 0.7 0.5 - - 2.0
- O&M 0.3 1.1 1.1 0.6 - - 3.1
- Contributions 3.8 3.4 6.2 4.1 - - 17.5
- Sub-total 4.2 5.2 8.0 5.2 - - 22.6
Renewable Heat
- Salaries - - - - 0.7 0.7 1.4
- O&M - - - - 1.0 1.1 2.1
- Contributions - - - - 3.4 6.6 10.0
- Sub-total - - - - 5.1 8.4 13.5
REDI & RH
- Salaries 0.1 0.7 0.7 0.5 0.7 0.7 3.4
- O&M 0.3 1.1 1.1 0.6 1.0 1.1 5.2
- Contributions 3.8 3.4 6.2 4.1 3.4 6.6 27.5
- Sub-total 4.2 5.2 8.0 5.2 5.1 8.4 36.1
TOTAL
- Salaries 0.3 0.9 1.1 0.9 1.4 1.7 6.3
- O&M 0.4 1.3 1.3 0.8 2.0 2.5 8.3
- Contributions 6.6 8.7 16.7 29.0 48.6 66.1 175.7
- Total 7.3 10.9 19.1 30.7 52.0 70.3 190.3

Source:   Data from ecoENERGY Renewable Energy Initiative programs, November 9, 2009.  Salaries include Employee Benefit Plan costs.

Graph 3: Renewable Energy Expenditures by Program, 2003-04 to 2008-09

Graph 3: Renewable Energy Expenditures by Program, 2003-04 to 2008-09
Total Expenditures $190.3 Million

Graph 4: Estimated Renewable Energy Expenditures by Type, 2003-04 to 2008-09


Total Expenditures $190.3 Million

2.0 ISSUES AND METHODOLOGIES

This evaluation examined relevance and rationale; results and success; and cost-effectiveness and alternatives including design and delivery. 

Five methodologies were used:

  • document review;
  • literature review;
  • 45 interviews with key stakeholders:
    • utilities (14 interviews); provincial/territorial governments (12 interviews); Natural Resources Canada (9 interviews); renewable heat industry (7 interviews); and renewable power industry (3 interviews);
  • 12 case studies; and
  • a quantitative analysis of renewable energy in Canada.

Information for the case studies relied on project documentation and interviews with project proponents.  The case studies are identified in Table 6:

Table 6: Evaluation Case Studies by Program and Technology

Renewable Heat
Ferme Yvan Beauregard Solar Air
New Westminster School District #40 Solar Air
Veldman Farms Inc. Solar Air
C&A Paint-A-Line Solar Water
Pathways Adera Projects Ltd. Solar Water
The Corporation of the Municipality of South Bruce Solar Water
Renewable Power
Brilliant Expansion Power Corporation/Brilliant Expansion Project Low-Impact Hydro
PEI Energy Corporation/East Point Wind Plant Wind
Kruger Energy/Kruger Energy Port Alma (KEPA) Wind Power Project Wind
Norway Wind Energy Limited Partnership/ Norway Wind Park Wind
WPPI case study projects
Saskatchewan Power Corporation/Cypress Wind Farm Phases 1 & 2 Wind
TransAlta Corporation/Summerview Wind Farm (Phase I) Wind

The quantitative analysis was limited by data availability.  The analysis was limited to tracing the use of renewable energy over time, which generally supported the conclusion that the programs likely played a role in increasing the production and use of renewable energy.  Given that many other factors also contributed to the increase in renewable energy use (e.g., rises in the price of conventional fuels), it was not possible to quantify the extent of the programs’ contributions.

3.0 RELEVANCE AND RATIONALE

Summary

The ecoENERGY for Renewable Heat Program and the ecoENERGY for Renewable Power Program are aligned with federal government priorities and are consistent with federal roles and responsibilities.  The programs are part of the Government of Canada’s Clean Air Agenda and are consistent with NRCan’s mandate. 

1. Are the ecoENERGY for Renewable Heat and ecoENERGY for Renewable Power programs aligned with government priorities and consistent with federal roles and responsibilities?
  • Yes, the ecoENERGY for Renewable Heat and ecoENERGY for Renewable Power programs are aligned with government priorities and are consistent with federal roles and responsibilities. 

The literature review and key stakeholders indicated that renewable energy programs support Canada’s climate change objectives and are consistent with federal and NRCan roles.  
The federal government is responsible for resource-based science and technology and resource management in the frontier regions.  The federal government also has constitutional authority to exercise spending power for scientific research and development programs and other innovative programs. 

NRCan’s legislated mandate includes promoting the sustainable development and responsible use of Canada’s mineral, energy and forestry resources.  The Department’s work is focused in areas of core federal jurisdiction as well as areas of shared responsibility, such as the environment.   

As part of the suite of activities under Program Activity 2.1: Clean Energy, the programs support Strategic Outcome 2 “Canada is a world leader on environmental responsibility in the development and use of natural resources.”  The expected result of the Clean Energy Program Activity is “increased energy efficiency, increased production of low-emission energy, and reduced environmental impacts associated with energy production and use.”  The programs also contribute towards the overall Government of Canada Outcome of “A clean and healthy environment.”33

Both ecoENERGY for Renewable Power and ecoENERGY for Renewable Heat are part of the ecoENERGY Renewable Initiative34 of the Clean Air Agenda.  Both programs’ objectives support NRCan’s mandate of promoting the sustainable development of Canada’s natural resources while protecting the environment.  As part of the plan “Turning the Corner: Canada’s Plan to Reduce Greenhouse Gas Emissions and Air Pollution” announced in 2007,  the Government of Canada set the objective that 90% of Canada’s electricity needs will be provided by non-emitting sources, such as hydro, nuclear, clean coal, or wind power, by 2020.  The Government of Canada has also committed to reducing Canada’s total greenhouse gas emissions by 17% below the 2005 level by 2020, in respect of the Copenhagen Accord. 

A large majority35 of the heat and power interviewees felt that these programs supported and aligned with the federal government’s priorities of climate change, cleaner air, and reducing GHG emissions.  They agreed that it was the federal government’s responsibility to stimulate the economy, create job opportunities, and build sustainable development in natural resources.  These interviewees indicated that federal renewable energy programs contributed to these priorities.

A few of the interviewees also indicated that it was the federal government’s responsibility to show leadership in an industry and play a catalyst role to induce provincial/territorial energy policies.  

2. Is there a continued need for the federal ecoENERGY for Renewable Power and ecoENERGY for Renewable Heat programs?
  • As described in the next section of the report, the programs have achieved, or are on track to achieve, their stated objectives and many of their long-term outcomes by the March 2011 end date.  Therefore, there is no need for these programs to be continued beyond March 2011 in order to achieve their objectives.  It should be noted that in interviews, proponents of renewable energy projects indicated that they would like to see a continuation of federal support. 

4.0 RESULTS AND SUCCESS

Summary

The four federal programs are associated with an increased rate of installations.  The majority of the industry and government interviewees agreed that the ecoENERGY for Renewable Power Program had increased the rate of renewable installations in Canada.  Likewise, the majority of industry and government interviewees agreed that ecoENERGY for Renewable Heat Program had contributed to stimulating activity in the area of renewable heat.

All of the case study interviewees who received support under the federal renewable programs indicated that the programs had a major influence on the decision for their projects to go forward.  More specifically, about half of the case study contacts said, in their interviews, that their projects would not have proceeded without the incentive from the federal government. 

However, direct attribution of the increased rate of renewable power installations to causal factors is not possible.  Many other factors, forces and initiatives have influenced the adoption of renewable energy and it was not possible to quantitatively measure the relative impact of WPPI and the ecoENERGY for Renewable Power Program in comparison to the relative impact of the other factors. 

Most interviewees, including those from provincial governments, agreed that WPPI and ecoENERGY for Renewable Power played a leadership role in the development of provincial renewable power policies. 

The survey data (2008) on the portion of the renewable heat industry targeted by the ecoENERGY for Renewable Heat Program suggests that there are approximately 100 firms with a few hundred full-time equivalent employees working in the area of solar thermal technologies.  The capacity of the solar thermal industry may have increased as a result of the program.  However, the industry remains small without many of the attributes of a mature industrial sector.

Only a few of the provincial and utility interviewees agreed that the ecoENERGY for Renewable Heat Program had contributed to stimulating activity in the area of renewable heat and provided complementary support for the development of the provincial programs.

1. To what extent did the previous programs (WPPI, REDI) achieve their objectives and expected outcomes? To what extent do the current programs (ecoENERGY for Renewable Power, ecoENERGY for Renewable Heat) support the attainment of their objectives and expected outcomes?
  • WPPI achieved its expected outcomes, with the exception of adding turbine manufacturing capacity.  The level of installations was too low to attract foreign manufacturers or induce domestic production.
  • REDI achieved most of its objectives with the exception of the self-sufficiency aspect. 
  • After two years, the ecoENERGY for Renewable Power Program and the ecoENERGY for Renewable Heat Program have achieved all of their objectives, and are on track to reach most of their expected outcomes.

Evidence of attainment of outcomes can be found in Annex 1: Evidence of Results and Success.

2. How and to what extent have the programs contributed to stimulating activity in the areas of renewable power and renewable heat? 
  • The majority of industry and government interviewees believe that the two ecoENERGY Renewable Initiative programs have made important contributions in the areas of renewable power and heat.
  • All of the case study interviewees who received support under renewable programs indicated that the programs had a major influence on the decision for their projects to go forward.  More specifically, about half of the case study contacts said, in their interviews, that their projects would not have proceeded without the federal incentive. 
  • However, the support of the programs is one of many factors at play in any given project.
Power

The majority of industry and government interviewees agreed that the ecoENERGY for Renewable Power Program had increased the rate of renewable installations in Canada, citing the number of renewable power installations across the country over the past couple of years and the number of projects registered for ecoENERGY for Renewable Power as evidence.

All of the case study interviewees who received support under the renewable energy programs indicated that the programs had a major influence on the decision for their projects to go forward.  More specifically, about half of the case study contacts said, in their interviews, that their projects would not have proceeded without the incentive from the federal government. 

Other industry and utility interviewees indicated renewable power plants had been installed in their jurisdictions since the introduction of ecoENERGY for Renewable Power but they did not attribute the installation solely to the presence of the program.  Provincial programs, energy price increases and a desire to become independent from the central power grid were some commonly offered parallel factors in the development of renewable power.

Heat

The majority of industry and government interviewees agreed that the ecoENERGY for Renewable Heat Program had contributed to stimulating activity in the area of renewable heat.

Most industry and program manager interviewees also mentioned the drop-off in solar air and solar water installations during the transition from REDI to the ecoENERGY for Renewable Heat Program (2007) and the periods of uncertainty during REDI renewal periods as indications of the stimulating effect of the federal programs.

These interviewees mentioned that the level of installations decreased “significantly” when the federal incentive was not available, although no reliable measure of the decline was offered. A few of industry and government interviewees indicated that the impact of the program had been minimal because the level of incentive had not been enough to have an impact on the industry.

One utility contact said it was too early to see an impact on the residential solar water heating installations, but said the program would not have gone ahead in his jurisdiction without ecoENERGY for Renewable Heat Program funding.

As noted above for the ecoENERGY for Renewable Power Program, all of the case study interviewees who received support under the ecoENERGY for Renewable Heat Program indicated that the programs had a major influence on the decision for their projects to go forward.  More specifically, about half of the case study contacts said, in their interviews, that their projects would not have proceeded without the incentive from the federal government. 

3. Has the production of renewable power increased over the course of the program (due to WPPI) and to what extent can this increase be attributed to the program?
  • The production of wind power has increased since the introduction of WPPI, but it is still less than 1% of the electricity produced in Canada.  
  • WPPI (and more recently ecoENERGY for Renewable Power) are “associated” with this acceleration of the installation of renewable power. 
  • The majority of industry and government interviewees saw this as proof of the role of WPPI in stimulating production.
  • However, it was not possible to quantitatively measure the impact of WPPI leaving the issue of attribution open to differing views.

In the five years previous to the introduction of WPPI, Canada installed 18 wind farms, for a total generating capacity of 191.9 megawatts (average of 10.7 megawatts).  In the five years following the introduction of WPPI, Canada installed 51 wind farms, for a total generating capacity of 1,245.1 megawatts (average of 24.4 megawatts).  

Graph 5 plots the cumulative amount of total wind capacity in Canada and the cumulative wind capacity commissioned through WPPI and the ecoENERGY for Renewable Power Program.  Though direct attribution is not possible, the graph shows that the steep increase in wind power production coincides with the commencement of WPPI in 2002, and tracks consistently throughout the period. 

Graph 5: Growth of Installed Wind Capacity in Canada

Graph 5: Growth of Installed Wind Capacity in Canada

Source:  NRCan ecoENERGY for Renewable Power Program, Internal Spreadsheet Database, Yearly Wind Sum Canada - Dec 2009 from Reporting Technical.

The majority of industry and government interviewees said that since the introduction of WPPI in 2002, the amount of wind energy in Canada had grown exponentially. These interviewees referred to the increase in wind power production as proof of the role of WPPI in stimulating production.

A few industry and government interviewees cautioned that other factors, especially provincial programs, have also contributed to the increase in renewable energy production.  Some of the government interviewees noted, however, that WPPI helped encourage the implementation of those provincial programs and policies.

However, it was not possible to quantitatively measure the other important factors that support the use of increased renewable energy.  There is no energy macro-econometric model available to support an assessment of the net impact of these programs. 

4. Has the ecoENERGY for Renewable Heat Program increased the capacity of industry to deliver quality renewable heat systems into the Canadian market?
  • The industry’s capacity may have increased as a result of the ecoENERGY for Renewable Heat Program.  However, the industry remains small without many of the attributes of a mature industrial sector.

The main objective of the industry capacity development component of ecoENERGY for Renewable Heat Program is to increase deployment of renewable thermal technologies.  This was to be met by supporting activities related to the development of technology standards for renewable thermal technologies, the certification of solar thermal technologies, and the encouragement of consumer confidence.

Financial support is provided for the development of design tools to facilitate the use of solar thermal technologies, and the program activity also supported human resource skills development for renewable energy technologies.
The majority of industry and government interviewees agreed that REDI and ecoENERGY for Renewable Heat Program have increased the capacity of industry to deliver quality renewable heat systems into the Canadian market by:

  • developing performance (energy efficiency)and installation standards for the residential pilot component (NRCan interviewees also mentioned that development of a certification process for the industry through the residential pilot component was being considered);
  • increasing the capacity of firms and personnel to design and install solar equipment;
  • making technologies more affordable through incentives; and
  • making the technologies more visible and credible through the number of installations.

A few industry and government interviewees indicated that the capacity of the industry could be greater if the program were more highly promoted.  The interviewees said that there would be more installations if people in the industrial, commercial, and institutional sector were more aware of the program.  However, given the take-up of available funding, there seems to be little need to increase promotional activities, unless a more competitive selection process is required. 

The majority of the industry and government interviewees agreed that the ecoENERGY for Renewable Heat Program had begun, and would continue to meet this objective by increasing the level of activity in industry.  One example of work underway is the development of a curriculum for college courses to train installers and provide certification.36

A few of these interviewees indicated that they had not seen an increased capacity since the start of the program, and that it had a long way to go to increase the capacity of industry.  Officials from the ecoENERGY for Renewable Heat Program have undertaken several studies and surveys of the renewable heat industry.  The industry remains small and fragmented, without many of the attributes of a mature industrial sector.  In attempting to understand the sector, ongoing research would be useful. 

5. How and to what extent have the programs influenced/supported renewable energy policies?

  • The interview evidence is mixed with regard to the influence of the programs on renewable energy policies but interviews provided some evidence of impacts. 
Power

All industry, all NRCan and a large majority of provincial government interviewees agreed that WPPI and the ecoENERGY for Renewable Power Program played a leadership role in the development of provincial renewable power policies.  These interviewees noted that each province implemented a renewable policy following the introduction of WPPI.

A few other provincial interviewees said some of the provincial policies would have been developed independently of the federal programs.

A few of the provincial/territorial government interviewees mentioned that none of the three territories have implemented policies because the federal incentive was insufficient to encourage renewable installations in the North.

Heat

The majority of NRCan and heating industry interviewees agreed that renewable heat programs played a leadership role in the development of provincial policies. 

However, only a few of the provincial and utility interviewees agreed that renewable heat programs had contributed to stimulating activity in the area of renewable heat and provided complementary support for the development of the provincial programs.

6. What are the lessons learned /best practices from the programs?
  • Industry and government interviewees offered suggestions on lessons learned/best practices from the programs.
General Suggestions
  • Given the sizeable investments involved, as well as the significant time required to obtain approval for renewable energy installations, governments should provide stability and certainty for industry through long-term programs or programs that are renewed without time gaps.
  • In order to increase confidence in, and awareness of renewable energy, governments could increase the level of communication/promotion of the benefits of renewable energy generation to the public, industry and other targeted audiences.37
  • In order to ensure that programs meet the priorities and needs of their major stakeholders, government program designers should reflect the input of the stakeholders (e.g., industry) in the development and operation of the programs.
  • In order to ensure maximum return on taxpayer investment, governments should increase the coordination among all orders of government in renewable energy programming.
7. Have there been any unintended impacts of the programs?

The following unintended impacts of all four programs were identified in interviews and the literature review.

Power
  • Some environmental concerns have arisen regarding wind projects and their impact on bird and bat populations as well as noise and human health impacts.
  • Positive economic spinoffs have accrued to local communities from the installation of renewable technologies.
  • Installation costs for wind generation equipment have increased in recent years because of the high world and domestic demand for these specialized products and services from a limited number of suppliers.
Heat
  • Regulatory issues have arisen with respect to the deployment of residential pilot projects.  Standards and certification regarding energy efficiency arose as issues with the Canadian Standards Association (CSA) because of the increased number of proposed solar hot water installations in the residential market.
  • There is opinion-based evidence that the ecoENERGY for Renewable Heat Program has resulted in additional renewable energy jobs being created which was not an explicit intended impact.
  • Some large projects have come forward under the Renewable Heat Commercial Deployment Initiative.  Initially, the program did not expect large projects, but following the changes to the incentive rate in September 2008, a few applied for the incentive.
  • The ecoENERGY for Renewable Heat Program has provided indirect help towards the development of the world standard in solar air heating systems. 
  • There may have been increases in the price of residential solar water heating systems arising from the high demand for the product and the relatively low number of installers.  Unfortunately there is little data on this industry sector, which is not defined by the North American Industrial Classification System.
  • Renewable heat case study interviewees indicated that the level of energy savings realized since the installation of their heating systems was larger than they expected.

5.0 COST-EFFECTIVENESS AND ALTERNATIVES INCLUDING DESIGN AND DELIVERY

Summary

The evaluation suggests that renewable energy programs have been appropriate, to date, to increase the supply of clean electricity (primarily wind energy) and solar thermal renewable heat. 

At the time of the fieldwork for this evaluation (early 2009), interview and literature review data indicated that there was little, if any, overlap among renewable energy programs at the federal/provincial/territorial level and that complementarity existed for both the ecoENERGY for Renewable Power Program and the ecoENERGY for Renewable Heat Program.   

For the most part, the application and approval processes for these programs appeared to be clear although some interviewees would like further streamlining in the application processes. 

When asked if there are ways to improve the effectiveness and efficiency of the design and delivery of existing programs, the interviewees offered a number of suggestions on ways to enhance the programs.

1. Are the programs (based primarily on incentives) the appropriate approach to increase the supply of clean electricity (wind energy) and the use of renewable power for each of the renewable energy technologies?
  • The evaluation suggests that renewable energy programs have been appropriate, to date, to increase the supply of clean electricity (primarily wind energy) and solar thermal renewable heat.

Literature and document review, as well as interview and case study data, indicate that the incentive approach has been appropriate to encourage an increase in the supply of clean electricity and the use of renewable heat and power for some of the renewable energy technologies.

Without these programs, renewable energy technologies were too costly to penetrate the market.  As an example of one typical study in the literature, Lund indicated in 2007 that public programs have, “an important role to play in providing future directions and triggering necessary changes to achieve social goals.”38

The literature review found that other countries have used similar approaches to encourage the adoption of renewable heat technologies.  For example, Germany offered the Market Incentive Program which primarily served the expansion of heat generation from biomass, solar power, and geothermal energy.  

Approximately half of the case study contacts (including those from power and heat projects) said, in their interviews, that their projects would not have proceeded without the incentive from the federal government.  Two-thirds of the interviewees also mentioned that the incentive should be higher.
 

2. To what extent will renewable power production, solar thermal technology, and renewable    thermal technology be self-sufficient in the coming years? 
  • It was not possible for the evaluation to determine the extent to which renewable technologies will become self-sufficient in the coming years.   
3. Are there complementarities/overlaps with provincial programs?  If so, to what extent?
  • At the time that the fieldwork for this evaluation was carried out (early 2009), interview and literature review data indicated that there was little, if any, overlap at the federal/provincial/territorial level and that complementarity existed for both the ecoENERGY for Renewable Power Program and the ecoENERGY for Renewable Heat Program.   
 Power

Almost all of the industry and government interviewees agreed that the provincial programs/policies complemented the federal program. 

One power industry interviewee believed that the federal program and provincial programs might overlap in some instances because the provincial programs were too generous.

One of the wind farm case study projects took advantage of Prince Edward Island’s feed-in tariff under its Energy Act.  The project contact noted that both the federal incentive and the provincial feed-in tariff were important factors in the decision to develop the wind farm.  

Heat

All of the industry and government interviewees agreed that the provincial programs/policies complemented the federal program.  They provided the following evidence:

  • some provinces match the federal program and offer the client a one-window approach to both programs (e.g., Ontario, Saskatchewan);
  • some provinces offer programs that do not match the federal program, but the interviewees indicated that they were complementary (e.g., Nova Scotia, Quebec, B.C.); and
  • several provinces use tax incentives to complement the federal program; this is the case for commercial deployment and residential pilot components (e.g., Manitoba).

The case studies provided examples of provincial programs complementing the ecoENERGY for Renewable Heat Program’s industrial, commercial and institutional deployment contribution incentive.  A solar water heating system installation and a solar air heating system installation received additional support from the Ontario government through the Ontario Solar Thermal Heat Incentive (OSTHI).  OSTHI matches the ecoENERGY for Renewable Heat incentive.  Also, a solar air heating system installation received additional support from the Nova Scotia government, in the amount of $500, under the province’s Solar Water Heating Rebate Program.

Finally, provincial/territorial programs and targets indicate a commitment to encouraging the adoption of renewable energy technologies.  According to the evidence provided by the key stakeholders and the case studies, provincial/territorial programs and policies are complementary but are continually changing/evolving.

4. Are the processes used for the programs appropriate (e.g., application, reporting)?
  • Yes, the evaluation finds that the application and reporting processes for the ecoENERGY for Renewable Power Program and the ecoENERGY for Renewable Heat Program are appropriate.   Some suggestions were made for possible improvements for both programs.  However, for the most part, the application and approval processes for these programs appeared to be clear although some interviewees would like further streamlining in the application processes. 
ecoENERGY for Renewable Power Program Application Process

Applications for the ecoENERGY for Renewable Power Program incentive undergo an extensive review process.  As with WPPI, eligible projects are selected on a “first-in-construction, first-served basis” and must go through the program’s five-step approval process.

1.   Notice of Project Application

  • This initial phase includes developing a description that meets the requirements of the Canadian Environmental Assessment Act (CEAA), undertaking a pre-feasibility assessment and demonstrating that all affected Aboriginal groups have been made aware of the project.

2. Technical Project Information (TPI)39

  • The existence of a TPI indicates that a project is at an advanced stage of planning and development and provides information for the drafting of the contribution agreement. 
  • Hydro and biomass energy generation projects need EcoLogoTM certification from Environment Canada’s Environmental ChoiceTM Program (ECP).

3. Environmental Assessment

  • Most projects require an environmental assessment, in accordance with the CEAA and must comply with applicable federal legislation (e.g., Species at Risk, Fisheries Act).

4. Notification of the Start of Construction

  • Following the signing of the contribution agreement, the recipient has six months to demonstrate that the project construction is ready to start.

5. Commissioning

  • Projects must be commissioned within one year after the Notice of Start of Construction has been issued and before March 31, 2011.
  • Once commissioned, the recipient must send a commissioning report and, if necessary, proof of EcoLogoTM Program certification.40

All of the case study and most of the industry interviewees agreed that the application process for the ecoENERGY for Renewable Power Program was straightforward.  The case study interviewees stated that NRCan staff were helpful in answering their questions and guiding proponents through the approval process.

A few of the case study interviewees said that the application process was lengthy.  At the same time, these project contacts agreed with NRCan interviewees that the approval process had become more streamlined when the terms and conditions of the program were altered in 2008.  One of the main changes was allowing the environmental assessment to be completed following the signing of the contribution agreement, which could considerably reduce the total time from application to the flow of funds.

Provincial, utility, and power industry interviewees were not involved directly with the application process and mostly based their responses on what they heard from independent power producers.  One of the main concerns they relayed was a perceived lack of communication from NRCan concerning the funding application and project selection processes.

They suggested that the information (application process and results of the application) should be more readily available on the web page through an online database system.  They also reported a perception that the industry encountered uncertainty surrounding the amount of funding that was still available from the program.  Although utilities were not a direct beneficiary of the incentives (the incentive is received by the power producer and then electricity is supplied to the utility), the utilities were attempting to contract energy suppliers from firms that had applied for support and, therefore, the utilities had a keen interest in the process. 

The majority of industry and government interviewees agreed that the structure and mandate of the ecoENERGY for Renewable Power Program had been clearly established through the website, conferences, word of mouth, etc.  A small minority disagreed, however, and believed that either the structure and mandate of the program had not been clearly established, or it had been established but not well communicated to the power industry.

ecoENERGY for Renewable Power Program Reporting Process

Projects funded by the ecoENERGY for Renewable Power Program are required to submit annual reports for the ten years of the incentive.  The annual reports present:

  • actual performance of the project;
  • if required, that the ecoLogoTM certification has been validated; and
  • if required, its emissions levels.

Performance information in the annual reports includes monthly aggregated energy production and an assessment of the resource level for that month.

The first annual report requires additional information on initial project costs and average operations and maintenance costs of the project, as well as estimated GHG and other air contaminant emissions reductions.

Throughout the ten-year repayment period, proponents also provide information about production when they submit their quarterly requests for payment.

All of the case study contacts agreed that the reporting process for the ecoENERGY for Renewable Power Program was straightforward.  While the majority of the interviewees did not have any direct involvement with the renewable power reporting process, they indicated that they had not heard any complaints concerning the process from independent power producers.

Renewable Heat Application Process

Each of the three ecoENERGY for Renewable Heat Program components had their own application process.

Applicants seeking a deployment contribution for the industrial, commercial and institutional sector completed an application form, while applicants for the residential pilot project contribution and the industry capacity development contribution were required to submit an expression of interest to NRCan.

The approval processes for these three streams required essentially the same core information from applicants, plus additional information related to the specific activity.  Contribution agreements were signed once the projects were approved.

Many of the industry interviewees, and all but one of the case study interviewees, stated that they were not involved in the application process for the industrial, commercial and institutional deployment component.  The majority of the case study contacts stated that it was the installers41 of the renewable heat systems that brought the program to their attention and completed the application on their behalf.  The few industry interviewees who had more involvement with the process noted that the application procedures were straightforward and communication with NRCan during the process was good.

A specific issue exists with regard to schools because installing solar heating systems can be time-sensitive.  Solar panels need to be installed on roofs during the summer months when the students are not in school.  Delayed approvals can cause projects to be delayed until the following summer. 

A majority of industry interviewees suggested that information on the application status of projects funded under the ecoENERGY for Renewable Heat Program be made accessible on the website,42 and that the promotion of the program, especially its structure and goals, could be improved. 

Renewable Heat Reporting Process

The three ecoENERGY for Renewable Heat Program components have different reporting requirements:

  • recipients of the industrial, commercial and institutional deployment contribution are required to provide a project commissioning report;
  • recipients of the Residential Pilot Program contribution must provide project progress reports and a final report, based on details outlined in the contribution agreement; and
  • recipients of the industry capacity contribution must submit progress reports, a final report, and other deliverables identified in the contribution agreement.

Many of the industry interviewees and case study interviewees for the industrial, commercial and institutional deployment contributions also indicated that they were not involved in the reporting process.  A large majority of the case study interviewees indicated that the installers of the renewable heat systems completed the report on their behalf as well.  The few interviewees who had more involvement with the programs confirmed that the reporting process was straightforward.

5. Are there ways to improve the effectiveness and efficiency of the design and delivery of the existing programs?
  • Interviewees provided a number of diverse suggestions regarding ways to improve the effectiveness and efficiency of the delivery of the existing programs, many of which would increase the scope and cost of the Programs.  Several of these suggestions are provided in Annex 2, for information purposes only. 

Annex 1:  Evidence of Results and Success

Wind Power Production Incentive (WPPI)

Annex 1, Table 1:  WPPI’s Results and Success

Objectives and Expected Outcomes Evidence

1. Increased experience in wind energy for electric utilities, independent power producers, and other stakeholders

All of the industry and government interviewees agreed that WPPI increased the industry’s experience in wind energy by increasing the number of renewable technologies deployed across Canada. WPPI supported the installation of 22 wind farms, for a total generating capacity of 924 MW of the 1,000 MW target.
 
WPPI and the ecoENERGY for Renewable Power Program supported the vast majority of the wind power capacity between 2002 and 2009.  According to interviewees, WPPI played a pivotal role in supporting the installation of this new capacity.  However, the role of federal tax policies, provincial programming, the increase in oil and other fossil fuel prices and the expectation of future increases also influenced investment in renewable power. 

2. Reduced cost of production for wind-generated electricity

 

Much of the material on wind power is optimistic about the cost trajectory of this technology:

  • Turbine costs have decreased by a factor of four since the 1980s. Since 2004, however, they have increased by 20-80%, due to tight supply of turbines and components, and high commodity prices.43
  • In the long-term, the International Energy Agency projects that the investment costs for wind power projects will continue to decline through to 2050. 

It is probably not possible to assess the contribution of NRCan programming in reducing the cost of installing and operating renewable energy generation capacity for the following reasons:

  • NRCan has not analyzed the costs of renewable energy generation. This would require a historical record of the cost per installed project compared to that of all projects supported by WPPI and the Renewable Power Initiative. 
  • NRCan has information from the applications/annual reporting and could, in principle, calculate the cost per kWh. However, each project is unique in scale and location (deriving trends in unit costs are challenging).  Further, measuring the full costs of energy generation requires an analysis of financial information held by the proponents, and NRCan does not have the agreements in place to undertake this review.
  • Some industry interviewees believed that WPPI reduced the cost of wind energy overall, while others believed that due to short-term demand  pressures on wind turbines and commodity price increases, the cost of wind power had actually increased over the past few years.  Fluctuations in the exchange rate further complicate identification of the role of WPPI in reducing the costs of wind power.  Confidential firm-level financial data would be needed to track costs.
  • Even with the above factors, any cost reduction in wind power generation experienced since 2002 cannot be attributable solely to WPPI.  Provinces and the tax system are also key factors, but the most important factor has been the improved technology embodied in turbine equipment and installations, resulting from European and U.S. investment.  This suggests that WPPI, and ecoENERGY for Renewable Power Program, have had a small influence on any cost reductions of wind power in Canada.
  • At the same time, contractors and power companies gained experience in the construction of wind farms, and provincial and local governments have gained experience in the location and regulatory processes needed to establish these operations.
  • Most important is that NRCan has not undertaken the analysis to determine whether the operating cost per kWh (including amortized capital cost) has declined since the inception of WPPI. 

3. Capacity to manufacture turbines and related parts in Canada

During the evaluation period, there was virtually no capacity in Canada to manufacture wind turbines in their entirety, though production of specific components of turbines was achieved in Quebec.  However:

  • Approximately 60% of the industry and government representatives agreed that Canada’s installation capacity increased over the course of WPPI. 
  • Interviewees agreed that any increased manufacturing capability in Canada had been restricted to wind turbine towers.  Some attributed the increased installation capacity to the overall increase in wind installations and the experienced gained; others attributed it to Quebec’s Request for Proposal process, which specified local content during the construction of turbines.  At the same time, local content regulations on purchases generally increase costs in the short-term unless production can be increased to exploit economies of scale, which requires an expanded market.  
  • It is likely that Denmark, Germany, China, and the U.S. will remain the centres for turbine manufacturing, largely because the volume of new installations in those countries will continue to outpace that of Canada. 

4. Replacement of more GHG-intensive sources of electricity production/ reduced GHG emissions in the Canadian energy sector

While the program rests on the expectation that the incentive will contribute to the reduction in/avoidance of GHG production, the scale of new installations remains well below that needed to make even a modest reduction in GHG emissions in Canada.

  • WPPI projects were required to provide estimates of the yearly CO2 emissions avoidance in the first annual report.
  • The two WPPI case studies estimated yearly CO2 emissions avoidance of 19,565 and 247,450 tonnes based on an assumed theoretical relationship between the addition of wind power and the consequent displacement of electricity generation using fossil fuels.  Thus, the estimates of GHG avoidance are a “simulated” outcome, based on the assumed validity of technical relationships.
  • Each applicant is required to estimate the impact on GHG avoidance using regionally specific “capacity factors,” which on average are 35%; however, this figure varies depending on the strength and frequency of the winds in a region.  For example, prairie regions are more likely to have higher capacity factors than British Columbia because they do not have mountains blocking the wind.
  • Three-quarters of industry and government interviewees agreed that while WPPI might have reduced or avoided GHG emissions, it was on a very small scale.
  • NRCan and power industry interviewees noted that renewable technology should be viewed as the “avoidance” of additional GHG emissions at the margin, and not the outright reduction in current levels of emissions.  They indicated that additional renewable energy generation was meeting some of the increased demand for energy in the country but was not replacing any fossil fuel plants.  In this case, the projects may be reducing future GHGs.

5. Increased public awareness of wind power and its benefits

WPPI did not offer support for renewable energy promotion.  WPPI and ecoENERGY for Renewable Power Program have indirectly supported an increase in public awareness simply by funding wind projects, which are large and still uncommon in Canada.  Provinces typically promote the projects that they support.

  • Three-quarters of industry and government interviewees agreed that WPPI had increased the public awareness of wind power and its benefits indirectly through its degree of penetration into the market.
  • Two NRCan interviewees noted that the increase in public awareness also highlighted wind power’s detriments, such as wind turbines’ effect on bird migration patterns and human health (noise).  Only two utility respondents believed WPPI had not increased public awareness.
  • To increase public awareness of wind power and its benefits, one of the wind farm case studies has a virtual tour of the wind farm on its website.44
  • Wind farms have become much higher profile in both electronic and print media because they are unusual structures and also align with heightened media interest in green energy.
  • The construction of these generally land-based and tall structures requires the involvement of local planning and zoning processes, and high levels of public involvement.  Provincial governments and utilities have increased the coverage of renewable technologies, which are prominently promoted in news releases and websites. 
  • The NRCan website presents comprehensive material on renewable energy and this may contribute to increased awareness.

6. Increased use of wind-generated electricity in Canada

WPPI accelerated the installation of wind power systems in Canada. All of the industry and government interviewees agreed that WPPI had increased the use of wind-generated electricity in Canada. 

ecoENERGY for Renewable Power

Annex 1, Table 2: Renewable Power’s Results and Success

Objectives and Outcomes Evidence

1. Help position renewable energy technologies to make an increased contribution to Canada’s energy supply, and thereby contribute to a more sustainable and diversified energy mix

The ecoENERGY for Renewable Power Program has continued the trend initiated by WPPI.  It is on track to meet its electrical generation capacity by 2011. 

By April 1, 2009, projects totalling a capacity of 1,300 megawatts had been commissioned and projects with 1,800 megawatts were under construction for a total of 3,100 megawatts.

2. Increased low-impact renewable energy generation and capacity in Canada

As with WPPI, the projected reduction in/avoidance of GHGs depends on a series of assumptions about how utilities will meet future demand.  Given the increased focus on climate change, few utilities will consider the installation of new generating capacity that depends on fossil fuels (oil, natural gas, or coal) except those involving carbon sequestration.  If renewable technologies offer cost-effective solutions – and assuming that costs continue to decline –  the use of renewable energy generation will increase, at which point the ecoENERGY for Renewable Power Program and WPPI program will be considered to have made a contribution to the management of GHGs resulting from renewable electricity generation.  What can be said at this point is that ecoENERGY for Renewable Power Program is continuing the contribution to low-impact energy generation made by WPPI.  According to the program, annual GHG reductions from projects in operation during the evaluation period totaled 1.14 megatonnes of CO2 equivalent based on the emissions factor of 465.88 tonnes per gigawatt-hour.

3.  Greater experience in Canada with more low-impact renewable power generation

Although baseline data does not exist for this expected outcome, all industry and government interviewees agreed that ecoENERGY for Renewable Power Program increased the industry’s experience with low-impact renewable power generation by increasing the number of renewable technologies deployed across Canada.  This extends beyond the project proponent to local planning and government officials who have become more familiar with zoning and other land use regulatory issues.

4.  Reduced or avoided CAC and GHG emissions

By 2011, the initial program documentation estimated that the expected annual GHG emission reductions from the annual production of 14.3 terawatt-hours of electricity (about 4,000 megawatts of renewable capacity) would be 6–6.7 megatonnes, depending on the mix of renewable energy technologies supported by the program.  Three of the four ecoENERGY for Renewable Power Program case studies provided estimated yearly CO2 emissions avoidance45 figures ranging between 30,000 and 450,000 tonnes.

  • From the case studies, estimates of CAC reduction/avoidance are limited to established methods for projection of CO2 reduction/avoidance.  The program has not had established systematic methods for measuring the real world GHG/CAC emissions avoidance.
Renewable Energy Deployment Initiative (REDI)

Annex 1, Table 3: REDI’s Results and Success 

Objectives and Outcomes Evidence

1. Stimulate market demand for commercially reliable, cost-effective renewable energy systems for space and water heating and cooling

NRCan had not completed an industry analysis of this sector during the REDI period, even to count the number of specialist design and installation firms. Therefore, the only evidence for this outcome is the opinion of industry and government representatives and some interview-based evidence of projects supported:

  • Three-quarters of industry and government interviewees agreed that REDI met this ooutcome through the number of installations that received support under the program.
  • REDI supported the installation of 148 biomass, 282 solar air, and 136 solar hot water projects in the commercial sector.

2.  Develop a more dynamic and self-sustaining renewable energy industry in Canada

Presumably “dynamic and self-sustaining renewable energy industry” means one that can promote and install systems without the need for incentives.  This key term (self-sustaining) has yet to be defined.  This evaluation could only ask key interviewees to comment on whether REDI had achieved this goal.

  • Over three-quarters of industry and government interviewees agreed that REDI contributed to a more “dynamic renewable heat industry,” but one that was not self-sustaining.
  • A minority view was that while solar air was close to being self-sustaining, it still required federal incentives.  The solar water industry was seen as far from cost-competitive and would collapse were the federal incentive to be removed.
ecoENERGY for Renewable Heat

Annex 1, Table 4: Renewable Heat’s Results and Success

Objectives and Outcomes Evidence
1.  Increased deployment of solar thermal units in the industrial, commercial, and institutional sector

 

The program data and industry and government representatives indicated that the ecoENERGY for Renewable Heat Program will meet this outcome.

  • In 2007-08 and 2008-09, ecoENERGY for Renewable Heat Program supported 184 solar air and 84 solar hot water installations in the industrial, commercial and institutional sector.
  • ecoENERGY for Renewable Heat Program has committed funds to another 90 solar air projects and 109 solar hot water projects.
  • The program’s forecast indicates that it expects to support the deployment of up to 700 solar thermal units in the institutional, commercial, industrial sector by 2011.
  • According to NRCan reports on the solar thermal industry in Canada,46 the amount of solar collector area sold domestically in 2008 was 139,159 m2 — up from 53,571 m2 in 2004, and revenues from both domestic and export sales more than tripled over the period from $6.1 million to $18.8 million

2.  Increased understanding of deployment methods for solar water technology in the residential sector market

Very little quantitative information exists on the status of this outcome as this pilot initiative has just started.

  • Several interviewees said that the residential pilot component had had to overcome unforeseen local zoning issues and other barriers, such as meeting Canadian Standards Association (CSA) requirements, a shortage of trained residential solar installers, and a high price point for solar water heating systems.
  • By 2011, the ecoENERGY for Renewable Heat Program expects to support up to eight residential pilot projects with collaborators through its Residential Pilot Project component.

3. Increased renewable energy industry capacity to meet growing deployment of renewable thermal technologies

The ecoENERGY for Renewable Heat Program appears to be making a meaningful contribution to the fulfilment of this goal.

  • In 2009 the Electricity Sector Council conducted a survey of the Canadian solar industry with the Canadian Solar Industries Association (CanSIA) that was funded by the program.  This labour force survey invited 287 companies to participate, and 88 firms in the photovoltaic and solar thermal sectors responded.  The firms in the solar thermal segment that responded to the employment question have 215 full-time equivalents (including manufacturing, distribution, sales and marketing, as well as certified and uncertified installers).47
  • About 90% of the industry and government interviewees agreed that ecoENERGY for Renewable Heat had begun and would continue to meet this outcome.
  • Two NRCan respondents noted that, under the industry capacity development component of the program, a curriculum for college courses was being developed to train installers, and work was being done on certification as well.
  • A few interviewees indicated that they had not seen an increase in capacity since the start of the program, and that the program had a long way to go to increase the capacity of the industry.

4.  Increased use of renewable thermal energy technologies in Canada/creation of a sustainable technology for renewable thermal energy technologies

All industry and government representatives interviewed agreed that the program had met this outcome. 

However, the program has not determined how this goal is to be measured, and no quantitative data has been collected to support this opinion.  

5.  Reduced air emissions

The Results-based Management Accountability Framework (RMAF) expects that by 2011, the program will achieve “annual emission reductions of about 20 kilotonnes of GHGs, 9.8 kilotonnes of NOX, and 19 to 32 tonnes of SO2.”48

  • Each project that applies for ecoENERGY for Renewable Heat Program is required to use software to estimate the expected reduction in air emissions.  For example, replacing a natural gas water heater for a school or hospital with solar heating will reduce air emissions.  This software estimates the yearly GHG emission reductions of the project.
  • All renewable heat case studies used one of the software systems during their application process; however, only one provided these estimated GHG reduction/avoidance figures.  The one solar air installation expected an annual GHG reduction of 6.66 tonnes of CO2/year.
  • The RMAF states that “The emission reductions expectations are derived from assumptions regarding the displacement of the fossil fuel based energy used for space heating and water heating in Canada’s building and housing stock based on current energy consumption profiles.  Actual emission reductions achieved will be dependent upon project parameters such as: the efficiency of the heating equipment in use, the type of fuel displaced, solar thermal unit output, and the thermal loads being applied to the solar units deployed.”
  • It is important to note that collecting emissions data for each project is technically complex and expensive, and few proponents would be equipped to provide reliable reports.
  • Given the small size of the GHG/CAC targets for ecoENERGY for Renewable Heat projects and the anticipated high cost to collect actual data, the program has decided not to collect such information.  While this may be a reasonable decision, it weakens the program’s evidence of success and the lessons learned.

Annex 2: Interviewee Suggestions

Suggestions for the ecoENERGY for Renewable Power Program49
  • Increase the incentive.  Some felt that the one cent per kilowatt hour was low in comparison to the American Production Tax Credit of 2.1 cents per kilowatt hour for ten years for wind, solar, geothermal, and energy crops.  They suggested that if the incentive was not increased, investment would migrate to the U.S.
  • The incentive for wind should not be automatically capped at a capacity factor of 35%.  If a wind farm had a capacity factor higher than 35%, then the independent power producer would receive an incentive that was less than one cent/kWh.50
  • Extend the incentive period for up to 20 years to match the duration of power purchase agreements with utilities.
  • Vary the rate of the incentive by area to include remote and northern communities.
  • Continue to offer the incentive since the price differential between conventional and renewable energy generation remains a barrier to self-sustaining adoption.
  • Provide capital upfront, loan guarantees, low-interest loans or other incentive devices that can operate in the short-run.
Suggestions for the ecoENERGY for Renewable Heat Program51
  • Only a few of the industry interviewees indicated that the current incentive rate for the commercial deployment component of ecoENERGY for Renewable Heat was correct – most wanted to see it higher.52  A utility contact indicated that the incentive for the residential pilot initiative was about 17%, which did not result in a significant impact, and that if the incentive was doubled, more people would be interested in the program as an economic proposition and not just an environmental benefit.  Furthermore, a suggestion offered was that funding for start-up costs would make the program more effective:

    • direct the incentive to utilities;
    • base the incentive on gigajoules of energy delivered so that all programs may have one strictly comparable unit of measure; 
    • increase the program’s publicity to get the final consumer more involved;
    • do not change incentive levels partway through a program; and
    • better marketing for the residential pilot component of the program would increase awareness and demand/uptake.

1 The renewable energy programs are managed by the Renewable and Electrical Energy Division of NRCan’s Energy Sector.  The Renewable Energy Programs Sub-Activity (2.1.3) of NRCan’s Program Activity Architecture (PAA) has two sub-sub-activities: ecoENERGY for Renewable Heat (2.1.3.1) and ecoENERGY for Renewable Power (2.1.3.2) that are the subject of this evaluation.  The Division also has responsibility for other activities including policy development and two legacy programs that are not covered in this evaluation: 1) a 10-year (1998 to 2008) pilot project with the ENMAX Energy Corporation to provide 10 gigawatt hours annually of clean renewable power for NRCan facilities in Alberta; and 2) the Purchase of Electricity from Renewable Resources Program to purchase 45.4 gigawatt hours per year from 2001 to 2012 for federal facilities in Saskatchewan and Prince Edward Island. 

2 NRCan’s PAA. 14 September 2007, p. 38.

3 Most of the field work for this evaluation was done in early 2009 and covered a five-year period (2003-04 to 2007-08).  However, additional information on performance for 2008-09 has been incorporated.  A number of developments occurred in late 2009 and 2010 that will have significant implications for the renewable sector.

4 CACs are produced from a number of sources, including the burning of fossil fuels, and it is because of these shared sources that CACs are grouped together. CACs include: sulphur oxides (SOX); nitrogen oxides (NOX); particulate matter; volatile organic compounds (VOC); carbon monoxide (CO) and ammonia (NH3).  In addition, ground-level ozone (O3) and secondary particulate matter (PM) are often included among the CACs as they are by-products of chemical reactions among the CACs.  Source: Environment Canada, Clean Air Online, 5.2, Criteria Air Contaminants.  Accessed January 19, 2010 from http://www.ec.gc.ca/cleanair-airpur/Criteria_Air_Contaminants-WS7C43740B-1_En.htm.

5 GHGs are those gases that trap heat from the sun within the earth’s atmosphere.  The six main manmade direct GHG reported on for the purposes of the United Nations Framework Convention on Climate Change are: CO2 - carbon dioxide; CH4 - methane; N2O - nitrous oxide; PFCs - perfluorocarbons; HFCs - hydrofluorocarbons; SF6 - sulphur hexafluoride. Source: United Nations Framework Convention on Climate Change, GHG Data from UNFCCC.  Accessed January 19, 2010 from http://unfccc.int/ghg_data/ghg_data_unfccc/items/4146.php.

6 ecoENERGY policy approval documentation.

7 For example, the emission factor applied for carbon dioxide is 465.88 tonnes of carbon dioxide equivalent per gigawatt hour of production. 

8 Geoexchange technologies such as ground source heat pumps are often referred to as “geothermal” though geoexchange is a more accurate term. 

9 The 1982 Amendments to the Constitution explicitly recognized the constitutional right of the provinces to manage their non-renewable natural resources, forestry resources and electrical energy (Section 92A). Source: Natural Resources Canada, Division of Constitutional Powers.  Accessed January 21, 2010 from http://www.nrcan-rncan.gc.ca/smm-mms/busi-indu/bif-bfi/dcp-rdp-eng.htm.

10 Frontier lands refer to Nunavut, the Northwest Territories, the Yukon and the offshore.  

11 Department of Justice Canada, Department of Natural Resources Act 1994, c.41. Accessed January 21, 2010 from http://laws-lois.justice.gc.ca/eng/acts/N-20.8/FullText.html.

12 The only information on solar heating that is released by Statistics Canada appears as part of its Canada Year Book series, which reports manufacturing activity up to 2003. Available at http://www41.statcan.gc.ca/2008/1741/ceb1741_002-eng.htm.

13 Canada Electricity Association.  Accessed October 19, 2009 from http://www.canelect.ca/en/electricityincanada/images/Electricity%20Generation%20in%20Canada%20by%20Fuel%20Type%202008%20(2)%20[Compatibility%20Mode].pdf.

14 National Energy Board, 2005.  “Outlook for Electricity Markets 2005-2006.”  Figure 2.6, p.7.  Canada 2003 Generation by Fuel.  Accessed January 22, 2010 from http://www.neb-one.gc.ca/clf-nsi/rnrgynfmtn/nrgyrprt/lctrcty/lctrctymrkts20052006-eng.pdf

15 Natural Resources Canada, ecoACTION, ecoENERGY, ecoENERGY Renewable Initiative.  Accessed January 6, 2010 from /ecoaction/.

16 Environment Canada, 2010.  News Release. Canada Lists Emissions Target Under The Copenhagen Accord.  Calgary, Alberta. February 1, 2010.  Source: http://www.ec.gc.ca/default.asp?lang=En&n=714D9AAE-1&news=EAF552A3-D287-4AC0-ACB8-A6FEA697ACD6 . Modified February 17, 2010. 

17 Natural Resources Canada (NRCan). (2005). Priming the green heating and cooling market for take-off – Renewable Energy Deployment Initiative (REDI) – Strategic Business Plan 9-51, 2004-2007.

18 Initial program documentation, 2007. 

19 Government of Canada, ecoENERGY, ecoENERGY for Renewable Heat.  Accessed January 20, 2010 from /ecoaction/.

20 Natural Resources Canada (NRCan). (n.d.). Renewable Energy.  Accessed December 11, 2008 from /energy/renewable/1580.

21 Initial program documentation, 2007.

22 The solar collector area is the flat panel area of the solar hot water system that is exposed to the sun. 

23 It was expected that this change would result in a decreased level of incentive for solar air projects and the same level of incentive for solar water projects.  However, according to program staff, actual results show that the incentive, as a percentage of project costs, has increased for solar air and has been slightly reduced for solar water projects.

24 One MW can supply 722 homes in Canada with energy.  Source: Canadian Geothermal Energy Association (CanGEA).  Accessed November 26, 2009 from http://www.tpenviroenergy.com/page20/page20.html.

25 NRCan, 2001, WPPI Results-based Management Accountability Framework, p. 2

26 Undated WPPI program documentation.

27 ecoENERGY for Renewable Power Program internal database.

28 Initial program documentation, 2007.

29 International Energy Agency, Key World Energy Statistics 2009. p. 27. Accessed January 20, 2010 from http://www.iea.org/textbase/nppdf/free/2009/key_stats_2009.pdf.  According to the National Energy Board 2009 Reference Case, Chapter 8, “Electricity Supply Outlook” by 2020, the demand is expected to be approximately 683 TWh.  Wind power generation is predicted to grow to approximately 32 TWh. Source : http://www.neb-one.gc.ca/clf-nsi/rnrgynfmtn/nrgyrprt/nrgyftr/2009/rfrnccsscnr2009-eng.html#s8.   

30 ecoENERGY for Renewable Power Program internal database. 

31 The capacity factor of a plant is the ratio of the actual output of a plant over a certain period of time and its output if it had operated at the maximum output of the plant the entire time. For example, if the maximum generating capacity of a wind farm is 120MW and it produces an average of 40MW over a certain period of time, the capacity factor of the farm is 33.3% (40MW/120MW).  In the case of onshore wind, the program does not pay for any power produced above the 35% capacity factor. 

32 Internal communications with the Renewable and Electrical Energy Division of NRCan, January 28, 2010.

33 Natural Resources Canada, 2009.  2008-09 Departmental Performance Report, Section II – Analysis of Program Activities by Strategic Outcome. Modified 2009-11-05. Available at: http://www.tbs-sct.gc.ca/dpr-rmr/2008-2009/inst/rsn/rsn02-eng.asp.

34 Office of the Prime Minister of Canada, PM Unveils ecoENERGY Renewable Initiative. Accessed November 30, 2010 from http://www.pm.gc.ca/eng/news/2007/01/19/pm-unveils-ecoenergy-renewable-initiative.

35 Throughout this report: “most respondents” is more than 95%, a “large majority” means more than 80% (and less than 95%), and “majority” is 60-80%, a “minority” is 20-40%, a “small minority” is less than 20% and “a few” is less than 5% .  Equal numbers of respondents refers to the range of 40-60%.

36 Both REDI and Renewable Heat worked with the renewable heating and cooling industry on various initiatives including skills training.  The program worked with Canadian Solar Industries Association (CanSIA), the Electricity Sector Council and the Association of Canadian Community Colleges to formulate a strategy, with the goal of developing a better skill set for renewable energy installers and designers.  A college curriculum development project will be completed by March 2011, and a number of community colleges are currently developing courses based on the parts of the curriculum completed.  In 2008-09, RH provided CanSIA funding under Industry Capacity Building to explore the certification process in Canada.  Funding was also provided to CanSIA in 2010 to help with the adoption of certification by the North American Board of Certified Energy Practitioners (NABCEP). 

37 The December 2003 Renewable Energy Deployment Initiative (REDI) Evaluation noted that industry interviewees found the marketing activities to be unsatisfactory.  Subsequently, REDI and ecoENERGY for Renewable Heat Program efforts have been refocused on incentives.  Accessed February 1, 2010 from /evaluation/reports/2003/2890.   

38 Lund, P. D., 2007, Effectiveness of Policy Measures in Transforming the Energy System, Energy Policy, 35, pp. 627–639.

39 The TPI used to be Step 3 of the approval process, but was moved to Step 2 following the amendment to the terms and conditions of the program designed to streamline and improve the application process, in August 2008. The environmental assessment stage moved from Step 2 to Step 3.

40 NRCan, 2008, ecoENERGY for Renewable Power Program, Terms and Conditions, as amended August 2008, pp. 12-17.

41 The Canadian Solar Industries Association (CanSIA) has a list of qualified installer contractors.  Accessed January 20, 2010 from http://www.cansia.ca/Default.aspx?pageId=134694.  The Canadian Geothermal Exchange Coalition has a list of accredited geothermal professionals and qualified companies.  Accessed January 8, 2010 from http://www.geo-exchange.ca/en/accreditations_search.php.

42 Program staff indicated that this would raise privacy issues.

43 International Energy Agency, 2008. “Renewable Energy Essentials: Wind”  Accessed January 8, 2010 from http://www.iea.org/publications/.

44 The virtual tour can be seen at http://www.greenenergy.com/TransAlta/webcms.nsf/
AllDoc%20/031728362AD3999A87257%204C70049EB42?OpenDocument
.

45 Avoidance refers to the amount of emissions that will be avoided from generating power from the renewable resource (e.g., wind, low-impact hydro) instead of a conventional resource (e.g., coal, oil).

46 Natural Resources Canada, 2008,  Survey of Active Solar Thermal Collectors, Industry and Markets in Canada (2008).  Accessed May 28, 2010 from http://canmetenergy-canmetenergie.nrcan-rncan.gc.ca/fichier.php/codectec/En/CanmetENERGY_2009-11-30/STC-survey-2008_en.pdf.  Natural Resources Canada, 2005,  Survey of Active Solar Thermal Collectors, Industry and Markets in Canada.  Accessed May 28, 2010 from http://canmetenergy-canmetenergie.nrcan-rncan.gc.ca/fichier.php/codectec/En/CM001743/SOLAR-STC_survey_2003_2004_English.pdf.

47 Electricity Sector Council, 2009.  2009 Labour Force Survey of the Canadian Solar Industry. Exhibit 18 “FTEs by PV and ST Segments in 2008” Accessed May 28, 2010 from http://www.brightfutures.ca/lmi/en/ESC-CanSIA--Labour%20Force%20Survey--Final%20Report%20March%20182009%20(2).pdf.

48 NRCan, Renewable Heat Results-based Management Accountability Framework, p. 6.

49 Beyond changes to the existing ecoENERGY for Renewable Power Program, there was a suggestion to increase infrastructure development (transmission lines) to accommodate the collection of power, especially from wind turbine farms that are not close to current distribution systems.

50 Based on the experience from the WPPI program, this arrangement is intended to avoid lapsing funds due to overly optimistic production projections.

51 Beyond changes to the existing ecoENERGY Renewable Heat Program, there were suggestions to mandate the use of renewable energy in all new federal facilities, and encourage provinces to amend their building codes to require a percentage of power generation to come from renewable energy sources.

52 Note that few industry interviews had experience with this component.