Some experts predict the $1.4 billion in the Canadian government's main incentive program for wind farms and other renewable energy projects will dry up in ten months, far earlier than planned and just when it's most needed.
The Canadian Wind Energy Association and the Pembina Institute, a sustainable energy think tank, say the likelihood of the subsidy funds drying up early will discourage investment in Canadian green power production just as the new U.S. government is going gung ho with incentives.
The two organizations say the government should have extended and expanded the incentive program in the federal budget last week if it really means business about stimulating the economy and boosting clean energy production. Canada aims to increase carbon-free electricity production to 90 per cent from the current 73 per cent by 2020.
Environment Minister Jim Prentice responded in an interview with Canwest News Service by saying there is still more than $800 million in the fund that provides a penny-per-kilowatt hour subsidy for renewable power developers. The fund is not in his department but in Natural Resources Canada.
"In a future budget if there's a need to consider where we are with wind specifically that would obviously happen at that time," Prentice said. "But today there is a program in place and there are dollars in that program and they continue to receive applications. This is anticipating a problem that we don't currently have, namely that the program has run out of money which it has not."
The association's calculation that funds will dry up early is based in part on the recent rate at which Natural Resources Canada has been signing subsidy agreements under the ecoEnergy for Renewable Power program.
Since the government has signed incentive agreements worth an average of $82 million per month for the past three months, the remaining $862 million in the program would be allocated in 10 months, says Robert Hornung, president of the non-profit Canadian Wind Energy Association. That's well before the life of the four-year program, set to expire March 31, 2011.
Since the program was set up in the 2007 budget, agreements have been signed with more than 30 green energy producers, mostly wind farms and hydro projects, from one coast to the other.
Hornung says wind projects slated for construction before 2011 require $817 million from the program and non-wind projects such as biomass and hydro need an estimated $525 million at least.
"Contribution agreements worth over $1.3 billion are likely to be required by March 2011 and only $862 remains in (the program)," he said.
The Natural Resources Department responded by saying there is still considerable due diligence, such as technical and financial reviews, to be done on applicants before the program is fully subscribed.
Power developers which have agreements from the program are also subject to environmental assessments before the money is made available.
"We can't confirm when the program will be complete until the funds have been fully allocated," the department said in an e-mail response.
Tim Weis of the Pembina Institute said the failure to commit more funds jeopardizes "shovel ready" wind energy projects across the country "while putting the brakes on billions of dollars of potential future investment."
"Canada risks being left out of the green economy of the 21st century, which is bad for our economy and bad for the environment," he said.
"The incentive unlocks investment and means a make or break difference for these projects."
One company concerned about the fund is the Greengate Power Corp. of Calgary, which has applied for the incentive to raise investments to build a $350 million wind project called Halkirk in east central Alberta.
"We're very serious about trying to get this project under construction by the end of this year," Greengate president Dan Balaban said in a telephone interview from Calgary. "We're currently in the process of trying to secure financing for the project. And with the uncertainty that exists right now with the future of the ecoEnergy program and exactly when the funding will run out, it introduces a significant amount of uncertainty, especially in today's environment where financing has become increasingly challenging with the global economic situation."
