Smart Electricity Options: The Renewable Energy Market Has Potential, but Only If the Right Policies Are in Place

Article excerpt

ONTARIO IS AT AN ENERGY crossroads. The province's decision-makers are in the process of choosing how Ontario will produce and use electricity in the coming decades. Their decisions will either take the province down the same road of boosting centralized supply to meet constantly increasing demand--or they will forge a new path towards a more sustainable electricity system focused on renewable energy, efficiency and conservation.

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Currently, Ontario is largely powered by outdated facilities that burn coal--the most polluting of all fossil fuels--and by aging nuclear plants. Coal plants contribute to southern Ontario's poor air quality, and especially to summer smog, while nuclear plants are characterized by unresolved safety issues (e.g. safe disposal of radioactive waste), chronic underperformance, and massive costs overruns.

The blackout in the summer of 2003 illustrated the vulnerability of the current electricity system and clearly signalled the need for change. In April 2004, Ontario's Minister of Energy, Dwight Duncan, estimated that fixing the province's electricity system will cost between $25 and $40 billion.

This investment presents a unique chance to decrease electricity demand through efficiency measures, and to increase the use of renewable energy options that can substantially improve the electricity system. Developing renewable energy sources throughout the entire province could help reduce power losses, while increasing the reliability and flexibility of Ontario's electricity system. And the use of renewables would also contribute to a cleaner environment and a new, vibrant economic engine.

Advanced renewable energy tariffs

The current policy initiatives intended to support renewable energy at the provincial and federal level are not adequate to achieve the high rates of adoption of renewable energy that are possible and necessary in Ontario.

If all the environmental and social costs and existing government subsidies for coal and nuclear power were taken into account, renewable energy sources would not require any special support to compete. The fact that significant costs are largely ignored but are still paid through public funds (e.g. provincial health care budgets) greatly distorts the real price of coal and nuclear electricity. However, since efforts to reflect these costs and subsidies in electricity prices have not been conducted and are not yet planned, policy measures are required to level the playing field.

Germany and Spain are leading the world in the adoption of renewable energy and provide clear examples of what can be quickly achieved if the right policy mechanisms are in place.

Germany does not have remarkable wind or solar resources, but has become the world leader in wind installations, and is only second to Japan in solar photovoltaic installations and manufacturing. Germany has currently over 14,600 megawatts (MW) of installed wind capacity, and in 2003 alone installed 2645 MW of wind turbines (by comparison the U.K., which has one of the best wind regimes in Europe, has only installed a total of about 649 MW of wind turbines). And Spain, in less than seven years, has become the second world leader in the wind industry, and in 2004 alone installed 2065 MW of additional wind power.

The leadership and success of Germany, Spain and Denmark is based on a set of common factors. Their records show that a strong renewable energy system requires a very active political commitment for renewable energy. Government must also be prepared to fund research and development of renewables, and to launch public awareness campaigns and incentives to achieve wide public participation.

But most importantly, clear policies need to be in place to actively foster a growing domestic renewable energy market. Countries that are currently leading in manufacturing and installation of renewable energy systems have achieved their success by establishing what are known as advanced renewable energy tariffs (ARTs). …