Thank you, Mr. Chair. It was actually quite fortuitous, because the solar industry is having its major conference and trade show in Edmonton this week.
I thank you for the opportunity to be presenting on behalf of the Canadian wind and solar industries.
Hello Mr. Chair, ladies and gentlemen of the committee.
First of all, thank you for inviting me to testify here today. I would also like to thank the clerk for her fine work.
My name is John Gorman and I am the president and CEO of Canadian Solar Industries Association, or CanSIA.
Today I will talk to you about the joint recommendations of the solar and wind energy associations, thanks to our cooperation with the Canadian Wind Energy Association, or CanWEA.
The federal government has stated that Canada will work to reduce its GHG emissions by a minimum of 30% from 2005 levels by 2030, and by 80% from baseline levels by 2050. This is an ambitious target, but it is consistent with the level of initial effort required to meet the Paris agreement commitment to hold the increase in average global temperatures to no more than 2°C from pre-industrial levels.
Numerous analyses have demonstrated that GHG emission reductions of this scale can only be achieved through the decarbonization of the electricity system, and the subsequent use of that electricity to replace fossil fuels across a wide variety of end uses, including transportation, buildings, and industrial processes. In other words, deep decarbonization in the Canadian context requires deep electrification with clean sources.
Solar heating and cooling technologies can also play an important role in reducing emissions from buildings and industrial processes. Accordingly, we believe a focus on zero carbon electricity production, increased electrification, and fuel switching to renewable resources must be at the core of Canada's climate change strategy. The federal government has a great opportunity, through its spending and fiscal measures, to transition Canada towards a low-carbon economy while ensuring that Canadians benefit from new jobs, economic development, and a cleaner environment.
This transition to a low-carbon economy will require significant investment in renewable energy projects. Global investments in renewable energy are in the order of $250 billion per year. Incidentally, that is twice as large as the amount of money that is invested in fossil fuel electricity generation globally per year.
As investment globally has soared, prices have plunged. For example, the cost of solar power has fallen 82% in the last six years. Similarly, the cost of wind has declined 61% over this same period. The amount of investment needed in Canada to meet its GHG reduction targets outweighs the available public funds. For that reason, successful public policy seeks to attract and leverage private sector investment to its maximum potential. To this end, CanSIA and CanWEA have detailed several mechanisms to attract the investment of private capital in renewable energy projects in Canada.
We have made a detailed submission to this committee, but as our time here is limited today, I would like to focus on just one of these measures, tax credits. They are the one measure, if introduced in combination with the existing measures, that have the potential to attract the private sector investment that Canada needs.
The United States has used tax credits for renewable energy since 2006, namely the investment tax credit and the production tax credit. The ITC, or investment tax credit, has been a tax credit in the U.S. that has attracted most investment in solar energy for households, businesses, communities, and industry. It is a dollar-for-dollar reduction in the income taxes that a person or company claiming the credit would otherwise pay to the federal government. The ITC is equal to 30% of the investment in the solar property.
The ITC steps down after 2023—this is in the U.S.—and the residential credit will drop to zero while the commercial and utility credit will drop to a permanent 10%.
The ITC reduces the cost of solar electricity by approximately 20% to 25%. Since its implementation, the ITC has helped annual solar installations grow in the United States by over 1,600%.
The production tax credit, or PTC, has been the tax credit most valuable to the wind energy industry in the United States.
The PTC is a production-based tax credit provided for every kilowatt hour of electricity generated to the power grid. The PTC alone has helped to more than quadruple wind power in the U.S. since 2008, and it has also helped them drive down the cost of wind energy by 66%.
Canada has the opportunity to benefit from these types of measures while learning from the United States' experience. CanSIA and CanWEA are working with staff in the departments of Minister Carr and Minister McKenna to provide detailed costings and design guidance to optimize these mechanisms for Canada.
Once again, thank you for this opportunity to testify before the committee.