Natural Resources Committee on June 13th, 2006

[The Clerk of the Committee, Mr. Chad Mariage]

Honourable members, based on the report of the Standing Committee on Procedure and House Affairs that was tabled in the House, which was also concurred with on Friday, we have a membership change--Mr. Todd Russell for Mr. McGuinty--and as Mr. McGuinty was vice-chair, we have to proceed to the election of a vice-chair.

I will receive motions to that effect right now.

Mr. Cullen.

[Roy Cullen, Liberal, Etobicoke North, ON]

I'd like to nominate my colleague, Lloyd St. Amand, eminently qualified former chair of the aboriginal affairs committee. I think he'd do a great job as vice-chair of this committee.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

I second that.

[The Clerk]

Are there any other nominations?

Is it the pleasure of the committee to adopt the motion?

(Motion agreed to)

[The Clerk]

Congratulations, Mr. St. Amand. I'll invite Mr. Richardson to retake the chair.

[Lloyd St. Amand, Liberal, Brant, ON]

Thanks very much.

[The Chair, Conservative, Lee Richardson]

We have another motion with regard to speaking and timing. Rather than keep the witnesses today, we'll proceed with that at the end of the meeting.

So without further ado, let me introduce our guests today. From the Department of Natural Resources, we have Director General Tom Wallace, electricity resources branch, and Christopher Johnstone, chief, fuels policy and programs. From the Canadian Solar Industries Association, we have Rob McMonagle and Christian Vachon. And we also have Robert Hornung, of course, from the Canadian Wind Energy Association, who's familiar to the committee.

I have a question from Mr. Ouellet.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

Mr. Chairman, when we proposed the witnesses for today, everybody around the table was interested to hear, first, about the solar industry. I would suggest that Mr. Rob McMonagle and Christian Vachon speak first, because I think it is the subject of the day to start with.

[The Chair, Conservative, Lee Richardson]

Okay. That was I think our intent, but it seems to me as well that we have had the practice of maybe giving a broad overview of alternatives in general from the department, and then we'll move to start the session with the solar people.

Perhaps I could ask Mr. Wallace to begin, and we'll try to keep the presentations to 10 minutes each for each of the groups. Then we'll proceed with questioning at the end of all of the presentations.

Mr. Wallace.

[Tom Wallace, Director General, Electricity Resources Branch, Energy Policy Sector, Department of Natural Resources]

Merci.

Bonjour, mesdames et messieurs. Good morning, ladies and gentlemen.

I believe everybody has a copy of the deck that was circulated in advance. I'd like to just take you through a broad overview of renewable energy, the role it plays in Canadian energy supply, and the array of federal and provincial programming that has been in place to support it. Then I'll turn it over, at the end of the presentation, to my colleague, who's more of an expert on the renewable fuels component, to speak before I offer some concluding remarks.

If we turn to slide 4 of the presentation, the definition of renewable energy is energy produced without depleting resources, and the three main sectors in which it's used are electricity, thermal energy, and transportation fuels. The availability of the resource varies widely across Canada, and there's a wide range of technologies that produce renewable energy in different stages of development.

In slide 5, we're tried to give you a schematic that illustrates the various technologies that people are talking about, broken down between electricity, thermal, and fuels. As you go to the right-hand side of the schematic, there are the technologies that are in the most advanced stages of development. So if we're talking about the electricity side, of course, the furthest to the right is large-scale hydro. Biomass, wind, and landfill gases are increasingly competitive with conventional generating sources. Solar and geothermal are a little bit further behind, and then tidal and energy crops are in the very early stages of development.

A similar array is on the thermal side, where you have firewood--as we'll see later--being one of the most widely used sources of thermal renewable energy. Solar air heating and ground-source heat pumps I'm sure we'll discuss later. Solar hot water and deep water cooling are a little bit earlier in the chain. There's a similar array that you see on the renewable fuel side.

Together, all renewable energy technologies make up about 17% of Canadian energy supply, and you can see that's dominated, really, by hydro, large hydro and biomass. People burn firewood, but also it's in large part biomass used in the pulp and paper industry. About 50% of the energy needs of the pulp and paper industry are met through biomass.

So you can see that the technologies that are increasingly the focus of attention—tidal, solar, wind, and everything—represent currently quite a small slice of the total energy supply. However, as we'll see later, they are technologies that are growing rapidly.

Regarding just electricity and thermal renewable energy first, on the next graph, on page 8, you can see within the electricity sector again that large hydro is about 60% of Canadian generating capacity, with renewables making up about 3%. “Emerging renewables” is the phrase we use to refer to the suite of technologies--wind, solar, geothermal, biomass, but not large hydro.

Chart 9 gives some 2003 figures for capacity additions, and I'm sure my colleagues will have more up-to-date statistics and additional information to provide to you.

While renewables are currently a small slice of our total electricity supply, a number of them--small hydro, solar, and wind--are growing very rapidly, although solar doesn't turn up in this graph as much because the graph is looking at just the electricity side.

The federal government has traditionally supported renewable energies through three broad arrays of policies. The first is on the research and development side. For example, there's the Canadian Wind Energy Institute in Atlantic Canada. There's the National Solar Test Facility. Should you have additional questions on our technology dimension, we have some experts from the department here who can respond to any questions.

The next block of support is tax measures. There's quite an attractive tax regime for an array of renewable energy technologies. Class 43.1 is essentially a writeoff at the rate of 50%. You can depreciate your investment over two years or two and a half years, subject to some of the tax rules. The Canadian renewable and conservation expense gives a 100% writeoff on test turbines for wind farms and the like. It's analogous to the kind of exploration tax credit that we have in the oil and gas industry, although it's not a 100% writeoff for exploration expenditures.

There were an array of programs providing direct support, which we'll hear about later. The two of most interest to this table are: the renewable energy deployment initiative, which among other things provided incentives for solar at the rate of 25% for certain applications, thermal applications in the commercial and industrial sector; and the wind power production incentive, which provided a subsidy of one cent per kilowatt hour over ten years for new wind farms. Both programs are now under review as part of the new government's reconsideration of its approach to energy and climate change more generally.

The array of federal initiatives has really stimulated or helped to stimulate a broad variety of complementary provincial initiatives. Each province has different ways of supporting them. In the annex to the presentation, you'll see a detailed list of what the targets are for each province and the array of measures in place for support.

A wide variety of instruments are used in the provinces to support renewable energy. Most do it through requests for proposals operated by the utility or, in Ontario's case, by the Ontario Power Authority. In other cases, they have renewable portfolio standards, where there's an obligation on electricity suppliers to source x percentage from renewable energy. In Ontario we increasingly see standing offer contracts, where you set a price to pay x cents per kilowatt hour for any eligible technology that comes in under that price. It's designed to reduce the administrative costs for some of the small producers. Direct government procurement of renewable energy is another way.

I'll stop there. I'll have some concluding remarks, but I'd turn it over to Chris, if I could, to take you briefly through the renewable fuel story.

[Christopher Johnstone, Chief, Fuels Policy and Programs, Office of Energy Efficiency, Energy Technology and Programs Sector, Department of Natural Resources]

Thanks, Tom.

With respect to renewable fuels specifically, we're currently behind the U.S. and Europe in the production and use of these fuels. These are fuels such as ethanol and biodiesel. On average, only about 0.5%, half a percent of our transportation fuels, is renewable at this time, although this is expected to increase to about 2% on average over the next year. Other jurisdictions, such as the U.S. and European Union, have set aggressive targets in this regard—5.75% for the European Union by 2010 and approximately 4% for the U.S. by 2012.

The government has announced its intention to require a 5% average renewable content in our fuels by 2010. This would represent a tenfold increase over the current level of 0.5%. Natural Resources Canada, Environment Canada, and Agriculture and Agri-Food Canada are working closely on this initiative.

Work is under way with the provinces as well. In late May, federal, provincial, and territorial ministers met to discuss this subject in a dedicated meeting and to discuss the path forward. The interdepartmental and intergovernmental approach is critical, because of the complexity of this file. The work is looking at considerations that span the value chain from the feedstock production, the production of the inputs—the grain or other inputs to the renewable fuels—to the biofuel production itself, to the fuel distribution and the changes to the fuel distribution network that will be required, and the end use or the interaction with vehicles, and to the environmental impacts on a life-cycle basis. Stakeholders from across this value chain are being consulted in this process.

With respect to next steps, further consultations with stakeholders will be taking place over the course of the summer. In addition, federal-provincial-territorial meetings with respect to agriculture, energy, and environment are scheduled for June, August, and September respectively. In addition, another dedicated meeting of federal, provincial, and territorial ministers is envisioned for November.

[Tom Wallace]

Thank you, Chris.

Let me just conclude, Mr. Chairman.

Large hydro and biomass now are making the most important contributions to Canadian energy supply. However, attention is increasingly focused on an array of emerging renewable energy technologies. While they're making a small contribution now, that contribution is rapidly growing.

The future pace of development will be determined in large part by market forces and the pace of technology development, but also, federal and provincial policies will continue to be an important determinant of growth. All over the world, you see that generally, to compete in the market, these technologies continue to require some degree of support from government, so policy is important. Some of the major federal expenditure policies are under review. The tax policies aren't, and I anticipate that in the coming weeks or months the government will be making announcements in this regard.

I believe when our minister was here last week—and I read some of the transcripts—he mentioned his personal support for wind and solar. Exactly what form that will take will be up to the government to determine, of course. I think, as Chris said, we're well advanced on a national plan to achieve 5% renewable content in Canadian fuels.

Thank you very much.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Wallace and Mr. Johnstone.

We'll reserve questions until we've heard from all of the witnesses today.

We'll move now to solar and to Rob McMonagle.

[Rob McMonagle, Executive Director, Canadian Solar Industries Associations]

Thank you, Mr. Chairman.

I would also like to introduce Mr. Christian Vachon, a past president of CanSIA, who is here to assist in answering the committee's questions. I would also like to point out that we have briefing notes that I believe have been passed around. They provide some background information on solar energy.

The Canadian Solar Industry Association, CanSIA, represents the solar industry in Canada. We are a small industry, both in the context of Canadian society and in relation to the solar industries of other nations. In Canada, the solar industry employs about 700 people, while Germany's solar industry employs 50,000, and in China it is estimated that the solar industry now employs over 200,000 workers.

Canada is an energy-rich nation. We are fortunate to have a bountiful supply of energy resources, both renewable and non-renewable. Canada has invested and taken advantage of our non-renewable resources, and as a result our oil and natural gas reserves have contributed significantly to our high-level standing that we all enjoy. But these energy resources are finite. At some point--20, 30, or 100 years from now--they will not be able to meet all the energy needs of Canadians. Just like the sands in an hourglass, our carbon fuels are slowly running down. If we add more sand or restrict the flow, they still run down.

There are three questions this committee should consider in pondering the future energy policy of Canada. Over the next two decades, will energy prices go up or down? Do nations want to import more of our energy or less? Is the world getting more concerned about climate change or less?

We must look outside of Canada's borders to see what countries are doing that are not blessed with Canada's rich but finite non-renewable energy resources. These countries are facing now what Canada must face in the future. What we find is that solar energy is playing a major role in the energy policy of other countries.

Solar energy is now a $15-billion-a-year industry worldwide and is growing by 35% annually. The price of solar energy is dropping. It is the only energy source that has seen its price drop consistently over the last 20 years, and it will continue to drop. Our great neighbour to the south has recently announced a target of installing 10,000 megawatts of solar electricity over the next decade. Canada has no plans and no targets for solar electricity.

Germany, the world leader for solar electricity, installed over 600 megawatts last year. Canada installed less than two. In Austria, one out of every seven homeowners now uses solar to heat their hot water. The village of Bliesdorf in southern Austria, with 35,000 people, has a greater installed capacity for solar heating than all of Canada. China has a renewable energy law that requires every new building to use solar water heaters. As a result, China is the largest solar market in the world, with over 10,000 solar manufacturers. Canada has two.

The major solar firms now include names like Sharp, Sanyo, BP, Shell, and General Electric. Recently, the National Bank of Canada issued a report on our solar industry and recommended the solar industry as a major investment opportunity. Globally, solar energy is becoming big business.

What is Canada doing to prepare for the day when the price of solar will be cheaper than other energy supplies, when other nations don't need or want our energy, and when other countries are reaping their investments now in climate change technologies? In Ottawa, you cannot legally install a solar water heater in your home. In Calgary, you cannot send your solar electrons into the grid. In Vancouver, you do not have the right to the sunlight falling on your roof.

My message today is that Canada is not looking to the future of its energy supply, but rather is stuck in the past. The lack of government and political leadership in the past is creating serious problems for our children, who will have to compete with nations who have taken their energy future into their hands today.

While in the 1980s Canada was a world leader in solar, Canada now lags every one of our trading partners in our support of solar energy. While other nations have moved forward steadily, there have been 20 years of inaction in Canada. Now even many third world countries are surpassing us with their level of support.

There is no support for solar PV by the Canadian government. Canada invests only 14% of what other industrialized nations invest in solar electricity, and this is spent on R and D. So while other countries are investing money in building industry capacity and bringing proven solar products to market, NRCan continues to study solar as something for the future. As a result, sales in Canada are less than 20% of the international average.

Ontario is the shining light in Canada for solar, with a recently announced program that will see sales grow from 0.1 megawatts to 15 megawatts in five or ten years. But remember, Germany is installing 40 megawatts a month now.

NRCan officials continue to say that PV is not cost-effective for Canadians and not ready for the market in Canada, so what does NRCan know that the rest of the world seems to be missing?

Solar is supposedly included in class 43.1 of the Income Tax Act. It is a tax measure that allows renewable energy technology to be written off faster by companies, yet solar is the only renewable energy technology that has restrictions placed on its participation. Over 95% of solar applications are excluded from class 43.1. For the solar industry, class 43.1 is all about smoke and mirrors. Major changes are needed before class 43.1 is of benefit to the solar industry. We have been lobbying for those changes for ten years, so why is solar listed as being in class 43.1 when in fact it's not?

Finally I turn to REDI, the renewable energy deployment initiative. It is the only support for deployment that the solar industry has seen from the federal government since the mid-1980s. It is a small program with a budget of about $5 million this fiscal year. It's small compared to the support in other countries, but nevertheless it's all we've got.

The funds for REDI have been frozen since March by the government, under a review of all climate change programs. However, solar applications for industrial and commercial buildings, which REDI supports, are closely tied to the building industry's construction cycle. Sales are made in the spring for installation in the summer. What good is it if REDI funds are available this fall or winter, when the industry can't install its products at that time? Further, the freeze is creating uncertainty in the market, with potential buyers holding off making decisions. As a result, sales of solar thermal projects, though meagre by international standards, have plummeted this year.

If the government is committed to developing Canada's renewable energy resources, this freeze needs to be lifted before it does further irreparable damage to the solar thermal industry. If the government is truly committed to supporting renewable energies, then allow the REDI program to act as a transition program to these new support mechanisms that NRCan says it's working on and the government says it's intending to announce this fall. Currently there is little or no support for solar by the federal government, and the only program we have, REDI, is frozen and slated to end in March 2007.

What can the Government of Canada do to ensure that solar energy plays a role in the future energy supplies of Canadians? Renewable energy sources like solar are not just about cleaner air and climate change. Yes, solar has a major benefit for the environment, but it is also about energy security, providing a cheap source of energy in the future and providing jobs and wealth for Canadians.

There are four key recommendations I would like to share with you today.

One, solar is not just a clean air issue. It must be included in energy policy discussions. We cannot be left out again. Solar and all renewables must have a major role in the development of a national energy framework. We should be planning for 20 or 30 years into the future for Canada's energy. We must look to the future, and not just to the day after tomorrow.

Two, we need a firm commitment from government and consistent policies. The government needs to live up to the fine words and often-stated aspirations it expresses for renewable energies. Recently there have been encouraging words of support for solar from the minister and the deputy minister of NRCan, but we have two decades to catch up on. We now need real, not token, action.

Three, Canada needs to build solar capacity today so we'll be ready tomorrow when Canada will need new energy options. As a start, the budget for solar needs to be increased so it is comparable to that of our trading partners. While the actual federal budget for support for solar is unknown, we estimate it is less than $12 million annually. To put us in the middle of the pack of other nations, this needs to be increased to $75 million.

Finally, government support needs to go into getting solar into the hands of technicians. We do not need more study, more R and D, more technology development. I cannot stress this enough. The technology is here and proven now.

We need to follow the footsteps of other nations, who are 20 years ahead of us in their use of solar energy. We need help in developing the market for solar products. We need help in building industry capacity. We need help in getting Canadians to understand the advantages of our products.

As Canada's current energy resources run down, we must have other energy sources ready to replace them. Like every other energy source--like water power, like oil, like nuclear in the past--it will take decades for solar to become a major source of energy for Canadians, but this cannot be an excuse for inaction now.

I hope for the sake of my son, and the children and the grandchildren of the committee members in this room, that Canada does not let the sands of time run out on Canada's energy future.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thanks very much, Mr. McMonagle.

Mr. Hornung, please go ahead.

[Dr. Robert Hornung, President, Canadian Wind Energy Association]

Thank you, Mr. Chairman and committee members, for the opportunity to be here today.

I expect you have a copy of the presentation I'll be giving. It's a little long, so I'm going to be going through some slides rather quickly, but I'll cover all the topics within.

My key messages for you today are that, first, wind energy has moved from the margin to the mainstream. Second, while Canada is currently far behind other countries in terms of deployment of wind energy, we have tremendous opportunities in this country. Third, we have made some good progress and we've started to create a policy framework that can help Canada, over time, become a leader in this sector, but that requires a stable policy framework. Right now the current uncertainty that exists over wind energy policy at the federal level can potentially have some very serious implications for the wind energy industry going forward.

Here is the first slide. I want to talk a little bit first about moving from the margin to the mainstream. Wind energy worldwide now provides enough power to meet the needs of 17 million homes. That's 59,000 megawatts of capacity. Wind energy meets 20% of electricity demand in Denmark, 5% in Germany, and 8% in Spain, starting from very low numbers at the start of this decade.

In 2005, the total value of installed wind energy capacity in the world was $14 billion U.S. in that year. There were 100,000 people employed in Spain, Denmark, and Germany alone. The growth is expected to continue, moving from today's 59,000 megawatts to 149,000 megawatts by 2010. That's an estimate from the World Energy Council.

The industry is increasingly characterized by major energy players. In the last five years we've seen General Electric and Siemens become leading wind turbine manufacturers. Within Canada, when we look at who are developing wind energy projects, it's a lot of the cream of the crop of Canada's energy industry. It's Suncor, it's Nexen, it's TransCanada, it's Enbridge, it's TransAlta, and it's EPCOR, all wanting to get involved in this industry.

Now why is that? There are a number of reasons. Some are economic. Technological evolution has led to declines in the cost of wind energy, and it's becoming increasingly cost-competitive with conventional power. If you look forward, you can have a high degree of certainty that wind energy's costs are going to continue to go down. You have less certainty of that with other technologies. The gap will continue to close.

Wind energy provides significant economic benefits in terms of investment and job creation, but I also want to highlight that it particularly provides benefits to rural communities. Canada's best wind resource is in rural areas. These areas have often been hard hit by declines in other sectors, such as agriculture, forestry, or mining. Wind energy provides land-lease payments to farmers of several thousand dollars a year per turbine and contributes significantly to the rural tax base.

In fact, in the United States, John Deere, the farm tractor and farm equipment manufacturer, has actually set up a program to provide funding to farmers to support the deployment of wind energy on their properties, because they see wind energy as a way to keep the family farm going in the U.S.

On the environmental side, wind energy provides a broad range of environmental benefits. I won't go over them here; they're fairly well understood.

I do want to spend a second talking about Canada's wind energy opportunity. We have probably the best wind resource in the world. We have the world's longest coastline and the world's second-largest land mass. Our wind resource is well distributed in all regions of the country; every jurisdiction has some opportunities with respect to wind energy development. Because our country on a national scale gets most of its electricity from hydroelectricity, we have opportunities that other countries do not have to integrate wind energy into our system, because hydroelectricity is a very good partner for wind energy in terms of helping to manage the variability of wind when it's integrated into the system.

Here is the current status of wind energy: we have an installed capacity today of 944 megawatts. This provides enough electricity for a little over 300,000 homes. It's only 0.4% of total electricity demand in this country, but it's growing rapidly.

If you look a little further in the presentation, you'll see that between 2002 and 2005, installed capacity of wind energy in Canada has increased by 38% a year. Last year it increased by 54%. This year we started with 683 megawatts; we're going to be at close to 1,200 megawatts by the end of the year.

Currently, either under construction or with signed power purchase agreements--so with contractual agreements that will lead to construction going forward--we have almost 3,000 additional megawatts of wind energy, moving forward, in Canada. So the growth is real and significant.

That growth has been stimulated by an emerging policy framework in Canada. This isn't really unusual. I mean, Canada's federal and provincial governments have traditionally played a role in creating policy frameworks to facilitate the development of new energy sources, be they the oil sands, nuclear technology, or offshore petroleum technology, and this is now beginning to emerge for wind energy.

At the federal level, the key initiative has been the wind power production incentive. This program was created in 2001 as an industrial development measure with a goal of having 1,000 megawatts of wind energy in place by the year 2007. We will pass 1,000 megawatts this year. The funding for this program was fully committed in the summer of 2005.

In the 2005 budget, an expansion of the program to a new target of 4,000 megawatts by 2010 was announced. That expansion has not yet been implemented. The funds are frozen.

What the wind power production incentive does is provide an incentive payment to producers of wind energy of 1¢ per kilowatt hour for a 10-year period. Again, this is not unusual if you look at what other countries are doing. The United States has a similar program, the production tax credit, which provides 1.9¢ U.S. per kilowatt hour for a 10-year period for wind energy production.

We also have, as Tom Wallace mentioned, a supportive tax policy initiative, the Canadian renewable conservation expense in class 43.1.

The wind power production incentive, as I said earlier, has been critical in kick-starting the industry in Canada. The fact that the funds associated with that program are frozen at this time is problematic for the industry. This uncertainty has real-world implications.

First, it sends a signal to the investment community that maybe Canada's wind energy market is going to be characterized by boom and bust. Maybe it isn't going to be stable. Maybe it isn't going to be sustainable or constant. That is something that has plagued U.S. wind energy policy going forward. In the U.S., we've seen years when you have 1,600 megawatts of wind energy installed and then years when you have 200 megawatts of wind energy installed because of the vagaries associated with the production tax credit.

The result is that investors decide not to invest. Given the size of the U.S. market for wind energy, it's woefully under-invested in terms of manufacturing capacity, because manufacturers have said that they don't want to invest there if they can't have any certainty that they're going to have a market for five years that's fairly constant. If they are going to have a good year and then a bad year, they're going to go somewhere else where they will have five good years. We're worried that the current status of WPPI is sending that signal to investors who are looking at Canada.

The second problem arising from the freezing of WPPI funds at this time is that we have a number of projects in Canada that participated in provincial procurement processes for wind energy after the 2005 budget, and participated in those processes with the expectation that the expansion of the wind power production incentive would be going forward. Therefore, when they bid into those processes and said they would like to compete in those processes and provide you with wind power, they assumed that they would be able to draw on those funds from the wind power production incentive.

There are eight projects in Ontario, representing about $2 billion of investment, that are in this situation right now. Under the contractual terms of those agreements, those projects are now in a position where they have to start building. They have to start delivering power in 2007, or at the latest by early 2008, or they will be penalized under the terms of the contracts.

It's a very difficult decision to go ahead with this investment when a source of revenue for the project, like the wind power production incentive, which for many of these projects would amount to about 10% of the revenue for the project for the first 10 years, is uncertain. It completely changes the project economics. It makes them much more marginal, and it has really put these companies in a very difficult position. Timing matters.

Frozen funds also means that there are limited resources within government to actually continue to process wind power production incentive projects.

We have about 40 projects right now that are in the process of undergoing a federal environmental assessment in the hopes of being able to secure the wind power production incentive. To secure WPPI funds, you have to have a federal environmental assessment. Those environmental assessment processes have slowed down enormously because of the uncertainty associated with WPPI, delaying future projects in terms of when they may be able to go forward.

Finally, the uncertain status of WPPI sends a signal to provincial governments that maybe the federal government isn't willing to be a partner going forward, as it has been to this point. That's problematic, because provincial governments have gone forward setting increasingly aggressive targets for wind energy, expecting the federal government to be there as well.

If you go to the next slide, you'll see a sense of what some of those targets are. Quebec recently announced in its energy strategy that it's going to seek 4,000 megawatts of wind energy by 2015; Ontario wants 2,700 megawatts of renewables by 2010; Manitoba, 1,000 megawatts of wind energy by 2014. I won't go through the whole list, but if you add all of those things together, provincial aspirations at this time total a little over 9,000 megawatts of wind energy by 2015. Remember that we're at 944 right now, so that's a minimum going-forward objective of 8,000 megawatts of new capacity over the next decade.

What would that mean for Canada if we actually proceeded with it? Well, by 2015, it would mean that wind energy was providing a little over 3% of Canada's total electricity demand. Now, 3% still sounds pretty small, but recognize that natural gas today provides only about 4% of Canada's electricity. Recognize as well that between 2005 and 2015, of all the new electricity generation currently planned to be built in this country, wind energy would be responsible for about 17% of that electricity.

It's clear that governments and utilities at the provincial level are looking for wind energy to play an important role in their future supply and they're looking for the federal government to be a partner in it.

I will note that even the level of growth we're talking about won't make Canada a world leader; it will move us to the middle of the pack. Already we have countries such as Denmark, Germany, and Spain that are using much more wind energy than we are. But if you also look at some of the objectives countries have set, the United States is putting in 10,000 megawatts of wind energy in the next three years; China wants 30,000 megawatts of wind energy by 2020.

Spain is an interesting example. Spain in the year 2000 was essentially where Canada is today. Spain had about 1,000 megawatts of wind energy capacity. In the year 2000, Spain adopted a target of 13,000 megawatts of wind energy by 2010. It seemed extremely ambitious at the time. Last year, Spain dropped that target and replaced it with a new target of 20,000 megawatts by 2010, and they're on track to meet that target.

Looking forward, our first priority is to proceed with the 2005 budget commitment to expand the wind power production incentive, and looking further forward, we'd like to see the development of a comprehensive wind energy strategy to support the deployment of wind energy in Canada.

Let's make efforts to attract domestic manufacturing capability. Let's do things with respect to streamlining environmental assessment processes. Let's focus on human resource development. This is a rapidly growing sector, and we have at this time little in the way of training for potential employees in this sector.

I've added a couple of slides at the end that I won't touch on now but would be happy to touch on in questions concerning what I call non-barriers to future wind energy development, some of the common myths related to wind energy involving sound, birds, and land use. I've also talked about some of the issues that are real issues for wind energy--for example, visual impacts, decisions about future transmission, and how far we can go in terms of ensuring a stable and sustainable policy framework.

The last point I'll mention, Mr. Chairman, is just to say that while we're poised right now for significant growth in Canada's wind energy sector of large, grid-scale electricity, Canada also has an emerging opportunity with respect to small wind energy systems, systems a farmer might use on his property, systems someone at a cottage might use, or someone at a home or a school or a small business or facility.

Canada actually has some of the leading manufacturers of some of these technologies in the world, but right now those manufacturers export essentially all their product. They survive by exporting their material to other countries because we don't have a policy and framework in place with respect to smaller wind energy systems. We have a couple of proposals in that regard that we'd be happy to forward to the committee and have further discussions about it at some point in the future.

Thank you very much for your time.

[The Chair, Conservative, Lee Richardson]

Thank you very much, Mr. Hornung.

Thank you for all the presentations. They were quite provocative. I think we're going to have lots of good questions. I appreciate your coming, and again, I wish we had more time. So let's get right on with it.

Mr. Cullen, would you like to begin? It's going to be five minutes for questions and answers on the first round.

[Roy Cullen, Liberal, Etobicoke North, ON]

Thank you. I have a 12 o'clock meeting. Unfortunately, I'm going to have to skip out.

[The Chair, Conservative, Lee Richardson]

Well, you might stay within time then.

[Roy Cullen, Liberal, Etobicoke North, ON]

Yes, that's right. So it might work.

Thank you very much to all the witnesses for being here.

I can understand why the new government wants to put its stamp on things and bring out its own approach to energy policy, but the freezing of these programs--the WPPI, the wind power production incentive, and now the renewable energy deployment initiative--seem to run counter to what we should be doing as a nation to encourage wind power and other types of renewable energy.

So I'll put it out to the departmental people and also to the solar group and the wind power. Is it frozen just because the government wants to review everything, or are there concerns about the effectiveness and the efficiencies of these programs? Has there been any evaluative work done in terms of whether they're meeting their objectives and how they stack up against other alternatives in terms of programs the government might want to look at or deliver?

What is the status? Is it just frozen because the government wants to review everything, or are there some concerns?

[Tom Wallace]

Maybe I could begin.

There are really two blocks of programs we're talking about. First, as far as the solar program is concerned, the renewable energy deployment initiative, the previous government announced a review of a number of climate change programs. The WPPI program was not included as part of that review, but the REDI program was.

If my memory is correct, there was something in the order of 100 programs that were subject to a fairly comprehensive review process initially by Treasury Board, and the Privy Council Office was involved. The results of that review were presented to the new government, and decisions are, in some sense, working their way through the system.

Robert McMonagle was in to meet us a couple of weeks ago. In the case of solar, I mentioned at the time that we were hoping to see a situation where we could unblock the solar program, with a decision at least one way or the other, but hopefully a positive decision, by the end of this month. I'm still hopeful that will occur, but I can't get ahead of the various government decision-making processes.

[Roy Cullen, Liberal, Etobicoke North, ON]

I want to interrupt you just for a moment. Is NRCan privy to all the evaluative work that has been done by, is it Treasury Board and the Privy Council Office?

[Tom Wallace]

People in our department would be. I'm privy to the results of our programs, the programs that I'm responsible for.

[Roy Cullen, Liberal, Etobicoke North, ON]

Okay, but regarding these programs that are frozen, have there been any concerns raised in terms of their efficiency or effectiveness?

[Tom Wallace]

I think of the hundred programs, there were some that were dropped. Indeed, the government I think has announced that there are about 15 or 17 programs that will not proceed. The REDI program is not on that list.

In response to your question about evaluation, we did have a comprehensive evaluation of the REDI program about three or four years ago, I think it was. Funds were frozen for a while. There was some controversy about the ratio of the support we were giving for incentives versus training, certification, building up the industry. We did a review and made some adjustments. We've been increasing the proportion of incentives over time.

By and large--and I think Rob might have some statistics on this--we have seen a real increase in the market for solar over the past couple of years. It was pretty slow in the early years as we were trying to build the infrastructure; now it's starting to really take off in a couple of sectors.

So I guess on the solar side I could say I'm hopeful, and that's all I can say. I can't really speak for the government, but I think I said a couple of weeks ago that we were hopeful about getting an answer on the solar side before the end of the month. That continues to be our hope.

In the meantime, we've done what we could as a department to relax one of our terms and conditions to ensure that you don't necessarily have to have your contribution in place by the time construction starts. We realize the difficult position the solar industry has.