Promoting Innovation, Small Business Enterprise and Job Creation through Solar Energy Technologies

Transcription

1 Promoting Innovation, Small Business Enterprise and Job Creation through Solar Energy Technologies A Submission to the Standing Committee on Finance Pre-Budget Consultations 2010 Prepared by the: Canadian Solar Industries Association (CanSIA) August 2010

2 Summary CanSIA is a national trade association that represents more than 500 solar energy companies throughout Canada. Since 1992, CanSIA has worked to develop a strong, efficient, ethical and professional Canadian solar energy industry with capacity to provide innovative solar energy solutions and to play a major role in the global transition to a sustainable, clean-energy future. As the March 2010 Speech from the Throne 1 highlighted, Canada s energy resource endowment provides an unparalleled economic advantage that must be leveraged to secure Canada s place as a clean-energy super-power and a leader in green job creation in a world whose energy-mix is diversifying and shifting towards new alternative clean-energy sources. Canada has historically met a large proportion of its electricity demand from renewable resources but has been slow to adopt innovative emerging technologies. Solar energy is a renewable energy resource that is more abundant and ubiquitous than any other natural resource native to Canada. It has the potential to contribute to Canada s economic growth, rising energy demands, greenhouse gas (GHG) emissions reduction targets and balance of trade. The benefits of a strong solar energy industry to the economy are well understood. Germany, for instance, had industry sales of over 19 billion, export sales over 6.5 billion, and a labour-force of over 80,000 in Many of the world s largest energy companies now also have solar energy in their portfolios, including those active in Canada such as Suncor, Enbridge and Chevron and solar energy is now a multi-billion dollar industry globally. Despite excellent conditions for the deployment of solar technologies, Canada, ranks near the bottom in per-capita generation and utilization of solar energy amongst its industrial trading partners. The Canadian solar industry has developed significant capacity and momentum and established a strong foundation to its supply chain. Since 2005, the Canadian solar energy industry labour force has grown by over 50% to 4,000 full time jobs in 2010 (in a diverse range of sectors that includes manufacturing, engineering and research and development). The industry s domestic and export revenues have grown at average annual rates of 30 50% since 2005 to the benefit of the Canadian economy, communities and the environment. While exceptional progress has been made, the Canadian solar energy industry today is at a crossroad for a number of reasons. The first is the withdrawal of federal investments which have created significant industry capacity and generated momentum. As market experience has shown time and time again, emerging technologies and nascent industries require sustained support to realize their full benefits. When support is removed prematurely, any progress made can be reversed to the detriment of the economy, individuals and communities. In addition, the lack of a national commitment to the deployment of renewable and solar technologies with associated targets and regulatory measures favourable to achieving them, puts Canada at a competitive disadvantage globally for investment in its renewable and solar energy supply chain and markets. Investors currently see Canada as ten small and distinct investment markets, each with their own policies, rather than a coherent and strong national market. Unlike Canada, leading industrial jurisdictions such as the United States and the European Union, have signalled to investors, manufacturers, and project developers their strong commitment to developing a new economy based on renewable and solar energy technologies through the establishment of national 1 Speech from the Throne (3rd March 2010) A Stronger Canada. A Stronger Economy. Now and for the Future. Canadian Solar Industries Association Page 1

3 policies supported by well-defined targets, regulatory environments favourable to the adoption of renewable and solar energy and long-term commitments to investments. Similarly Canada needs a strong federal government commitment to support the development of competitive renewable and solar energy industries. CanSIA recommends that the federal government commit to: 1. continuing and reinstating funding programs such as the ecoenergy Retrofit Homes Programs and the ecoenergy for Renewable Heat Program; 2. introducing an Investment Tax Credit (ITC) to stimulate the introduction of Solar Photovoltaics (PV) technologies and maintain Canada s competitiveness in North American and international PV markets; and 3. promoting solar energy through a strengthened federal Green Procurement Strategy with established targets to support the uptake of renewable and solar energy technologies. 1. The Canadian Solar Energy Industry: An Overview The industry comprises two categories of solar energy technology Solar Thermal (which consists of Solar Thermal Heating and Solar Thermal Air Heating) and Solar Photovoltaics (PV). Each of the technologies within these categories captures sunlight and converts it to a more useful form of energy that is clean, nonpolluting and reliable; heat in the case of Solar Thermal and electricity in the case of Solar PV. Due to differences in technology maturity and application, each currently enjoys a different market status. 1.1 Market Status: Solar Thermal Solar Thermal Water Heating transfers the energy in sunlight to water as heat. Simple systems can provide low-temperature heat for applications including swimming pool heating, whereas more advanced systems are capable of providing domestic hot water, space-heating and cooling, as well as heat for industrial processes. Canada predominantly employs only simple applications of solar water heating technologies. Despite excellent potential and many successfully operating representative projects and systems, the market for more-advanced applications is not yet developed, due to the existence of market bias toward conventional fuel sources. Financial incentives of the federal ecoenergy for Renewable Heat and ecoenergy Retrofit Homes programs have stimulated demand for Solar Thermal Water Heating technologies since Thanks to these investments over 100 new regionally based small- and medium-sized solar energy businesses have been created with a total national labour force approaching 1,000. Exports to the U.S. and Europe are growing and annual revenues now are approaching $40 million. The cancellation of the Federal Government ecoenergy Retrofit Homes program on March 31, 2010 and the scheduled conclusion of the ecoenergy for Renewable Heat Program in April 2011 have created major uncertainty in the industry. Jobs have been lost, major manufacturers have experienced a decline in sales of up to 50% and investors have shied away as a result of the market instability. All of this has put the future of the Canadian Solar Thermal Water Heating industry in question. Solar Thermal Air Heating involves heating air with sunlight that is then used for space-heating buildings or for industrial processes (e.g. drying timber in the forestry industry). The Canadian Solar Air Heating Industry is currently the most developed in the world and has the vast majority of the world s most innovative building-integrated solar air heating projects. Canada is very well placed to maintain a global leadership role in this young industry with excellent export potential, but continued investment is needed to capitalize on its success to date. Canadian Solar Industries Association Page 2

4 As with Solar Thermal Water Heating, the conclusion of the Federal Government s ecoenergy programs pose a significant barrier to the further development and expansion of the industry s domestic market. Unless the domestic market for solar air heating technology is maintained, technological innovation and its benefits to the Canadian economy will be lost, along with Canada s current leadership position, to our industrial competitors. Their reinstatement, continuation and redesign would enable continued maturation sufficient for the Solar Thermal market to achieve a measure of sustainability. 1.2 Market Status: Solar Photovoltaics Solar Photovoltaics (PV) convert sunlight directly into electricity by harnessing the electrochemical properties of semi-conductor materials. Solar PV has been readily employed throughout Canada for over 20 years to provide electricity in areas that do not have access to utility-supplied electricity as Solar PV has the potential to be more cost effective and have lower operation and maintenance requirements than conventional alternatives (e.g. diesel). Until the past few years, the adoption of Solar PV in areas that could access the utility grid has been low as the cost of electricity generated from Solar PV has been higher than grid-electricity. As a result of price reductions through innovations in manufacturing processes and the advancement of scientific expertise and industry experience, the cost of electricity generated from Solar PV is now rapidly approaching gridparity (the point at which the cost is equal to or less than power from conventional energy sources). As a result of these cost reductions and of financial incentives in place to encourage the deployment of clean alternative energy sources, Solar PV is now becoming increasingly more common in urban, suburban and rural areas ranging from small systems on single houses to systems that would cover many football-fields and power entire communities. The rate of deployment for Solar PV is considerably higher in many of our industrial trading partners than in Canada despite the fact that Canada has a better solar resource and higher energy demands. Federal government support for Solar Photovoltaics has been weak. Key incentives for adopting Solar PV in Canada to date have come from provincial governments. CanSIA believes that a federal financial incentive could help to lay the ground-work for the adoption of Solar PV across Canada, complementing provincial programs. As with Solar Thermal, government support for Industry Capacity Development would further contribute to industry safety and sustainability. 2. Recommendations 1. Reinstate, continue and redesign ecoenergy Solar Thermal Incentives: The initial cost of solar thermal technologies is commonly cited as the largest barrier to their uptake. Financial incentives that reduce the initial cost of a system to the end-user have proven extremely effective at stimulating market activity. In addition, the single most important success factor for the long-term stimulation of a solar thermal market through a financial incentive scheme has been continuity: With shortterm programs or insufficient budgets, financial incentive schemes have failed to create healthy market structures, which are the basis for continuous growth. 2 The ecoenergy programs have been extremely successful and popular with homeowners and consumers, however, the stop/start, boom/bust market that has been created by their cancellation and conclusion is 2 European Solar Thermal Industry Federation (2008) Financial Incentives for Solar Thermal Guidelines on best practice and avoidable problems Canadian Solar Industries Association Page 3

5 not conducive to the creation of a healthy, stable domestic market. To maintain market demand, capacity and momentum and stabilize the investment base of the Canadian solar thermal industry, CanSIA recommends that the federal government: Reinstate, continue and re-design the ecoenergy programs. This would provide an important boost to made-in-canada small- and medium-sized enterprises that operate throughout the nation, creating jobs in local communities, fostering technological innovation and bolstering domestic markets to attract investment in the supply chain. The cost for Solar Thermal Water heating technologies, would be $21 million per year over 5 years (33% residential and 67% commercial) and for Solar Thermal Air heating technologies, $9 million per year over 5 years (33% residential and 67% commercial). These figures represent a slight increase in the budget for the programs over previous years so as to create opportunities for businesses (and the number of businesses) to expand and create more jobs. A re-design of the programs to include a component for investment in Industry Capacity Development could support the development of national product standards for solar energy technologies, a national labour force strategy and research and development for technological innovation, as well as public awareness initiatives to encourage their broader adoption. An additional $4 million per year over 5 years for the Solar Thermal Water Heating industry and $1 million per year over 5 years for the Solar Thermal Air heating industry would be needed for this component. 2. Establish an Investment Tax Credit for Solar Photovoltaics (PV): As is the case with Solar Thermal technologies, the initial costs associated with Solar PV systems is often cited as the largest barrier to the uptake of Solar PV technology. Programs that reduce this initial cost with rebates or tax incentives measures have been extremely effective in stimulating the adoption of Solar PV in many countries worldwide. Currently, Canada s largest direct competitor for investment in the Solar PV supply chain and in solar energy projects, the United States, offers an Investment Tax Credit (ITC) that reduces federal income taxes for qualified tax-paying owners by 30% of the capital investment in commercial renewable energy projects. ITC earned when the capital equipment is placed into service, help offset upfront investments in renewable energy projects and provide an economic incentive to develop and deploy more capital-intensive renewable energy technologies. The current provisions in the Canadian Income Tax regulations for renewable energy generation (i.e. Accelerated Capital Cost Allowance and Canadian Renewable Conservation Expenses) offer only very limited incentives to solar energy project developers. In order to level the playing field between conventional and renewable energy sources in Canada and to ensure that Canada remains competitive in the North America and international Solar PV market, CanSIA recommends that the federal government: Establish An Investment Tax Credit for Solar Photovoltaics. The U.S. ITC incentivizes investors to focus on the U.S. Solar PV market rather than that of Canada. For this reason CanSIA recommend that the Government match the 30% ITC incentives of the U.S. Federal Government to stimulate the uptake of Solar PV technology to make Canada competitive with other key International energy markets (i.e. United States). Canadian Solar Industries Association Page 4

6 3. Strengthen the Green Procurement Policy for the adoption of Solar Energy technologies Green procurement is a process that ensures that when decisions are being made to purchase or invest in goods, services, utilities and works, their environmental and social benefits are considered in addition to the conventional procurement criteria of price and quality. The Public Works and Government Services Canada (PWGSC) Policy on Green Procurement is intended to: demonstrate environmental leadership and influence industry and citizens to use environmentally preferable goods, services and processes, stimulate innovation and market development of, and demand for, environmentally preferred goods and services, making these available and mainstream for other sectors of society, and support emerging environmental technologies. A clear commitment to the procurement of renewable and solar energy technologies for federal government operations would be an excellent route for achieving these outcomes. The United States Executive Order (13514) on Federal Sustainability is an example of how such measures could be implemented. CanSIA recommends that the federal government: Strengthen the Green Procurement Policy and Strategy for the adoption of Solar Energy Technologies. As energy equipment and building infrastructure may only be repaired or replaced every years, there may only be an irregular window of opportunity to adopt renewable technologies that is lost if not grasped. Currently, there are few active measures in place to ensure that the Policy on Green Procurement has a significant effect on the Federal Government s uptake of innovative, environmentally preferable and emerging renewable energy technologies. Providing explicit and measurable targets, clear operational policies and guidelines on how to achieve the targets and holding Ministers and Deputy Heads accountable for achieving them would help to strengthen the federal Green Procurement policy and processes to facilitate the appropriate adoption of renewable energy technologies. 3. Conclusion The Canadian solar energy industry has developed significant capacity and built major momentum to date. It is a Canadian success story. As is the case with many industries in a variety of sectors worldwide (and especially for emerging technologies), government investment and support is crucial to enable them to mature to achieve self-sufficiency. CanSIA understands that the 2011 budget must be prudent given the government s fiscal situation. However, we believe that a small investment in the solar energy industry now is an investment that will help drive Canada s sustainable economic development for years to come and will contribute to the goals outlined in the Speech from the Throne. CanSIA appreciates the opportunity to put forward these recommendations and would be very pleased to make a presentation to the Committee. Canadian Solar Industries Association Page 5