Canada is known as a stable business location with access through NAFTA to the North American marketplace, and for having performed well during the global recession. Its clean environment has been one of its chief assets, and the country has leveraged its abundant natural resources effectively. It is also known as one of the top countries in the world for renewable energy, as noted by Ernst & Young's Renewable Energy Country Attractiveness Indices, where Canada is currently in the top 10, a position it has held since 2003. Given the country's strengths, how is Canada set to develop and attract the mobile investment of this new industry, which is growing even in the midst of a recession?
Canada Competes For New Business
A recent analysis by The Williams Group of Canada's federal and provincial/territorial programs revealed 21 that are specific to attracting alternative and renewable energy companies and developing new renewable energy products. Grants are the most favored type of investment subsidy. Low-cost loans are the next most offered incentive, with rebates on production following. Several programs offer either a loan or grant depending upon certain qualifications. Only one program is a tax incentive.
Information about Canadian renewable energy incentives can be found below. Here the user can view the programs available that are specific to attracting or supporting renewable energy companies. (Pure research and development programs have been excluded, as have city-specific and utility-sponsored programs.)
Federal or Nationwide Programs
The federal government of Canada currently offers five programs designed to stimulate the renewable industry:
• ecoAgriculture Biofuels Capital Initiatives (ecoABC) is for construction or expansion of biofuel production facilities. Funding is by a repayable contributions rebate based on the increase in production capacity.
• ecoEnergy Retrofit Incentive for Industry grant is targeted to small- to medium-sized businesses with a focus on making existing or new facilities energy-efficient.
• ecoEnergy for Renewable Power provides kilowatt-per-hour rebates on low-impact, renewable electricity projects.
• NextGen Bio Fuels Fund, through Sustainable Development Technology Canada (a nonprofit organization funded by the Canadian government) is for next-stage demonstration of biofuels and co-products.
• Sustainable Development (SD) Tech Fund, through Sustainable Development Technology Canada, provides grants for late-stage development demonstration of clean power solutions.
The "eco" line of programs from Natural Resources Canada is theoretically available at least until 2011. However, the preliminary federal budget for 2010 puts their future in jeopardy.
Alberta - leveraging its agriculture resources - has four programs:
• Bioenergy Infrastructure Development Program is a grant for existing and prospective biorefining processors and investors facilitating new investment in the industry.
• Bioenergy Producer Credit Program is a tax credit program designed to assist in the production of biofuel.
• Biorefining Commercialization and Market Development Program provides grants for capital costs, feasibility studies, market research, etc.
• Energy Environment Technology Fund is a grant program for demonstration and deployment of renewable energy production technologies.
Ontario - the most industrialized and populous of the provinces - also offers four programs:
• Advance Manufacturing Investment Strategy program provides grants or loans for technology innovation including renewable energy and energy conservation projects.
• Applied Research and Development Program is a grant program for small- to medium-sized businesses for product development and commercialization in alternative energy.
• Innovation Demonstration Fund (IDF) assists with pilot-stage development projects including alternative energy and hydrogen.
• Northern Energy Program provides grants or loans on internal energy generation projects and renewable energy capital cost differentials in the north of Ontario.
Québec - which has the largest land area of all the provinces - has two programs
• Energy Innovation Assistance Program (PAIE) is a grant that includes demonstration and product introduction for energy efficiency and energy production.
• Green Technologies Demonstration Program (Technoclimat) provides grants or loans for the demonstration of technologies that can reduce greenhouse gas emissions. The program can also be used by firms that have licensed technology developed by a Québec institution.
Atlantic Canada - comprised of New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island - all share a single program:
• Business Development Program is a loan to small- and medium-sized businesses for new establishment and expansion, which applies to renewable technology companies as well.
Manitoba has one program:
• The Sustainable Development Innovations Fund (SDIF) includes grant funding for demonstration projects.
Northwest Territories is the only territory that has its own program:
• The Alternative Energy Technologies Programs - Medium Renewable Energy Fund is a grant program that can help fund wind, solar, and hydro renewable energy projects.
It is noticeable that several provinces and territories have no programs that are specific to the renewable energy industry. British Columbia, for instance, is actually quite aggressive with its Research and Innovation Strategy. The program's focus, however, is on R&D leveraging and funding the provinces' educational institutions. British Columbia also has, as do many of Canada's provinces and territories, incentives provided by electrical utilities including BC Hydro's New Construction Program and Fortis BC's New Facility Program.
It is worth noting one of the aims of the Western Climate Initiative, which includes four Canadian provinces and several U.S. western states, is to implement a regional cap-and-trade system, which would further stimulate development of alternative and renewable projects and the companies that would supply the technology and components.
Augmenting With Traditional Incentive Programs
Most provinces, territories, and geographically smaller locales have programs that - although not specifically targeting renewable energy company attraction - can be applied to any incoming mobile investment or expansion. Where they exist, renewable-energy-specific programs may be combined with and augment traditional incentives including:
• Tax credits or refunds for building and equipment
• Low-cost or interest-free loans
• Value-added tax/goods and services tax reductions or abatements
• Research programs
• Employee training grants
• Employee search assistance
• Property search assistance
• Infrastructure preparation for expansion or greenfields
These can all be helpful when establishing a new operation, whether it is headquarters, manufacturing plant, or research and development facility in the renewable industry. A careful review of a province/territory's full incentives program mix will uncover the opportunities for programs that can work together.
Incentives in Perspective
Having conducted numerous international site selection projects for renewable energy companies since 2000, The Williams Group advises companies to put incentives in their proper perspective among other site selection criteria specific to the industry. A company must carefully weigh the incentive opportunity with that of sound business infrastructure that will feed the company's growth over years.
Site selection criteria specific to the renewables industry include: • Market opportunity - including costs of petroleum and electricity and capacity shortfall;
• Government policy for purchase of renewable energy and energy-efficient products, as well as for conservation programs;
• Infrastructure programs - federal, provincial/territorial, and local governments' commitment to new grid distribution and biofuels infrastructure;
• Availability of industry-specific work force - engineers, scientists, system integrators, etc.;
• Job training programs - customizable to manufacturing process and management needs;
• Presence of competition;
• Presence of industry-specific suppliers;
• Renewable energy installation and generation incentives - assisting market growth; and
• Utility programs for distributing "green" energy.
These criteria are in addition to the usual suspects that should always be a part of a balanced location search and include: • Demographic growth trends;
• Availability and cost of labor;
• Availability and cost of land and property;
• Supplier and distribution logistics;
• Communications infrastructure; and
• Quality-of-life issues, particularly for relocating managers.
All criteria should be customized to the company and its specific activity, prioritizing appropriately, since one size does not fit all. A variety of techniques including company and investment assessments, comparative location modeling, and cost analyses and cash flows are very useful in narrowing the field and determining the best fit of finalist locations in order to ensure they meet company requirements. Incentives are part of the mix, and the analyses provide for successful negotiation and application.
Gearing Up for Recovery
Given Canada's long history of environmental stewardship, the country has demonstrated that it has embraced the new renewables energy industry and will not lose sight of the opportunity that this growing industry provides. Federal, provincial, and territorial programs continue to beckon the industry and urge increased competition for mobile investment. With the global recession subsiding, Canada will no doubt continue to play a pre-eminent role in stimulating this industry.