American homes are getting greener, like this one in Minnesota
by Jonathan Fahey, The Associated Press
NEW YORK – The average amount of electricity consumed in U.S. homes has fallen to levels last seen more than a decade ago, back when the smartest device in people’s pockets was a Palm pilot and anyone talking about a tablet was probably an archaeologist or a preacher.
Because of more energy-efficient housing, appliances and gadgets, power usage is on track to decline in 2013 for the third year in a row, to its lowest point since 2001, even though our lives are more electrified.
Here’s a look at what has changed since the last time consumption was so low.
Better homes
In the early 2000s, as energy prices rose, more states adopted or toughened building codes to force builders to better seal homes so heat or air-conditioned air doesn’t seep out so fast. That means newer homes waste less energy.
Also, insulated windows and other building technologies have dropped in price, making retrofits of existing homes more affordable. In the wake of the financial crisis, billions of dollars in Recovery Act funding was directed toward home-efficiency programs.
Better Gadgets
Big appliances such as refrigerators and air conditioners have gotten more efficient thanks to federal energy standards that get stricter ever few years as technology evolves.
A typical room air conditioner — one of the biggest power hogs in the home — uses 20 per cent less electricity per hour of full operation than it did in 2001, according to the Association of Home Appliance Manufacturers.
Central air conditioners, refrigerators, dishwashers, water heaters, washing machines and dryers also have gotten more efficient.
Other devices are using less juice, too. Some 40-inch (1-meter) LED televisions bought today use 80 per cent less power than the cathode ray tube televisions of the past. Some use just $8 worth of electricity over a year when used five hours a day — less than a 60-watt incandescent bulb would use.
Those incandescent light bulbs are being replaced with compact fluorescent bulbs and LEDs that use 70 to 80 per cent less power. According to the Energy Department, widespread use of LED bulbs could save output equivalent to that of 44 large power plants by 2027.
The move to mobile also is helping. Desktop computers with big CRT monitors are being replaced with laptops, tablet computers and smart phones, and these mobile devices are specifically designed to sip power to prolong battery life.
It costs $1.36 to power an iPad for a year, compared with $28.21 for a desktop computer, according to the Electric Power Research Institute.
On the other hand…
We are using more devices, and that is offsetting what would otherwise be a more dramatic reduction in power consumption.
DVRs spin at all hours of the day, often under more than one television in a home. Game consoles are getting more sophisticated to process better graphics and connect with other players, and therefore use more power.
More homes have central air conditioners instead of window units. They are more efficient, but people use them more often.
Still, Jennifer Amman, the buildings program director at the American Council for an Energy-Efficient Economy, says she is encouraged.
“It’s great to see this movement, to see the shift in the national numbers,” she says.
[quote]I expect we’ll see greater improvement over time. There is so much more that can be done.[/quote]
The Energy Department predicts average residential electricity use per customer will fall again in 2014, by 1 per cent.
Jonathan Fahey can be reached at http://twitter.com/JonathanFahey
When Prime Minister Harper is challenged on his environmental record, one of his standard replies is that between economic development and sustainable development, he must give priority to the economy. While it suits Harper’s ideological agenda to imply that economic and environmental objectives are opposing forces, the facts suggest otherwise.
[quote]In 2011, there were 372,000 people working in the nation’s clean energy sectors and the projections are such that these numbers are expected to be in the 400,000 to 500,000 range by 2020.[/quote]
Canada falling far behing world leaders like Germany
Indeed, as indicated in my previous Common Sense Canadianarticles, the clean technology sectors are among the world’s fastest-growing and highest job-creating sectors of our times. Unfortunately, each year of Conservative rule represents a rapidly expanding green jobs gap between Canada and its competitors.
Among nation-specific models that disprove the Harper economic paradigm – to the effect that a natural resource-based economy is the best vehicle for prosperity – Germany is a case in point. That is, Germany, while rising to become one of the globe’s strongest national economies, reduced its emissions by 25% below 1990 levels by 2012, thus exceeding its Kyoto Protocol commitment to reduce its emissions by 21% below 1990 levels for the 2008 to 2012 period.
This is an especially remarkable achievement in light of the economic troubles in much of Europe and in the world at-large.
Components of the German Success Story
This German success story is a result of numerous factors – one might say a holistic approach.
One of the important pillars of this success story is the 2001 German Renewable Energy Act, which introduced the concept of a Feed-in-tariff (FIT) and right to connect (RTC) formula to the world – a concept entailing: 1) the paying of above-market rates for renewable energy sources over a specified time period, combined with 2) a requirement that all sources of renewable energy production within a given utility’s region must be connected to, and given priority within, the network.
This concept makes sense economically in that all new sources of energy cost more than existing sources that were developed some time ago and may be fully paid for. Over time, the plan calls for a reduction of FIT rates for new renewable power entries to the grid, thus providing incentives for manufactures to invest in innovation to lower costs.
Attesting to the success of the formula is the fact that the German model has since been emulated by 19 of the 27 EU states and 40 jurisdictions around the globe, including China. Up until recently, Ontario offered such a system.
Community ownership of renewable energy
The success synergies resulting from the aforementioned FIT/RTC model and the rapid uptake of renewables also comprise attractive terms of engagement for community and individual ownership of renewable energy production. To this effect, in 2013, 50% of the entire Germany production of renewables is owned by individuals, communities and cooperatives – with the sources ranging from home rooftop solar panels to wind power and biogas production on agricultural land. With regard to the latter point, farmers account for 11% of total German renewable production.
In effect, the individual homeowner uptake has been so successful that a March, 2013 survey showed 60% of homeowners are considering adding rooftop solar for heating or electricity generation.
An equally significant symptom of success is the fact that in May, 2013, a €50m ($66.5M) program was introduced for power-storage systems for owners of small and medium-sized PV solar installations in order to kick-start the storage sector and take pressure off grids. This has become necessary because grids are increasingly struggling with rising amounts of homemade renewable energy flooding the system at midday, creating an imbalance in supply and demand and having a distorting effect on the market.
As for the role of the utilities in the clean energy high-local-ownership landscape, only 13.5% of the nation’s renewable power is produced by Germany’s 4 major utilities and regional and municipal utilities.
Few countries have outdone Germany on this score, other than Denmark, where 83% of the renewable power sources are owned by individuals and communities.
Perhaps the most significant bottom line success of the German approach is the job numbers – once more demonstrating that the Harper economic paradigm is dated. In 2011, there were 372,000 people working in the nation’s clean energy sectors and the projections are such that these numbers are expected to be in the 400,000 to 500,000 range by 2020.
Fukushima accelerates migration to renewables
A major acceleration force for the German migration to a green economy was the Fukushima meltdown in 2011, the German Energiewende (the energy transition). The program saw 8 of its oldest nuclear power plants shut down immediately after the disaster struck and includes plans for the shutting down of the remaining 9 plants by 2022.
As for filling the gaps left by the remaining planned shutdowns, a study by engineering form BEW concluded that onshore wind could replace all nuclear plants, with backup from other renewable sources.
Offshore wind a key component of Germany’s energy future
Accordingly, among other things, the new Energiewende package comprised: 1) an increase in the Feed-in-Tariff (FIT) for offshore wind; 2) a commitment from kfw, the state development bank, for $7.2B of investments in offshore wind development, and 3) a plan to cut electricity consumption by 10% by 2020.
To be eligible for the premium for offshore wind, originally, Energiewende projects were to be completed by 2017, but given delays in the construction of the underwater offshore TenneT cable and 30 year project lifecycles, the offshore wind industry’s lobbying efforts were rewarded by the newly re-elected Merkel-led government with a November 2013 decision to extend the completion date requirement to the end of 2019.
Germany aims for 80% emissions reduction by 2050
On longer-term Energiewende objectives, the 2050 goal is ambitious, calling for a reduction of emissions by 80% with 80% of its electricity derived from renewable sources by then. Not bad considering that only 23% of the nation’s electricity was attributable to renewables in 2012. Interim renewable electricity targets are set at 35% by 2020 and 50% by 2030.
With there being a strong renewables lobby in the country – unlike Canada, where the fossil fuel industry plays a dominant role – the German renewable industry is exercising its clout to suggest a 47% renewables target for 2020.
In this regard, the results of the September, 2013 German federal elections may in fact mean that the interim goals could become more stringent because: 1) Merkel’s Christian Democrats (CDU) are forming a coalition with the Social Democrats (SPD); and 2) the SPD had campaigned for a 40-45% target for renewable electricity sources by 2020 and 75% for 2030. The SPD campaign also included a 25% target by 2020 for co-generation, the combining of heat and power generation.
Clearly, the Energiewende will be high on the political agenda because it was a component of the Merkel election platform.
Shift away from Nuclear still not fast enough, most Germans say
Notwithstanding the impressive speed of the energy transition away from nuclear, for much of the German public, the abandoning of nuclear power is not going fast enough. A March, 2013 poll by Infratest Dimap showed that 57% of Germans believe the shift away from nuclear is going too slowly, while only 30% feel it’s advancing too fast.
This same poll also illustrated another big difference between the energy and climate change debates in Germany versus Canada. The poll had 39% indicating that environmental protection should be among the main criteria for political decisions.
Lastly, consistent with the Energiewende goals, Germany will be building 4,400km of new transmission lines by 2022, the year of the shutdown of all of the remaining nuclear plants. This includes connecting offshore wind resources in the North and Baltic Seas.
Clean Energy vs. Fossil Fuels for electrical power: the economics
Contrary to appearances, the premium rate for renewables does not involve subsidies, as the costs are passed on to consumers. As one would expect, the German fossil fuel industry has complained that the surcharge to consumers for renewables gives renewables an unfair competitive advantage in the marketplace.
But a Greenpeace study showed that the exact opposite is true. Specifically, while renewables received €17B ($22.7B) in aid via the surcharge in 2012, the fossil and nuclear sectors actually represented a staggering €40B ($54B) in hidden costs. The hidden costs are composed of direct state aid and tax breaks, as well as external damage costs associated with climate change impacts and costs resulting from nuclear accidents – all of which are borne by taxpayers. But – unlike the renewables surcharge – these costs don’t appear on electricity bills and aren’t transparent. If these hidden costs were slapped on electricity bills, consumers would be burdened with a surcharge of €0.102/kWh (14₵/kWh).
Wind, solar now close to on par with fossil fuel costs
Based on these calculations, currently wind, solar and hydro are the cheapest sources of electrical supply. According to a Nov, 2013 Fraunhofer ISE study, with innovation driving down production costs, actual costs for wind are now lower than coal and gas. Solar production costs are still higher than fossil sources but the ratio is expected to favour solar by 2030.
More generally, the impact of the German energy model on the country’s electricity mix has been that of pushing of gas-fired plants out of the market, and the lowering of load factors for both coal and gas-fired plants, expected to decline to 33% by 2015.
Taking into account the popularity of the German model throughout Europe and the influence of the European cap-and-trade scheme – The European Trading System (ETS – cap and trade system) – E.ON, one of Germany’s largest utilities, indicated it may close 11 gigawatts (GW) of fossil fuel capacity across Europe by 2015. In July 2013, EnBW, another German utility, announced plans to mothball 668 megawatts (MW) of fossil fuel production, involving 4 power facilities.
Lessons for Canada from Germany, European Cap and Trade
Germany’s achievements mean that it will be one of the most, if not the most, important contributor to achieving the EU-wide aggregated goal for a 20% reduction in GHG’s by 2020. (Note: to achieve the EU goal, member states have also taken on nation-specific targets related to national wealth for GHGs not covered by the EU ETS, such as the housing, agriculture, waste and transport sectors – sectors representing 60% of total EU emissions).
As Canadians contemplate the possibility of adopting some cap-and-trade scheme like Europe’s ETS, it is worth considering: 1) The degree to which the ETS has helped put EU nations on track for meeting their respective Kyoto targets; 2) the fact that it has become less influential in reducing carbon as the price of carbon has dropped considerably in recent years. Indeed the price of carbon declined from €13.09/tonne in 2010 to a new record low of €2.63/tonne in April 2013.
The European Commission has recommended backloading 900 carbon credits – that is temporarily removing them from the market. In July 2013, the European Parliament approved the measure, which now must be ratified by the European Energy Ministers.
For Germany’s part, the backloading details will largely be a funtion of the outcome of coalition government negotiations. The CDU wants backloading to be an integral part of a long term plan, while the SPD wants a onetime one-of solution.
Accordingly, the lesson for Canada here is that any cap and trade system that Canada sets up should include a mechanism for annual reviews of the supply and demand for emission credits to ensure no oversupply occurs that can drive down the price of credits.
As well, for select sectors which may have difficulty in complying with Canada’s cap-and-trade scheme, a loan guarantee program – with a maximum of one-loan/firm – may be in order.
When most people talk of China and its environmental and energy challenges, they tend to paint a very bleak picture. While this view is historically justified, things are changing fast in today’s China.
Criticism of China’s environmental record has been traditionally well-justified. After all, China: 1) displaced the US as the world’s largest energy consumer as of 2009 – doubling its energy consumption between 2000 and 2009; 2) produces the world’s highest pollution levels, with 16 of the top 20 most-polluted cities in the world being in China; and 3) now has total annual vehicle sales higher than that of the US.
[quote]China went from 1% of the global market for solar technologies in 2004 to 50% by 2012[/quote]
Add to this picture the fact that approximately 62% of China’s current electrical power generation is derived from thermal, mainly coal-fired, generating plants and much of China’s industrial pollution emanates from plants with dated technologies.
China invests hundred of billions in green economy
The flip side to this gloomy portrait is that China is actively migrating to a green economy, albeit in sometimes chaotic fashion. Indeed, in 2012, China had the highest level of investments in clean energy, totalling $67.7B – up 20% from 2011 due to a solar sector surge. The US was in a distant second place with $42.4B in clean energy investments in 2012.
With these sharp contradictions, one might be tempted to conclude that China is schizophrenic on environmental issues. However, that would be unfair because the trends are shifting in favour of clean technologies, supported with massive investments by the national government.
In fact, in 2009, China committed a staggering $223B to clean technologies, sustainable development-related R &D, energy efficiency and emissions and pollution control. In August 2012, it announced a new plan for $372B up to the year 2015.
Concurrent with the aforementioned investments, under the 2009 China Renewable Energy Law, China introduced: 1) a Feed-in-Tariff (FIT) for renewables (a fixed price paid above market prices for all renewable energy sources that sell into the grid), and 2) Right-to-Connect obligations that require all grid operators buy all of the renewable energy produced in their respective regions. (Note: the FIT and Right to Connect formula was conceived in Germany and has since been copied by 40 governments around the world, including Ontario, until that province abandoned the model in response to a WTO ruling over provisions requiring the use of locally-built technology to qualify for the program).
China’s renewable energy quota
Complementing the FIT and right to connect programs, in 2012, China began to implement a quota system for provinces and cities for the amount of their energy that must come from renewable sources.
Against this backdrop, China has become the world’s fastest growing wind energy market. With 13.2 gigawatts (GW) of new wind power capacity added in 2012, the total wind installed capacity reached 75.6 GW by the end of 2012. (To put this in a relative perspective, Quebec’s current total installed electricity production capacity, including Churchill Falls, is 44 GW). Projections are for over 16 GW of new installations in 2013 and 17 GW and 18 GW for 2014 and 2015 respectively. China’s unofficial target is 200 GW by 2020, but that may prove an underestimate.
Half million wind sector jobs by 2020
In terms of jobs in the wind energy sector, the projection is that from the 150,000 jobs in China’s wind sector in 2009, the numbers will rise to 500,000 jobs by 2020.
Unfortunately, in its haste to advance its wind and solar energy sectors – from the development of clean energy manufacturing capacity to the construction of wind and solar farms – China “forgot” to invest in corresponding increases in electricity transmission capacity. Consequently, Chinese electrical grids are not in place to handle all of its new renewable energy production capacity, so 20% of wind production capacity was not connected in 2012.
To remedy the situation, China will build 19 new ultra high voltage lines, but the first two lines will not be ready until 2014. One of these lines will be 2,000 km long.
China offers green economy to the world
In the interim, with the help of generous state financing from the Chinese Development Bank and other sources, China began dumping its manufacturing surplus of clean energy technologies on global markets.
With respect to tariffs and Europe, following sabre rattling to the tune of an 11.8% introductory tariff on Chinese solar imports, effective June 6, 2013, on August 6, the EU decided not to impose planned provisional tariffs averaging 47%.That is, a preliminary truce was worked out on prices and a maximum export volume. Notwithstanding this preliminary agreement, Europe is keeping its options open for new tariff decisions at a later time.
China captures 50% of global solar market, runs into trade wall
Regrettably, up until the aforementioned trade wars, China’s photovoltaic (PV) solar manufacturing sector was almost entirely dedicated to global markets – with hardly any domestic market to speak of. China went from 1% of the global market in 2004 to 50% by 2012 – that is, up to when US and European tariffs eliminated China’s price advantage.
The US and EU tariffs having brought China back to earth, China is now more focused on internal solutions to its temporary surplus in solar manufacturing capacity.
China looks inward for new solar market
One of these internal solutions comes in the form of PV solar energy targets to install 10 GW/year in the 2013-15 period –quite a sharp increase from the total installed PV solar capacity at the end of 2012 at 5 GW. To encourage the private sector to get into the act – 40% of PV projects are represented by private developers – the Chinese government is offering 50% tax breaks for utility scale projects for that period. As a result, when the figures are in for the year 2013, China will likely be the world’s largest solar market.
What this will mean in terms of job growth in China’s solar sector may not be known for a while, but it is worth noting that prior to the new policies and targets mentioned above, there were 300,000 jobs in the PV solar sector in 2011. Another 800,000 Chinese people were employed in the solar heating and cooling sector in that same year.
But since domestic market growth by itself would still not be sufficient to address the solar manufacturing overcapacity and declining overseas demand, China has introduced tax breaks and other measures to encourage Chinese solar manufacturing sector restructuring. With the cap on exports to Europe – the world’s largest solar market – China has blocked access of its small solar firms to European markets.
Wind, solar to eclipse coal?
Where does all this lead? Well, Bloomberg New Energy Finance (BNEF) projects that 50% of China’s electricity will come from wind and solar energy by 2030 – roughly equal to that of coal. A recent story published in the Common Sense Canadian suggested that coal production in China will peak in 2015. This may suggest that these BNEF projections are too conservative.
One indicator that these clean energy projections may be too conservative or, at least, not tell the whole story, is China’s own recognition that overarching policies are essential to bring all sectors of the economy on side. More precisely, in May 2013, China’s National Development and Reform Commission began a process to explore cap and trade options, aiming to have one in place by 2016.
China exploring cap and trade
The review of this option began in June 2013 with the first of seven pilot carbon trading schemes in Shenzhen. The plan calls for strict emissions, pollution and energy efficiency standards for the industrial sectors by 2016, backed by stiff penalties for non-compliance. To assist industry to achieve compliance, loans would be made available to firms to invest in clean technologies. According to BNEF, if the power sector is faced with a price on carbon, greenhouse gases in China would peak around 2023.
As to why Shenzhen was chosen for China’s first cap and trade pilot, it may well be because that city’s green leadership, particularly in the area of clean transportation alternatives. To this effect, the city of Shenzhen has established a target to have more than 3,000 electric taxis, 5,000 hybrid and 1,000 electric urban transit buses around by 2015. Moreover, by 2015, the city will ban all vehicles that fail to meet in advanced emission standards. Not bad for the city that ranks second to Beijing as having the most vehicles in mainland China.
Warren Buffet joins the party in Shenzen
The audacity of Shenzhen complements that of the Warren Buffet-backed BYD of Shenzhen, which:
has become a world leader in all electric buses
will introduce its e-buses to Canada through pilot projects with the Société de transport de l’Outaouais (STO in the Gatineau area) and Société de transport de Montréal (STM)
has introduced its e-buses in a pilot in Frankfurt Germany
built an e-bus and electric car manufacturing plant Sofia, Bulgaria, which began operations in February 2013
is building an e-bus and an Iron-Phosphate energy module (large-scale battery) manufacturing facility in California that will be operational in late 2013.
Canada missing out on green economy
Meanwhile, back in Canada, Stephen Harper continues to present economic development and sustainable development as two opposing policy paths. This is true only as long as all of Canada’s economic eggs are in the old economy and one turns a blind eye as to what’s happening by way of economic paradigm shifts in China, Europe and the US.
The Common Sense Canadian has made much of the Harper government’s promotion, facilitation and subsidization of big oil and the Clark government’s current LNG export fetish. The underlying messaging to Canadians in both cases is: support these projects or face economic and social armageddon.
What seems to get lost in the refrain is the vast business opportunity presented by “alternative energy”. Alternative energy in quotes because “alternative” is rapidly becoming a misnomer. What was alternative a decade ago is now mainstream and a viable job-creator. Often it’s just a matter of governmental emphasis, the stroke of a bureaucrat’s pen and entrepreneurial determination.
[quote]Microgrids promise to be a $3 billion industry in 2013 growing to more than $8 billion in 2020.[/quote]
One such opportunity lies in the application of technology to off-grid power systems which have been around forever and already number in the tens of thousands worldwide. Currently, these are powered primarily by diesel. What’s new is other systems using smart, far cleaner combustion technologies capable of reducing diesel consumption by as much as a third without any renewable generation. Even better, with renewable distributed energy generation (RDEG), relegating diesel to emergency or peak demand backup, for which it is ideally suited.
Developing nations will lead growth in electrical demand
The International Energy Agency (IEA) estimates that demand for electric power will double by 2020 in the developing world. This projected demand is substantially higher than projections for the industrialized world, representing 80% of total growth in electric production/consumption by the year 2035.
Industry leaders point to the majority of this new power being produced and distributed via remote microgrids which are ideally suited to the demand. As small-scale versions of the centralized, conventional grid we are more familiar with, they provide the benefits of reliability and flexibility. With extreme weather now business-as-usual, according to the Center for Research on the Epidemiology of Disasters, this is good news. Plus key technology now allows for increased security and widespread customer participation at the community level.
Microgrids promise to be a $3 billion industry in 2013 growing to more than $8 billion in 2020 – and that’s a conservative scenario. Along with the $8 billion in revenue will come a wide range of long-term jobs.
How can Canada plug into microgrid market?
So…how does Canada fit into this grand opportunity? A recent report by Navigant points to”twenty promising players (both established and newly entering ones) in the microgrid market” and a market where the “competitive landscape…presents a very interesting picture, where large number of small players has become a force to reckon with.
“While the bigger players including the utility and software giants are venturing into the market and have earned big projects. Some of the key players in the microgrid market include ZBB Energy Corporation (U.S.), Chevron Energy (U.S.), Siemens AG (Germany), Echelon Corporation (U.S.), Mera Gao Power (India), Spirae Inc (U.S.), GE Energy (U.S.), ABB Limited (Switzerland), Power Analytics Corporation (U.S.), Virdity Energy (U.S.), Pareto Energy, Ltd. (U.S.), and Microgrid Energy, LLC (U.S.) among others.”
We haven’t yet cracked this particular top twenty, but Canada does have program appropriately titled Canada’s Smart Grid, which: “will be a network of integrated Smart Microgrids: geographically compact units capable of running autonomously from the main grid. Each microgrid will be capable of load side management, peak-shaving, power conservation and integration of local renewable energy generation”. Clearly a joint government and private industry program as one can tell from the mind bobbling list of associate acronyms the NSERC Smart Microgrid Network (NSMG-Net) looks like a good start. There is a nascent industry here and remote towns and villages that can serve as microgrid development test beds.
So where is Canada? A shift in political will on energy, a few strokes of the pen at the provincial and federal level, a bit of entrepreneurial elbow grease, and jobs and economic opportunity will follow.
Both the Intergovernmental Panel and Climate Change and the International Energy Agency have concluded that public policies, rather than the availability of resources, are among the key determinants for a shift from fossil fuels to clean technology development and deployment. Public banks are critical agents for change along these lines.
Public financial institutions and the green economy around the world
Starting with some of the largest public banks, in July 2013, both the World Bank and the European Investment Bank announced that they will limit to the bare minimum investments in fossil fuel projects, while shifting the lion’s share of their respective energy investments to renewables.
The World Bank’s Jim Yong Kim – the first scientist to head the institution – said it is impossible to tackle poverty without dealing with the effects of a warmer world. “We need affordable energy to help end poverty and to build shared prosperity. We will also scale-up efforts to increase renewable energy and improve energy efficiency – according to countries’ needs and opportunities.”
Based on perspectives not very different from that of the World Bank, in July 2013, The European Investment Bank (EIB), in line with the current European Union climate policy, announced it will implement new lending criteria that skew heavily towards renewables and screen out nearly all coal and lignite plants.
The significance of the EIB shift is illustrated by the fact that the EIB invests, lends and leverages $13.2B/year for energy initiatives. The leveraging of EIB investments in turn fosters private financing, especially important for the capital-intensive offshore wind sector. Many offshore wind projects have benefited from the low cost EIB loans in recent years.
In the UK, the Green Investment Bank, headquartered in Glasgow, was created in 2012 with $3.6B (£3B) in initial capital to carry it through until 2015. Its mission is to respond to the specific financing challenges of commercial green infrastructure projects by tackling the finance gaps which remain despite the advent of new government policies. Like the EIB, this mission includes leveraging its investments to bring in other lenders and investors.
To raise additional capital, GIB’s capital base is, and will be, regularly reinforced with pollution permit proceeds and the newly announced carbon tax revenues. Beginning in the 2014-2015 period, bonds will be issued to raise additional capital.
In Germany, the state bank, kfw, is backing offshore wind development to the tune of $7.2B (5B€).
Meanwhile, the Chinese Development Bank (CDB) has been a key player in making China the world’s largest clean tech player. In 2012, total investments in renewables was $67.7B, compared to its closest rival, the US, with $56B in investments in that same year.
The CDB is a formidable player, especially because it appears to have no limits on the billions of dollars with which to work. About 2 years ago, the CDB committed a whopping $45B over 5 years to smart grid development and deployment. Smart grid platforms are the key to the massive integration of intermittent renewable energy production, such as energy from wind and solar sources, by storing surplus energy for redeployment as required.
More recently, the CDB provided Goldwind, a state-owned wind turbine manufacturer, with $6B to finance international business development. Similarly, Ming Yang, a smaller Chinese turbine manufacturer, acquired $5B from the CDB for loans and credit facilities between 2011 and 2015 to prepare for its entry into international markets.
This significant CDB support for China’s clean tech sectors has contributed to accusations of global clean tech dumping – specifically from the US and the European Union. Both the US and the EU have responded to the alleged dumping by imposing steep tariffs on imports of clean tech products from China.
By contrast, Canada has taken an opposite course by being oblivious to the problem of dumping of clean techs by China. To this effect, the proposed Canada-China trade deal stipulates that there will be no commercial barriers applied to environmental technologies. Evidently, the Harper regime is prepared to give China what it wants, in order for Canada to sell tar sands oil them. Either the Harper administration is unaware of the significance of China’s request, it simply does not care, or a combination of both!
Yet another innovative model for public financial institutions to support domestic clean tech manufacturing is that of Brazil’s Banco Nacional de Desenvolvimento Economico e Social. As of January, 2013, Banco Nacional requires that wind turbine manufacturers source 60% of components in Brazil and produce or assemble in Brazil at least 3 of the 4 main wind technology components – towers, blades, nacelles and hubs – between now and 2016. Under the Banco Nacional model, turbine makers have to meet the staggered manufacturing phases established by the bank, which will be stepped up every six months, until 2016.
Turning to the US, there the US Export-Import Bank, which represents 7 US government agencies, was created to finance renewable energy projects in emerging markets and, most important, to support the US clean tech industry with its requirement for 30% US content. India, one of the bank’s 9 key markets, accounted for approximately $7B of the its worldwide credit exposure as of the end of fiscal 2011. Another example of Ex-Im Bank loans was the $1B credit package to fund wind power development in the Mekong Delta, Vietnam, in collaboration with the Vietnam Development Bank.
Lastly, there is the pension fund green investment model, such as that established by Denmark’s Dong Energy. Dong is 75% owned by the Government of Denmark and is involved in 30% of all offshore wind projects in the world. Currently, Dong uses Danish pension funds for its financial activity in offshore wind projects in Denmark and partners with the Japanese trading firm Marubeni for equity financing for projects outside Denmark.
These government and pension fund connections have translated into Dong being a very special kind of energy investor in that 85% of its current portfolio is associated with fossil fuels and 15% renewables – but its mission is to reverse this ratio by 2040.
Canada falling behind
With the examples of the World Bank, the European Investment Bank China, the UK Green Investment Bank, Germany’s kfw, the Chinese Development Bank, the US’ Ex-Im Bank and Brazil’s Banco nacional, showing the way to the effect that publicly funded investment institutions can play critical roles in assuring a migration to renewables and clean techs, the question to raise in Canada is as follows: Why can’t Canada do similar things via the Business Development Bank of Canada (BDC) and Export Development Canada?
Indeed these Canadian investment vehicles offer excellent options for the financing the development of Canada’s clean tech sectors. The BDC, like the other institutions mentioned in this article, could leverage its venture capital funds to attract additional support from Canada’s private banks and financial cooperatives. What an excellent way to take on the challenge of reaching US equivalency with regard to 20% of venture capital activity in 2011 and 2012 going to clean tech sectors.
As well, the BDC could take a page from Brazil’s Banco Nacional de Desenvolvimento Economico e Social and include Canadian content requirements, thus assuring optimal benefits for Canadian economic development and job creation. It is conceivable that BDC-supported local economic development along these lines could fly under the radar of free trade agreements.
As for an approach for supporting Canadian exports of clean technologies, the models described like those of the Chinese Development Bank and the US Export-Import Bank, may be tough acts to follow, since these institutions have billions of dollars to work with. Nevertheless, the fact that the US Ex-Im Bank brings together 7 US national government organizations, suggests this US model could provide some insights for a made-in-Canada model. For example, if the Canadian International Development Agency would partner with Export Development Canada, the Government of Canada would be able to support the setting up of clean energy micro-grids in isolated communities without necessitating the prohibitively expensive land infrastructure connections to distant, centralized electricity generation plants.
Canada’s pension funds could also have a role to play, along the lines of Denmark’s partially pension-funded Dong Energy. There are Canadian precedents for major investments of pension funds in clean tech sectors. For instance, in February, 2013, the Caisse de dépôt et placement du Québec – the financial arm for Quebec’s pension fund – invested $757M to purchase half of Dong Energy’s 50% share in the world’s largest offshore wind energy project, the UK’s 850 MW London Array. Just prior to that, in January, the Caisse purchased $500M in shares of 11 Invenergy wind farms in the US and Canada, representing 1500 MW and including 2 wind projects in Canada, one of which is in Quebec.
This raises a second question: why can’t the Canada Pension Plan Investment Board (CPPIB) create a clean tech portfolio to optimize Canadian participation in one of the world’s fastest growing industries for job creation, the clean tech sector?
From my previous dealings with the CPPIB, I know that their answer is that their job is to get the maximum return for pensioners and, consequently, no particular preference is given for Canadian investments. This is faulty logic for 2 reasons.
First, it is not unusual for investment vehicles to be associated with more than one objective. Second, and most importantly, investments in growth sectors in Canada that offer high-paying jobs would bring additional revenues for the CPPIB in the form of greater contributions from both employers and employees – in addition to the traditional form of returns on investments. Indeed, from time-to-time, the Caisse has adopted priorities for investments in Quebec with similar motivations.
It can be done
In conclusion: 1) innovative clean technology roles for the BDC and EDC to support and leverage venture capital and finance exports and 2) the creation of a clean tech portfolio for the CPPIB, could both significantly help Canada catch up to its competitors in the global migration to the high-growth and high-job creation green economy, all while making good money in the process. Earnings from completed projects would in turn finance more projects. These are opportunities that make good sense for Canada to embrace.
As Jack Layton used to say, “Don’t let them tell you it can’t be done.”
Will Dubitsky worked for the Government of Canada on sustainable development policies, legislation, programs and clean tech innovation projects/consortia. He lives in Quebec.
With so many Canadians eagerly awaiting the end of the anti-democratic, unaccountable Harper regime, some seem to be inclined to support any alternative that may stand a chance for replacing the Cons in 2015, after the next federal election. But maybe we should take a pause to think this through just a little more. Canadian Idol Trudeau, though he hasn’t said that much so far, has already shown that he shares many of the policy positions of Harper. This is where things get scary.
With Duffy, Wallin, Wright and Harb making the news, it might seem that now is a good time to call attention to Trudeau not believing in a need for changing the Senate status quo. For Trudeau, it’s just a matter of choosing good Senators – that is to say, the Senate would be improved if Trudeau got to choose Liberal senators instead of Harper choosing Conservative ones. But these are merely small distractions from the frightening resemblances between Trudeau and Harper.
Indeed, there are extraordinary similarities between Harper and Trudeau on:
The Middle Class, Corporate Taxes, Health Care and Trade with China
Justin Trudeau claims to be a champion of the middle class. Sound good so far?
Well, never before in the history of Canada have inequalities between Canadians been more pronounced. Thanks to the corporate tax cuts initiated by the Liberals and accelerated by the Conservatives, those with power and money – especially the petroleum industry and the banks – are sitting on $600 billion in liquidity. The Conservatives tell us we must tighten our belts, that young people have to accept low wages and precarious jobs. Meanwhile, our cities are clogged for lack of investment in sustainable transit alternatives, etc., because the Conservatives tell us the cupboard is bare.
Yet, Justin Trudeau, self-proclaimed champion of the middle class, has said he will not raise corporate taxes. When push comes to shove, Liberals like Conservatives, always seem to cede to money and power.
Justin Trudeau thinks there are no money problems associated with health care, just management challenges. This position is necessary because Trudeau would lead a government short of revenues, thanks to the lowest corporate taxes among G8 nations! Conservatives couldn’t agree more. The Cons plan on cutting health care funding within 3 years. So much for caring about the middle class!
But there is much more middle class stuff that makes the celebrity Prince Trudeau a scary prospect. A case in point is Justin Trudeau favoured the sale of Nexen to state-controlled Chinese interests because he said it would pave the way to free trade with China, which would in turn pave the way to more prosperity for the middle class. The Conservatives have said the same thing. Yet the North American Free Trade Agreement has been around for a long time and middle class revenues/wages are stagnating or going down. The middle class is being hollowed out. The required fixes are internal/domestic.
Regarding the aforementioned, proposed Canada-China trade agreement, in response to massive dumping on global markets by China’s clean tech industry, the US has imposed trade tariffs running from 31% to 250% on solar tech imports from China, along with tariffs of 45% to 71% on imports of Chinese wind turbine towers; 2) the European Commission is considering tariffs averaging 47% on solar tech imports for China; and 3) Canada is the only country dumb enough to accept, under the proposed China-Canada agreement, a guaranteed exemption for environmental technologies from commercial barriers.
Guns: an integral part of Canadian culture
Justin Trudeau thinks that guns are an integral part of Canadian culture and that the gun registry was ineffective. Stephen Harper has similar views. This, despite the fact that the Canadian Association of Police Chiefs supported the gun registry as: 1) an effective tool for police in the line of duty; 2) regarding the development of evidence related to judicial proceedings.
Environment, submission to the fossil fuel Lobby, Tar Sands, Kinder Morgan and Keystone
Then there’s the matter of the environment. Trudeau and Harper say they favour sustainable development but the legacies of both of their parties suggest otherwise. Prior to their defeat, the Liberals had several climate change action plans. They all failed to do the job, because when you got down to the details, their plans were concessions to money and power. Jean Chrétien promised the petroleum industry that, in the event of a price on carbon, there would be a very affordable ceiling on the price of carbon. Stéphane Dion came out with his billions for a Climate Fund just before the Martin government was defeated, a fund that would have the government pay the largest emitters to reduce their respective emissions or invest in carbon offsets. In other words, the more one emits, the more the government would subsidize – a pay-the-polluter principle rather than the polluter pays. No wonder Canada’s emission levels spiked upwards during the Liberal reign!
Thanks to Conservatives’ narrow focus on accommodating the fossil fuel lobby, Canada is one of the rare developed nations that is not a full participant in one of the greatest job creation areas of our time, the clean tech sectors. China had 1.6 million jobs, and Germany 372,000 jobs in clean tech sectors in 2011. Today, there are over 500 wind tech manufacturing facilities in the US; wind energy was the largest source of new electrical power generation in the US in 2012; the US solar sector employed 119,000 Americans in 2012; and 20% of US venture capital activity in 2011 and 2012 went towards the US clean tech sectors. Yet Canada is barely participating in green economy and, the few advancements that are being made, are thanks to provincial policies
What can we expect from Trudeau on environmental matters? Don’t get your hopes up. Justin Trudeau has already ceded to power and money by being very vague on environmental matters so as not to offend anyone. Following the Jean Chrétien model, Boy King Trudeau supports the Keystone pipeline and the expansion of the Kinder Morgan pipeline to Vancouver (to export tar sands oil to Asia), while saying he is a champion of the environment – even though the emissions associated with tar sands-related production for these pipelines would negate any of the Trudeau’s nebulous motherhood notions of being on the side of the environment.
Poor Sense of Priorities: Pot Over the Lac-Mégantic Tragedy
More recently, Trudeau has shown his true colours on priorities, with the July 2013 refusal of both the Conservatives and Liberals to interrupt their summer break for the purpose of holding sessions of the Parliamentary committee on Transport to look into the Lac-Mégantic rail disaster that left an estimated 47 people dead. One doesn’t need to await the report of the Transportation Safety Board to figure out that the Transport Canada approval of the Montreal Maine and Atlantic Railway request to have only one person operate a train with 72 wagons of dangerous cargo was a stupid decision.
Former Transport Canada employees have said that, under the Harper regime, safety has taken a back seat to corporate profits. The odds of the tragedy ever happening with 2 people in charge of the train would have been very minimal. But Trudeau thinks the top message for the lazy, hazy days of summer is about legalizing pot. Glad to see he has got his priorities right.
Employment insurance
It was the Liberals who started gutting Employment Insurance and the Conservatives have merely followed through. Justin Trudeau must be counting on the short memory of Canadians.
Wrap-up
Wrapping up, juggling complex issues such as taxation fairness, equal opportunity and participation in the global migration to a green economy, health care, day care etc., requires well-thought-out, synergistic policies with real depth. But both Stephen Harper and Justin Trudeau prefer to operate in sound bites and clichés on such matters. Harper answers all tough questions with, “but it’s the economy.” As for Trudeau, he simply repeats his aforementioned mantra that he is for the middle class without any references as to what he would do now that income inequalities have reached an historic high and corporate tax revenues aren’t sufficient to do anything meaningful for the middle class.
Unfortunately, you won’t see much of the above-mentioned criticisms in the media. With very few exceptions, journalists are not interested in the policy details or comparative analyses. The majority of English newspapers in Canada are partisan and represent, first and foremost, corporate Canada, money and power. Canadians have been criticized by some journalists for falling for a superficial Justin Trudeau brand, but the reasons for this can, in part, be found in the lack of depth by the journalists making such criticisms.
Once again, the Liberals are presenting themselves as the best option to address their own poor legacy.
With Trudeau at the helm, Canada now has two Conservative parties.
Unlike Canada, Germany is a world-leader in renewable energy development
The real-life global competition over clean energy is growing increasingly intense, as countries around the world sense a huge economic opportunity and the opportunity for cleaner air, water, and a healthier planet.
– Former US Energy Secretary Steven Chu, May, 2012
The current Conservative government wants Canadians to believe that economic development and sustainable development are opposing forces. Consequently, Conservatives see their Bills C-38 and C-45, with draconian anti-environmental components, as justified. Nothing could be further from the truth.
First, the clean tech is among the globe’s fastest growing and highest job-creating sectors. In 2012, global investments in renewable energy amounted to $268.7B – down from $302.3B in 2011 due to decline in prices and costs, policy uncertainty in the US, and European economic woes.
China led the way with $67.7B in clean energy investments in 2012, an increase of 20% over the previous year, due to a surge in its solar tech sector. Investments in 2012 for the US, Japan and Germany were $42.2B, $16.3B and $22.8B respectively.
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On jobs, the employment to date in these sectors that only a few years ago were nascent sectors are extraordinary. The total global numbers of jobs in 2011 in clean energy sectors were 5M with China, once again leading the way with 1.6M, followed by Europe with 1.1M and Germany and India with 372,000 and 350,000 respectively.
Canada, as a result of the absence of adequate federal support for being a full participant in this growth misses out on job opportunities by the 1000’s every year and the gap between Canada and other developed nations grows yearly.
For a sense of lost employment opportunities for Canadians, the November 2012 report of BlueGreen Canada, an organization that represents unions and environmentalists, indicated that if the $1.3B in subsidies allocated to the oil and gas sector which currently supports 2,300 jobs were to be transferred to renewable energy, energy efficiency and public transit, this same amount of money would create 18,000-20,000 jobs in clean energy sectors – 6 to 8 times more jobs per investment unit.
Behind the aforementioned growth figures lies the fact that the point of departure for much of this leadership by other nations is government support for innovation. Specifically, innovation leads to product development and ultimately manufacturing jobs. However, the Conservative Budget 2013-2014, for the first time in over 40 years, did not assign any financing for clean tech innovation – zero!
To catch up, Canada’s requires a highly aggressive climate change action plan that includes substantive fiscal, legislative, program and research components for immediate implementation after the next federal election in 2015. Put another way, Canada’s catching up to the rest of the world should not focus principally a dependency on clean tech imports and the sacrificing of the potential for domestic clean tech innovation and manufacturing in Canada.
China
In 2009, China became the largest single energy consumer in the world, putting the US in second place. But, since then, China has also become the largest clean energy market in the world and a leader in the manufacturing of clean technologies for both domestic and international markets.
While thermal coal-fired generating plants continued to dominate new installations of electrical power generation, with 50.7 GW in 2012, wind energy came in second with a record 13.2 GW added. Total 2012 installed wind capacity was 67.7 GW and the installed projections are for 2020 are 200 GW. (Note, for comparative purposes, Quebec’s total electricity capacity is 37 GW, not including Churchill).
From the 150,000 jobs in the Chinese wind sector in 2009, the projections for 2020 in this sector are 500,000 jobs.
With respect to solar energy, there are 14 GW in the pipeline. China had 300,000 people who worked in the photovoltaic sector and 800,000 employed in solar heating/cooling in 2011. Projections for total installed solar capacity for 2020 are on the order of 50 GW.
The United States
The US is the second largest clean tech market and, consequently, its energy portrait is changing rapidly. Wind was the largest new source of electrical power generation in 2012 with 13.1 GW of new installations, bringing the total US installed capacity to 60 GW.
This US migration to a green economy was kick-started with the American Recovery and Reinvestment Act (ARRA), which pumped $70B into the green economy – including major investments in innovation – during the 2009 to 2011 period, the first half of the first Obama mandate. Grants, tax credits loans, loan guarantees and investments in research were among the principle mechanisms applied during the 2009-2011 period. Republicans have since put the brakes on this; nevertheless, a strong momentum has been established.
There are about 75,000 people working in the US wind sector and over 500 facilities manufacturing turbine components. There were about 119,000 jobs in the US solar in 2012, a 13% increase over 2011 and the biomass and geothermal sectors provided 152,000 and 10,000 jobs respectively in 2011. When one adds the sum of the various parts of the renewable energy sectors, renewable energy capacity in the US doubled in the 5 years from 2008 to 2012.
Meanwhile, in parallel, between 2007 and 2012, oil consumption as a percentage of total US energy consumption dropped from 39.3% to 36.7%. As well, the consumption of coal has dropped from 22.5% of total US energy consumption in 2007 to 18.1% in 2012.
The impacts of the above-mentioned factors combined with investments in energy efficiency by power utilities and improved average fuel consumption of US vehicles, have resulted in a 13% drop in US CO2 emissions from 2007 to 2012.
In his late June 2013 statement on new actions on climate Change, President Obama announced an objective of a reduction of 3B metric tons by 2030. Unfortunately, the new support proposed for clean energy in his pronouncements was very modest.
The good news is that President Obama announced that the process for approving clean energy production and distribution on federal lands would be accelerated. This is good because federal lands represent 20% of the US continental land mass. The bad news is the June 2013 proposals are in effect an accelerated version a Department of the Interior mandate assigned during the ARRA 2009-2011 period. No details have been provided as to the nature of initiatives to speed up DOI approvals.
Disappointing in the June 2013 action plan, is the lion’s share of new funding, $8B, is to be allocated to technologies to reduce fossil fuel emissions, in particular to support carbon capture and storage technologies (CCS). CCS technologies are prohibitively expensive and consume enormous amounts of energy while only offering modest carbon reduction.
Short time line extensions from the ARRA days are 1) the Investment Tax Credit of 30% on investments, primarily applied for the construction of solar farms and 2) the Production Tax Credit of 2.2 cents/kWh used mainly by wind farm developers.
Europe
In Europe, renewable energy represented 69% of new electrical power capacity installed in 2012 while the oil, coal and nuclear sectors experienced negative growth.
There were 11.6 GW of wind power installed in 2012, bringing the total installed capacity in 2012 to 105.6 GW. Wind is expected to reach 136.5 GW by 2014 and 230 GW of installed capacity by 2020.
Solar installations surpassed wind in 2012 with 21 GW of installations, representing one quarter of 2012 global solar installations in that year.
This rapid growth of the European renewable sectors is generating equally rapid employment growth. From 192,000 jobs in Europe’s wind sector in 2009, the European Wind Energy Association (EWEA) is predicting 280,000 jobs in 2015 and 450,000 by 2020. So quickly is the industry growing that despite the exceptionally high unemployment in many parts of Europe, the EWEA estimates that the industry will experience a skilled labour shortage of 5500 jobs/year.
Germany is a leader among European nations with about 372,000 jobs in its renewable energy sectors for the year 2011. That’s bigger than the German auto industry. By 2020, the projections are for 400,000 to 500,000 employed in the renewable sectors.
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In parallel, Germany’s nuclear sector is on the way out – a consequence of the Fukushima crisis. Germany has shut down 8 of its nuclear plants and intends to shut down the remaining 9 by 2022.
Germany’s installed wind capacity was 31.3 GW in 2012, representing 30% of the European Union total. Its installed capacity of solar energy in 2012 reached 32 GW, making it the second largest solar market in the world after China. With respect to its renewables targets for the percentage of total energy consumption by 2020 (including the transportation sector), Germany has a higher target than the 20% target of the European Union. Germany is going for 35% and offshore wind will play a major role in pursuing this target. To this end, the German development bank, kfw will be backing offshore wind development with $7.2B (€5B) in financing.
Conclusion
The US, Europe, China and other developed nations are well-engaged in the migration to a green economy – from supporting domestic innovation; to the construction of green technology manufacturing plants; to the development of clean energy production sites; and more generally, to the expansion of national and international markets.
These developments continue to give rise to the creation of jobs by the thousands in most regions of the developed world – with the exception of Canada. They also offer hope for developing countries, where more than 50% of the global potential for renewable energy power production exists.
Conversely, all the evidence indicates that the old model – the fossil fuel-based economy – no longer makes sense. The old model not only requires massive dependencies on importing energy and the resulting exportation and concentration of energy wealth, but it is also not good for the planet. Surely a healthy economy cannot exist in a planet that cannot sustain healthy life.
For at least the next 2 and a half years, until the federal election of 2015, Canada will largely miss out on the global green economy opportunities, both in terms of spreading the energy-related wealth across the country and in terms of green technology market possibilities, domestic and export markets alike.
Perhaps more importantly, under the present circumstances, Canadian innovation capabilities cannot be adequately supported to keep pace with the rest of the world and ultimately offer Canada high-job creating manufacturing and export opportunities.
In a recent special report on renewables to the United Nations, the International Panel on Climate Change concluded that public policies, rather than the availability of the resource, are the key determinants regarding expansion or constraints to renewable energy development/deployment. In its June 2013 report, the International Energy Agency came to similar conclusions and added that uncertainty about renewable policies may hamper investment and growth.
In other words, the extent to which nations benefit from the high job-creating clean tech sectors, while reducing emissions, is a matter of political will. There certainly are no lack of possibilities for those who choose to be a part of the solution, in light of the fact that less than 2.5% of the globally available technical potential for renewables is currently exploited – leaving over 97 % untapped.
Indeed, the technical potential of renewable energy technologies exceeds the current global energy demand by a considerable amount. Meanwhile, the prices of clean technologies have declined considerably.
Last month’s announcement by Stephen Harper of EcoEnergy Innovation Initiative recipients and other Government of Canada investments in clean tech provided an excellent example of false and misleading information coming straight from the Prime Minister’s Office.
First, the EcoEnergy Innovation Initiative call for statements of interest came in the form of regional launches across Canada in September 2011. The deadline for submissions of statements of interest for one part of the program was just two weeks after the launches, the second part in mid-October 2011.
While those who have had their projects approved were advised to this effect 2 years ago, the Prime Minister made the official announcementof approved projects on May 3, 2013, to purposely mislead the public to the effect that the government is doing something now. But there is no new funding for clean tech innovation in 2013-2014 – zero!
Note, as well, that 30% of the EcoEnergy Innovation Initiative funding awarded — $24.942M out of the total $82M — went to carbon capture and storage (CCS) technologies, the greenwashing technologies to make it appear that the fossil fuel industry has the environment at heart. Also, $8.826M, or 11% of all funding, went to tar sands projects.
As for the merits of CCS, according to this article from La Presse: 1) one third of the energy produced by a pilot CCS application to a coal-fired generating unit of the Boundary Dam facility in Saskatchewan is necessary to run the CCS component; 2) TransAlta, despite $800M in funding from Ottawa, abandoned its CCS project in Pioneer, Alberta.
Further on recent investments in clean tech, note that:
1) Sustainable Development Technology Canada, which averaged $56.4M/year in investments in clean tech innovation in the past, was allocated in the last Budget only $1M for 2013-2014 and $12M for 2014-2015;.
2) Obama recently announced an increase in clean tech research funding by 30% to reach $7.9B and an acceleration of the permitting approval process for renewable energy production and distribution projects on federal lands – federal lands make up 20% of the continental US land mass;
3) in August 2012, the Government of China announced financial commitments up to the year 2015 in the amount of $372B for emissions and pollution reductions and energy efficiency. http://www.ibtimes.com/china-spend-372-billion-reduce-pollution-encourage-energy-efficiency-759575 This complements the $67.7B in investments in clean techs in China for the year 2012; and
4) the global totals for clean tech investments in 2011 and 2012 respectively were $302.3B and $268.7B, the drop in investments in 2012 in part a reflection of the decline in clean tech prices, policy uncertainty in the US and European economic woes.
Will Dubitsky worked for the Government of Canada on sustainable development policies, legislation, programs and clean tech innovation projects/consortia. He lives in Quebec.
Canada is shooting itself in the foot with the China-Canada trade agreement – the Foreign Investment Promotion and Protection Act (FIPPA). Specifically, a little known stipulation in the China-Canada trade agreement risks torpedoing the development of Canadian clean energy technology sectors. This stipulation calls for no commercial barriers on environmental technologies. Why is this dangerous?
Well, with Canada’s clean tech sectors still very much in an embryonic stage, FIPPA, as it presently stands, would impose severe limitations on Canada’s potential participation in the phenomenal growth of global clean technology sectors, because of the massive and highly subsidized dumping of Chinese clean technologies on global markets.
More precisely, while the 1) US response to this dumping has been to impose trade tariffs, running from 31% to 250% on solar tech imports from China, along with tariffs of 45% to 71% on imports of Chinese wind turbine towers; and 2) the European Commission in June 2013 announced provisional tariffs on imports of Chinese solar products, ranging from 37.3% to 58.7%. Canada is the only country dumb enough to accept, via FIPPA, a guaranteed exemption for environmental technologies from commercial barriers.
In the US, the action taken by the US Dept. of Commerce in Fall 2012 followed 1) the bankruptcies of 4 US solar firms; 2) complaints filed by The Coalition for American Solar Manufacturing (CASM), representing 11,000 US workers and 150 US companies; and 3) complaints filed by the US Wind Tower Trade Coalition, representing 4 US wind tower manufacturers.
With 119,000 jobs in the US solar sector in 2012 – a 13.2% increase over 2011 – and 75,000 in the US wind sector in 2011, the US wanted to take swift action to address unfair trade practices affecting sectors experiencing solid growth in these difficult economic times.
In Europe, the European Commission (EC) took action on complaints from EU ProSun, a group representing 20 EU solar companies and the majority of European solar industrial capacity. In May 2013, the EC issued a “warning shot” by indicating it might open fair trade probes into Chinese mobile telecom equipment and in June 2013 the EC announced provisional tariffs on solar imports from China, stating that the dumping by China’s solar firms “caused thousands of Europeans to lose their jobs, and 60 European factory closures of which 30 were in Germany alone”.
For Europe, the job stakes are especially high in that its clean tech sectors represented 1.1 million jobs in 2011 – with 372,000 jobs in Germany alone. In effect, “illegal dumping” below the cost of production allowed China to capture more than 80% of the EU solar energy market “from virtually zero” only a few years ago.
Accordingly, beginning on June 6, 2013, the EC tariffs came into effect at a reduced rate of 11.8% for 2 months with the game plan being that, in the event of failed negotiations with China, the full provisional rate would be ramped up to an average of 47.6%, with the high end at 67.9% for the next 4 months. Subsequently, the EC would decide as to whether it would make the tariffs permanent.
In parallel, BSW, Germany’s solar trade association, is reviewing a trade case against China.
Notwithstanding Europe’s sabre rattling, it appears that the majority of European nations, Germany in particular, would prefer a negotiated settlement over trade wars.
China, for its part, initiated its counter-offensive, in July 2012, when it launched WTO anti-dumping and anti-subsidy investigations into allegedly unfair, low-priced US and South Korean polysilicon exports to China. Polysilicon is a key raw material for solar panels and 44% of the polysilicon used by Chinese solar manufacturers comes from the US.
Moreover, China registered a complaint with the WTO to the effect that $7.3B worth of Chinese renewable energy products have been subject to US tariffs in recent years, contrary to WTO rules. China also launched its own probe into subsidies of 4 US states and found they violate WTO rules.
The irony in all this is that, largely due to US polysilicon exports to China, the US had a $1.6B clean tech trade surplus with China in 2011. Specifically, when polysilicon, PV production machines and solar materials are factored in, the US held a $913M solar trade surplus over China in 2011.
Regarding China’s response to the EC’s June 2013 tariff initiatives, China’s polysilicon producers have called on Beijing to launch an anti-dumping investigation into European polysilicon imports, and urged Beijing to retaliate.
To add some colour to China’s sabre rattling, it has also indicated it would investigate the dumping of European wines in China. China did, however, acknowledge that Europe provided for a 2 month period of reduced tariffs.
Over the long run, however, Chinese manufacturers will likely to have an advantage in trade wars because of generous, cheap financing, lower production costs, scales of production which lower total costs, and an ability to refine silicon, make wafers and cells and build modules, as well as, or better than, any other group of manufacturers.
