Tariffs ‘Distort’ Renewable Energy Market, Alberta Minister Says

Feed-in tariffs, incentives that have helped drive renewable energy development in Germany, the U.K. and more than 40 other nations, “distort” markets and there are no plans to use them in Alberta, the Canadian province’s energy minister said.

“We do not support feed-in tariffs,” which offer above- market rates for power generated from renewable sources, Ronald Liepert said in an interview in Calgary. “It’s clear that when you start going the route of feed-in tariffs, you start to distort the market.”

Feed-in tariffs have been used for more than a decade in much of Europe to promote the development of renewable energy and have helped make Germany the world’s largest producer of solar power. Electricity and heat generated from sunshine, wind and biofuels must compete on price with fossil fuels, without government incentives, Liepert said.

“It just isn’t economic yet,” he said yesterday. “It has to get to the point to where it can compete. But if someone wants to come into Alberta and put up the capital for solar, wind, whatever, they’re welcome to do that.”

A feed-in tariff program “can cost a lot or a little, relative to the underlying cost of generation from any technology,” said Nathaniel Bullard, a policy analyst at Bloomberg New Energy Finance in San Francisco.

“In recent years, Germany has successfully drawn down the levels of its feed-in tariffs in line with decreasing fundamental costs for systems,” he said. “The biggest challenge in setting feed-in tariff rates is that rates are set on a legislative timeline, while fundamental costs change on the market’s timeline.”

National Energy Policy

Alberta is home to the world’s third-largest reserves of crude in addition to coal and natural gas, and has almost 1 gigawatt of installed wind-power capacity, the most in Canada.

The western province is also working with other Canadian regions and the federal government to craft a national energy policy. Ontario, the nation’s most populous province, is the only one that has a large-scale feed-in tariff policy.

Canada’s energy plan will involve coordinating policies on energy consumption, transmission and eventually carbon emissions, Liepert said. Canada has committed to reducing carbon dioxide emissions by 17 percent by 2020 from 2005 levels, in line with a target set by U.S. climate change negotiators at United Nations talks.

“There is no way you can develop energy policy without environment being intertwined,” Liepert said. “Maybe even a year from now or two years from now I can envision this being a joint energy and environment initiative.”

Cap-and-Trade

A system of cap-and-trade, which limits the total emissions of greenhouse gases and allows emitters to trade permits to pollute, has “fallen off the back burner” in the U.S. A tax on carbon has “worked well” in Alberta, where large emitters are charged C$15 ($15.58) a ton. The money goes into a fund to support clean energy technology.

Taxes on carbon may be a solution for a federal energy strategy, Liepert said. “There’s no reason why we can’t pursue that at a national level.”

To contact the reporter on this story: Jeremy van Loon in Calgary at jvanloon@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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