Nova Scotia and Britain has plannedto slash renewable energy funding amidst fears that renewable energy projects have been pushing up electricity prices.
In early August, Nova Scotia said it will end its “community feed-in-tariff” program, which paid high prices for power generated by local renewable projects – most of which were wind turbines. Declaring Comfit a success in getting individuals to invest in small-scale community projects, the government said adding more capacity would “negatively impact rates.”
At the end of August, Britain’s Department of Energy and Climate Change made a similar announcement, saying it is proposing an end to its feed-in-tariff for small-scale renewables early next year. It too was a success, the government said, but “costs exceeded our projections” and action had to be taken to “limit the effects on consumers who ultimately pay for renewable energy subsidies.” Most of the British projects under the program involved solar panels.
In an era when governments are increasingly under pressure to trim greenhouse gas emissions and to embrace the new economy of renewable energy, cutting these kinds of supports may seem counterproductive. But they mark an increased sensitivity to consumer concerns over electricity price increases.
Warren Mabee, a geography professor at Queen’s University in Kingston, said the changes in Nova Scotia and Britain are mostly driven by the desire of governments to manage electricity costs. The subsidy programs were set up as a way to kick-start renewable energy generation, he said, and were designed to be so attractive that many individuals and organizations jumped in to take advantage of them. “The downside is that they are costly on a per-kilowatt basis and are arguably less able to keep costs down compared to industrial-scale solar or wind, which has successfully moved towards much cheaper generation,” Mr. Mabee said.
But lawyer Thomas Timmins, who heads Gowlings’ global renewable-energy practice group, said the rise in electricity prices in most jurisdictions has little to do with subsidies for green energy. “There is a lot of mythology surrounding renewable energy procurement and the cost of power,” he said. “But the fact is that modern-day procurement of renewable energy doesn’t have a material impact on power prices.”
Other costs, such as building new power lines and upgrading old power plants, are far greater contributors to electricity prices, which have not actually risen much on a global basis, he said.
Still, Mr. Timmins said, with solar and wind power getting close to “grid parity” – meaning their costs are similar to other forms of power generation – there is less incentive for governments to provide subsidies to individuals, investors or larger developers.
In Ontario, the government has maintained a feed-in-tariff-based subsidy program for the smallest renewable projects, but eliminated it for larger ones.