Challenges and opportunities

In recent years, growing environmental concerns in society and technology improvements have encouraged the growth of Canada’s emerging renewable energy industry. Future growth of the industry will be shaped by different challenges and opportunities:

• wind and solar: intermittent sources of supply
  Wind and solar are intermittent resources, providing electricity only when the winds are blowing or the sun is shining. Wind turbines installed at windy sites, for example, operate at between 25 to 35 per cent of full capacity. In comparison, coal-fired power plants usually operate at an average of 75 to 85 per cent of full capacity. This intermittent nature means that renewable energy is not a solution to all our energy needs and must play a supporting role in the larger energy mix.
  
  
• renewable part of energy mix expected to grow
  Hydroelectricity has long been a major source of electricity production in Canada. This is expected to continue. According to Natural Resource Canada forecasts, hydro power’s share of Canada’s electricity generation will hold steady, but will drop slightly from 62 per cent in 1995 to 57 per cent by 2020. Other non-hydro renewable sources — such as wind, biomass and geothermal — will continue to grow, from under one per cent to about three per cent of the generation mix over the same period.
  
  
• decreasing cost of renewable energy
  The costs of renewable sources such as wind energy are approaching economic levels. With improved technology and manufacturing procedures, the cost of generating electricity from wind power has dropped to less than seven cents per kilowatt-hour in U.S. dollars, compared to four to six cents per kilowatt-hour to run a new coal or natural gas power plant. Prices for generating wind power are expected to drop even further over the next decade.
  
  
• new economic incentives needed
  In the last two decades, improvements in wind turbine design and technology have reduced the costs of wind power by more than half. Still, the growth of wind energy in Canada remains limited. This is due, in large part, to the presence of abundant, low-cost, competing sources of conventional electricity supply in Canada. Renewable energy developers argue that new government economic incentives and policies are needed to stimulate more consumer and supply interest in renewable energy sources over the long term. In the case of geothermal heat pumps, low-interest loans (like those available in Manitoba) could help offset the higher initial cost of installation and then could be paid off from the savings in lower annual energy bills.
  
  
• fossil fuels: still essential to electricity system
  As consumer demand for electricity grows, the need to build new generation capacity raises important questions about our different energy options. Alternative forms of energy such as fuel cells are being developed but are not commercially ready. The costs of renewable sources such as wind energy and photovoltaics are approaching economic levels. And while concern about the environment has heightened, it could still be decades before renewable energy options reach critical mass. Much of the renewable industry’s future will depend on improving economics. For example, it costs about 2.5 cents per kilowatt-hour to generate power from coal or gas. That compares with just under four cents per kilowatt hour for wind power (down from 10 cents a decade ago) and roughly 25 cents per kilowatt-hour for solar power (down from one dollar per kilowatt-hour in 1980). As a result, fossil fuel sources, such as oil, coal and natural gas, are expected to remain the backbone of our electricity system at least for the foreseeable future.