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Ian MacLellan has a message when it comes to renewable energy: “Canada needs to get with the program.” MacLellan is the founder and chief technology officer of ARISE Technologies, which manufactures 35 megawatts worth of solar cells each year. The company is not producing cells anywhere near its home in Waterloo, Ont., however; instead it is doing so in Bischofswerda, a town in eastern Germany. The transatlantic flights may not be the most pleasant experience for MacLellan, but he had little choice when it came to deciding where to locate ARISE’s first factory. “Germany is where the action is,” he says. “Canada continues to fall further and further behind in renewable energy.”
Others in the industry have similar stories. When it comes to building a renewable energy industry, Canada is simply not really a go-to destination. That’s not to say there is no appetite domestically or that federal and provincial governments are ignoring the issue. Canada actually scores fairly high on the Ernst & Young renewable energy country attractiveness index, a ranking of nations based on the climate for clean power investment. The most recent edition, released in August, places Canada eighth out of 25, where it has more or less remained for the past two years. “Canada could move up if it was more aggressive,” says Jonathan Johns, head of renewable energy at Ernst & Young in London. Meanwhile, Germany, Spain and the U.K. have positioned themselves as leaders by attracting investment.
Subsidies for wind and solar power are marginal in Canada, and virtually non-existent for wave, geothermal, and biomass energy. The main funding mechanism at the federal level is the ecoEnergy program, which provides a 1¢-per-kilowatt-hour subsidy for renewable energy. The initiative is set to expire in 2011 and is already close to using up its $1.48-billion budget. That’s in part driving Canadians to find more business abroad than at home. International success is generally something to be lauded, but in this case it means Canada is missing out not only on the environmental benefits, but also on job creation and the chance to become an exporter of renewable-energy technology. “One of my frustrations is certain politicians feel that if you do what’s right for the environment, you’ll hurt the economy,” MacLellan says. “What I’m seeing first-hand is that if you do what’s right for the environment, you’ll create thousands of jobs.”
John MacDonald, co-founder of solar module manufacturer Day4 Energy in Burnaby, B.C., a fledging company that went public in a $100 million IPO last year, echoes that sentiment. “Renewable energy will be the future of energy,” he says. “There is always tons of money to be made when fundamental things change.” Canada has to make major policy changes to fully cash in.
If there is a world leader in renewable energy development, then Germany is probably close to the top of the list. The German government made a serious push for alternative energy in 2000, when it implemented the Renewable Energy Sources Act. (The German acronym is EEG.) The program uses what’s called a feed-in tariff, a guarantee that any company producing renewable electricity can distribute it on the grid, and utilities will buy the power at a premium. The increased price allows producers to turn a profit, and the feed-in tariff is guaranteed for 20 years, ensuring a long-term market. The subsidy also decreases incrementally each year, forcing producers to increase efficiency and reduce costs.
“We did not even need to increase any taxes,” says David Wortmann of Invest in Germany, a government organization that aims to attract business to the country. Instead, the utilities pass on the price to consumers. That obviously results in higher electricity bills, but not significantly so — the average household in Germany pays an additional €2.50 for renewable power. As Wortmann puts it, “This is less than a pint of beer.” (Germans already pay about twice as much for electricity as Canadians, however.)
Solar and wind power developers have flocked to Germany largely as a result of the feed-in tariff. The photovoltaics sector alone generated €5.7 billion in revenue last year, and the country now employs about 250,000 people in alternative energy. Many of the facilities are located in eastern Germany, an area that has traditionally had high unemployment but is now experiencing a rebirth as a hub for renewable energy manufacturing. About 15% of Germany’s electricity production is renewable (the comparable Canadian figure: 4%), and the country has ambitious goals. By 2020, it plans to boost its share of renewable electricity to 30%.
Germany isn’t the only country to implement a feed-in tariff. Denmark generates about 20% of its electricity from wind, in part due to a feed-in tariff, and Spain is following Germany’s example, making an aggressive push for solar power.
Job creation may have been a significant motivator for the Germans, but they also acted out of necessity. The country is virtually devoid of natural resources, so financing ways to develop energy domestically only makes sense for its long-term security. That partly explains why Canada has been slow to move: there simply hasn’t been much reason to. The country is blessed with an abundance of natural resources — nearly 60% of its electricity is generated by hydropower. The environment is an increasing concern — but not enough to prompt the kind of action seen in Europe — and energy security is barely on the radar.
While Canada plods along, Germany is busy building an industry and attracting companies by using more than just a feed-in tariff. Invest in Germany (though not entirely focused on alternative energy) has offices around the world and actively lures companies. That’s how ARISE Technologies ended up with a factory in Bischofswerda.
MacLellan was approached by representatives from Invest in Germany at a solar energy industry conference in 2006. “They basically said, ‘If you build your factory in Germany, we’ll give you half the money,’” MacLellan recalls. That amounted to around €24.5 million. MacLellan refers to Invest in Germany as a “one-stop shop” that provided advice, connected the company with banks, engineering and construction firms, and took him to visit approximately 20 different potential sites for the company’s factory. “They even booked my hotels and arranged my car rentals,” he says.
Locating in Germany also allowed ARISE to tap into a network of talented and experienced partners. The construction firm ARISE hired had built similar plants before, and the Canadian company would have been hard-pressed to find a plant manager with the same level of experience as the one hired in Germany. And then of course there’s the huge market in Europe.
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