By Rikki Stancich in Paris

With almost 1,100 MW of installed wind power capacity, Ontario is Canada’s leading province for wind energy. But a generous feed-in tariff system combined with the staggering offshore wind potential of the Great Lakes - fit to rival the UK’s Round 3  - will undoubtedly position Ontario as a renewable energy goliath in coming years.

WindEnergyUpdate catches up with John Kourtoff, CEO of Trillium Power Wind Corporation to learn about key factors influencing renewables investment in Canada and the progress of Ontario’s FiT programme.

WindEnergyUpdate: What progress on project applications for large-scale wind projects has been made since the introduction of Ontario’s FiT?

John Kourtoff: The FiT progress has been excellent. What people don’t realize is that Ontario is an awakening renewable energy giant.

Ontario has learned from the best systems from Europe and elsewhere, we’ve improved upon them and set the bar even higher. Ontario is the first jurisdiction anywhere in the World to mandate 6 months for the regulatory permitting system. The average timescale for the permitting process in Europe is 42 months.

So far there are planning applications for around 20,790MW. This is impressive when compared to the UK’s Round 3, which involves 32,000MW.

WindEnergyUpdate: When it comes to the build out of offshore wind on the Great Lakes, does Ontario face similar problems such as a skills shortage, vessel shortages and other supply gaps? 

John Kourtoff: Yes and no.

We have tremendous harbors and staging areas, so onshore assembly shouldn’t be as much of a problem or bottleneck.

With regards to vessels, in Canada there are laws that designate a preference for Canadian built vessels between ports in The Great Lakes, However, we do not have a strict law such as the US Jones Maritime Act.

In Canada, foreign-owned vessels are allowed, so long as they can get through the locks of St. Lawrence and pay a fee to the Canadian Government.

Trillium Power is looking to build some of its vessels in The Great Lakes and will be looking to rent or lease other support vessels from elsewhere, such as Europe. Naturally, these vessels must be able to navigate the lock system of The Great Lakes, which requires a beam of 23.2m or less.

Ontario has no oil and gas industry from which to learn, however, we do have some very good quality ship building capability.

Trillium Power has partnered with the First Nations Technical Institute (FNTI) and St. Lawrence College to initiate training for offshore construction, operations & maintenance.

The FNTI is a tremendous partner and we are very pleased to be working with them and the Mohawk community. I am confident that the general resources are available and that it is just a matter of putting all the pieces into place.

WindEnergyUpdate: You mentioned late last year that Canada’s capital markets for early stage finance had not evolved sufficiently to reflect the potential of Ontario’s recent policy changes. Has there been any change since then?

John Kourtoff: Generally, Canadian capital pools have been slow to come to the table and realize the significant positive transformation in Ontario. Recently, CIBC, the fifth-largest Canadian bank formed an internal investment team to focus on green energy and clean technology markets so things are changing here, albeit slowly. This is providing good opportunities for international investors that are already familiar with offshore wind development financing.

Federal tax incentives to invest in renewable energy are still very limited in Canada to incentivize high net-worth investors. There is a CRCE flow-through credit (Canadian Renewable Conservation Expense) available but not much else at this time.

The CRCE flow-through tax incentive is extremely small when compared to the enormous number and size of subsidies available for the oil and gas industries and the direct financial support provided to the Canadian nuclear industry in addition to insurance on nuclear installations being backed by the Canadian taxpayers and not the nuclear operators.

These, and other, hidden subsidies for oil, natural gas and nuclear electricity generation hides the true cost of electricity generation from these sources from the taxpayers and ratepayers. 

We remain hopeful that the Canadian Government will soon begin to view renewable energy development in Ontario – especially offshore wind – as potentially important to the Ontario economy as the oil and gas sector is for Alberta and then begin to shape policies to reflect that reality.

Fortunately, elsewhere in the world, such as in the Middle East, Asia and Europe, investors are looking for quality ‘AAA’ jurisdictions to invest their funds, of which there are relatively few. Ontario is one of the few jurisdictions that meet all of the criteria required by investors.

WindEnergyUpdate: Trillium Power plans to develop four wind farms - what is Trillium Power's strategy for raising finance for these wind farms?

John Kourtoff: Taken in aggregate, Trillium Power’s four (4) developments would generate approximately 3,500 MW of clean electricity and require private investment of approximately CAD$14 billion.

Our first development, TPW1 (Trillium Power Wind 1) will cost approximately CAD$1.7 Billion. Trillium Power is just about to launch its final development tranche of financing for TPW1 of CAD$25 million. This is the final development tranche prior to the construction equity tranche next year. 

We have been pleasantly surprised at the quality and quantity of interest by international investors for both the equity and debt side. Most of the organizations that our advisors are speaking with are outside of Canada, generally in the Middle East, Asia, Europe and the United States.

WindEnergyUpdate: The Ontario government has created a favourable climate for renewable energy development, but what are the stumbling blocks and how could these be resolved?

John Kourtoff: Ontario has a tremendous amount of renewable energy resource available: offshore wind, solar, hydro and onshore wind. Ontario is second to none in the depth and breadth of its renewable energy resources and interconnection opportunities to population centres.

We believe that are more optimal offshore wind resource on the Ontario side of The Great Lakes than anywhere else in The Great Lakes region - combined. In addition, Ontario links to all of the Great Lakes on the Canadian side of the border and all 8 of the US Great Lake States.

Interconnectivity of power grids will become more important between Canada and the USA as both countries work to decarbonize their economies. The USA has no qualms to importing oil and gas from Alberta for security of supply reasons even though oil and gas can be stored.  

As we all know, electricity needs to be consumed as it is generated and cannot really be stored, other than for short periods of time at pumped-storage facilities, and so transmission to high-demand markets such as Ontario is capable of doing will be more highly valued in the future.

As the need for clean energy continues to pick up pace around the world, we expect the USA to develop as much clean energy within its borders as possible and begin to look nearby for additional sources of clean energy that is easily transmittable. Therein lies a unique opportunity only available for Ontario.

Ontario has the widest interconnectivity of any jurisdiction in North America. Ontario connects from the US East Coast all of the way to the US Mid-West. It connects to 8 Great Lake States directly and another 12 directly behind those states. The combined population of those 20 US States is 125.6 million people, which is equivalent to 41.7% of the US population. 

With a population of just under 14 million, Ontario has a larger land mass than France and Spain combined, more engineering schools and graduates per capita than anywhere else in North America, we have the second-largest financial capital in the Western Hemisphere, and as demonstrated during the financial crisis, a very stable banking system.

We also have very low corporate taxes in Ontario of 32%, which will be reduced to 18.5% over the next few years. In most other countries, corporate taxes are increasing. Canada’s debt to GDP is 31% whereas most other OECD countries it is above 80%.

Federal policy in Canada could be enhanced so that it encourages the creation of capital pools where the focus is renewable energy. This could be achieved by developing something similar to real estate income trusts that exist to provide income investments to long-term investors in assets that are not easily made liquid.

Such an allowance should be made for renewable energy development as these projects are long-term infrastructure assets. The term REITs (Real Estate Investment Trusts) could equally be used for a new entity such as Renewable Energy Income Trusts.

Ontario has done a tremendous job of putting the right incentives in place for renewable energy developers. We believe that the Federal government has an important role to play in trying to begin to level the energy playing field and assisting renewable energy development throughout Canada and especially in Ontario, which is leading the way with its Green Energy and Green Economy Act.

WindEnergyUpdate: On a separate note, what impact could a moratorium on deepwater drilling in the Gulf of Mexico have on renewable energies? Is it likely to make renewable energies comparatively attractive to investors?

John Kourtoff: There is some debate as to whether it will be a short-term blip, or whether it will have a long-term effect.

Whether oil comes from deep water drilling in the Gulf, or from tar sands, it is often a case of ‘out of sight, out of mind’. It takes incidents like Deepwater Horizon to raise the profile and to make people realise the true cost of oil and gas extraction – and that everyone is responsible for that cost.

When each of us fills up the tank of our vehicle we have no idea whether the gasoline came from a barrel of oil extracted from the Gulf of Mexico, northern Alberta or the Middle East.

Deepwater Horizon will have a strong, lasting visual and psychological impact. Each generation becomes more aware of the hidden costs of energy extraction and generation and that those costs will only continue to rise. This will enhance the value of renewable energy development and generation significantly in the minds of all generations – especially the younger generation. In this sense it will have a long-term impact.

From the investor perspective, I’m not sure that it will immediately change investor patterns. Those investors that understand and focus on the oil and gas sector will most likely continue to do so. However, I expect that they will demand a higher risk premium, or they will discount investor shares – as BP’s share value has plummeted due to potential liabilities.

To respond to this article, please write to the editor:

Rikki Stancich: rstancich@gmail.com