New GE Study Shows Canadian Wind Farms' Profits Would Exceed Government Investment

GE Energy Financial Services, a unit of General Electric (NYSE:GE), recently released a study showing the benefits of federal Canadian wind power incentives.

The study [pdf] estimated that injecting an additional C$1.5 billion into Canada’s ecoENERGY for Renewable Power program could spawn 5.2 gigawatts of new wind projects. The program would not only recoup its costs, but it would generate additional revenue for of C$287 million for Canada’s governments.

In addition to providing emissions-free electricity, the federal financial incentive program for wind energy projects would more than pay for itself through tax revenues from the projects’ income, corporations’ profits, and individual workers’ wages. An indirect tax benefit is also created when workers and corporations spend money on products and services – creating more jobs. This expansion of wind power would create 49,000 jobs, directly or indirectly, during construction and more than 1,800 permanent jobs.

“Governments worldwide are rolling out ways to encourage the deployment of green renewable energy generation,” said Mark Tonner, Managing Director for Canada at GE Energy Financial Services. “Canadians want to be leaders in green energy. It’s high on the social agenda as the right thing to do. In Canada, the ecoENERGY initiative has been effective in stimulating renewable energy deployment, and as our study shows, it’s time to view the program not as a cost but a net contributor to Canada’s treasury. EcoENERGY helps Canada compete globally for renewable energy investment, at a time when such competition is becoming more intense. ”

To encourage the production of renewable energy by closing the economic gap with conventional electricity generation, the Canadian government established the ecoENERGY for Renewable Power program in 2007 and committed C$1.48 billion to it. Renewable energy projects receive 1 cent (before tax) per kilowatt-hour for the first 10 years of power production.

EcoENERGY for Renewable Power payments provide an important part of the developers’ return on investment while reducing the price that utilities and their customers pay for the energy. Under the current rules, applications had to be submitted by Dec. 31, 2009, and projects must be constructed before March 31, 2011.

The ecoENERGY for Renewable Power program has been so successful that funding requests far exceeded the program’s $1.48 billion budget. Nearly 10,924 megawatts of projects have registered to receive funds and the program has now signed contribution agreements with 4,154 MW of projects – meeting its target well ahead of schedule.

To make up for the shortfall and expand Canada’s use of wind energy, GE and the Canadian Wind Energy Association (CanWEA) are asking the federal government to provide the funds required in the 2010 Federal Budget to renew and extend their support for renewable energy deployment to March 2013.

“GE's new study makes crystal clear that Canada’s ecoENERGY for Renewable Power program is good for the environment, good for the economy, and even good for the Treasury," said Robert Hornung, President of CanWEA.

“Unless the government acts quickly, Canada’s wind energy industry and – as this new GE study shows -- the broader economy will suffer a major setback, leading to delays and cancellations of planned wind projects as investors seek more competitive investment opportunities south of the border, in the United States.”

If C$1.5 billion were added to the ecoENERGY program for Renewable Power, GE Energy Financial Services estimates that over a 25-year life, 5.2 gigawatts of new wind farms could generate:

• C$1.12 billion net present value of ecoENERGY payments over 10 years
• C$684 million in net present value of taxes on project income
• C$601 million in net present value of income tax on individuals’ wages
• C$82 million in net present value of income tax on vendors’ profits
• C$43 million in net present value of income tax on lease payments and royalties to landowners

The total net present value (NPV) to the Canadian government would be $1.41 billion, greater than the $1.12 billion NPV of the ecoENERGY payments – resulting in a net inflow to the Canadian Treasury of $287 million. The study did not include property taxes or sales taxes, which generate additional revenues for provincial and local governments.

In keeping with GE’s ecomagination program to help customers meet their environmental challenges, GE Energy Financial Services is partnering with Plutonic Power Corp. (TSE:PCC) on two British Columbia renewable energy projects benefitting from ecoEnergy: The 144-megawatt Dokie Wind Farm and 196-megawatt East Toba-Montrose hydroelectric power projects.

Wind makes up 80 percent of GE Energy Financial Services’ more than US $4 billion renewable energy portfolio. The company plans to invest US$6 billion in renewable energy projects worldwide by the end of 2010, including wind, solar, biomass, hydroelectric and geothermal power generation.