The U.S. move to extend tax credits for the renewable energy industry could mean a dramatic boost for Canada's solar and wind equipment makers.
Last Friday, the U.S. Congress passed legislation that renews tax credits for solar, wind and other renewable projects. The credits had been about to expire, which would have damaged a rapidly expanding industry. With the extensions – in some cases until 2022 and beyond – a surge in green energy projects is expected over the next few years in the United States.
That could expand the export market for Canadian companies that supply solar panels, wind turbine blades and other equipment used in the green-tech sector.
"It is promising to be a real boon to Canadian-based manufacturers," said John Gorman, president of the Canadian Solar Industries Association (CanSIA). The low Canadian dollar will also boost the fortunes of companies manufacturing solar products here for export, he added.
Some Canadian firms have already turned to the U.S. market because of a decline in business in Canada, Mr. Gorman said. Ontario cut its subsidies for solar projects, and a ruling from the World Trade Organization forced the province to eliminate rules that required renewable projects to use local content. More broadly, the demand for new sources of electricity has slowed in some parts of Canada.
Some companies that set up manufacturing plants in Canada have already shifted their sights to the U.S. market.
Silfab Solar Inc. now exports most of the solar panels it makes at a Toronto plant to the United States, said Geoff Atkins, head of business development. The plant has been booming recently as U.S. solar developers rushed to get projects completed before the tax credits expired at the end of 2016, he said, so the extension might actually reduce demand in the short run because that deadline is no longer looming.
But in the longer run, the tax credit extension "has offered a lot more clarity into the future" which will help Silfab plan its growth more effectively, he said. "It certainly eliminated the cliff at the end of 2016, which everybody was concerned about." He added that a "greatly increased amount of solar installed in the U.S." is now more likely over the next few years.
Since the Paris agreement on fighting climate change, the green energy industry is hoping the Canadian government will introduce a support program with a similar stimulative impact, Mr. Atkins said. The tax credit extension "has really endorsed renewable energy and [underlined] the need for long-term strategy," he said, and this should put pressure on the Canadian government to come up with something along the same lines.
The wind industry should also benefit from the U.S. tax credit extensions, said Robert Hornung, president of the Canadian Wind Energy Association. The rate of growth in the sector has been uncertain, he said. Now, companies making wind power equipment, and service companies doing wind resource measurements, environmental assessments and construction should have new opportunities in the United States, he said.
At the same time, he cautioned, competition will increase as more U.S. firms jump into the expanding market.
Many Canadian manufacturing firms in the wind sector are busy supplying the Canadian market, he said, but they also aspire to export, and the expected rapid growth south of the border "will certainly sharpen their minds to look at opportunities in the U.S."
Siemens Canada, which makes wind turbine blades in Tillsonburg, Ont., does not yet ship them to the United States, but is considering it. "We are evaluating supporting export to the U.S. given the recent extension of the [tax credit]," Siemens vice-president David Hickey said.
Mr. Hornung said U.S. growth in the wind business will complement potential expansion in Western Canada, where Alberta and Saskatchewan have said they plan to increase renewable energy generation and reduce dependence on coal-fired power plants.
Over the longer term, he said, much of Canada will have to add considerably more green power to meet greenhouse-gas reduction commitments. Part of that shift will involve adapting heating, cooling, transport and industrial processes – which have traditionally used fossil fuels – to run on renewable electricity, he said.
Tax Credit Breakdown
The extensions to renewable energy tax credits were added to U.S. legislation that lifts a ban on the export of crude oil so that Democrats would support the bill.
The renewed Production Tax Credit gives wind projects a credit of 2.3 cents (U.S.) per kilowatt hour, until the end of 2016, when it diminishes until 2020.
The Investment Tax Credit gives solar projects a 30 per cent tax credit until 2019, when it begins to decline until it hits 10 per cent in 2022.
An analysis from Bloomberg New Energy Finance says the extensions will add 20 gigawatts of solar to the U.S. market – as much as the total installed before 2015. They will also add 19 GW of wind.
Together, that means as much as $73-billion of investment, and enough new electricity for 8 million homes.