business

OTTAWA, CANADA

Canadian utilities are rapidly investing in renewable power, despite slumping demand for electricity in their country. The goal: to capture a share of the growing market for export of green electricity to the United States.

Canada's domestic electricity demand was flat from 2004 through 2008, while its electricity exports to the United States jumped 70 percent, with most of that growth met by higher renewable power generation. Hydroelectric power grew 10 percent and wind power nearly tripled, while fossil fuel generation fell 10 percent.

The growth of Canada's green power exports comes alongside the continued expansion of its much larger, more well-known export: petroleum, including heavy oil sands production responsible for high levels of greenhouse gas emissions.

With the growth of renewable exports, Canada could become the largest source of both dirty and clean power to the United States.

Canada's investment in renewables hasn't slowed this year despite a 30 percent recession-related slump in the cross-border electricity trade during the first half of this year. Continued investment is being driven by strong government incentives for renewable power and the expectation of regulations favoring renewable power in the United States.

"Over the last 100 years, utilities have built their systems to meet the growth of demand," said Darcy Johnson, an electricity market analyst at the National Energy Board (NEB), Canada's federal energy regulator. "Now we're seeing them expand capacity beyond that because of all kinds of government mandates and incentives: renewable energy credits, carbon markets and evolving renewable portfolio standards."

Johnson cited the growth of wind power as an example: The NEB raised its forecast Tuesday for Canada's growth in wind power this year to 3,700 megawatts from 3,200 megawatts previously. That's a 56 percent increase from last year and more than double 2007 levels, spurred by provincial incentives for wind power across the country.

The first wind project in British Columbia will be completed this year. The province has made export part of its renewable power growth strategy, including plans to build a 1,000-mile transmission line to Northern California in hopes of serving the environmentally conscious state. Through its low-carbon fuel standards, California turned up its nose at Canada's other energy export -- oil sands. PG&E Corp. (PCG) of California and Avista Corp. (AVA) of Washington are potential partners in the transmission line.

The biggest and most aggressive player in the green energy export market is Quebec's state-owned utility company. Last week Hydro-Quebec announced an agreement to acquire most of the utility operations of the neighboring province of New Brunswick, including its transmission lines into Maine.

Hydro-Quebec is North America's largest utility company and the largest single electricity exporter to the United States. The company generates 95 percent of its electricity from large-scale hydroelectric dams, and its chief executive, Thierry Vandal, said it plans to double U.S. exports to between 20 and 25 terawatt hours within two years. It's building or planning thousands of megawatts of new hydroelectric capacity for markets in the northeast United States.

"We have a major interconnection with New York ... and we supply about 30 percent of the power to Vermont," Vandal said in an interview. "What this is about is moving beyond that because of the new renewable that we are developing."

Vandal called Quebec's hydroelectric resources "a great fit for a world that is moving toward emissions controls."

So far, the U.S. Federal Energy Regulatory Commission has been receptive to Canada's plans to build new cross-border transmission lines with U.S. partners.

But there are potential pitfalls. Emissions regulations such as carbon cap-and-trade are political hot potatoes in Washington. In addition, there could be disapproval among Americans with buying green energy from abroad -- even from its largest trading partner and close ally -- rather than developing it at home, said Haywood Securities Inc. alternative energy analyst Tania Maciver.

"There could be political blowback on both sides, especially when there is so much development that needs to be done on the U.S. side, and especially when it's associated with economic development and jobs," she said.