5. Alternative Energy
1. Background

Unlike fossil fuel combustion and nuclear fission, renewable energy sources are virtually inexhaustible and replenished through natural processes. Alternative energy, particularly in the form of renewable biomass, already plays a significant role in New Brunswick’s energy mix. Biomass accounts for 15% of the total primary energy demand in the province. This includes 481,000 cords (589,000 tonnes) of round wood used for heating in the residential sector, 18,000 tonnes of wood residue consumed by hospitals and 2.5 million tonnes of wood residue and spent pulping liquor used for process heat in the pulp and paper industry.

Typical alternative energy sources and technologies in use worldwide today include:

• Biomass energy: includes wood, and wood waste/residue and agricultural waste, alcohol based-fuels, municipal solid waste; methane gas from solid waste landfills and sewage treatment, and cultivated energy crops;
• Geothermal energy: uses the heat in the earth’s crust (steam or hot water) or thermal gradients below the ground surface (ground source heat pumps);
• Hydroelectric and tidal power: uses flowing water to spin turbine generators that produce electricity or mechanical power;
• Solar energy: provides direct space heat and hot water, or it can be converted to electricity with photovoltaic ("PV") cells or a solar-thermal steam turbine;
• Wind energy: provides electricity by turning large blades connected to a generator;
• Fuel cells: a self-contained unit that chemically process fuel to produce electric power; and
• Micro-turbines: consists of small-sized combustion turbine generators.

Over the past 20 years, great technological advances have been made in reducing the costs of non-hydro renewables such as wind and solar which in some instances have declined to one-fifth their earlier costs per kilowatt-hour ("kWh"). Today, wind projects sited in the best locations can produce electricity at costs comparable to many conventional plants, at 6-7 cents per kWh. Similar advances are being realized with the development of alternative energy fuel cells, which are a clean and efficient means of producing off-grid electricity and motive power. Although fuels used in fuel cells are not necessarily renewable, they do offer many of the benefits of renewable technologies, such as reduced environmental impact, and a significant opportunity for application on a distributed basis which would reduce loses and can lead to higher overall efficiencies.

Despite the tremendous progress for renewable and alternative technologies, they typically have higher capital costs per kW and higher average costs per kWh than the most competitive conventional technologies, such as combined cycle gas-fired electric plants with average cost of production at 4 to 5 cents per kWh. In addition, because renewable and alternative technology projects tend to be capital intensive (albeit with lower operating costs), financiers of merchant plants, who typically seek target returns in an 8 to 10 year time horizon, often do not give full value to the long-term operating benefits of renewable and alternative technology projects.

2. Benefits of Alternative / Renewable Energy

Renewables are generally very clean sources of energy, although they can result in a number of environmental impacts. Increasing the use of renewables can diminish a host of environmental problems such as air pollution, solid and hazardous waste, and water pollution. In particular, renewable energy can lessen the effects of acid rain, ground-level ozone, regional haze, particulate matter, and the threat of climate change. Several renewable technologies, such as wind power, hydroelectric power and solar power, produce no air emissions. Biomass-powered facilities, with properly managed cultivation and harvest practices, contribute no net greenhouse gas emissions.

Renewable resources are far less burdensome on water resources as well. Solar and wind power consume no water at all. Hydroelectricity harnesses (but does not consume) the power of flowing water, without introducing pollutants or waste heat to water resources. In addition, hydroelectric facilities often provide other benefits such as flood control, drinking water supplies, and recreational opportunities. Biomass often uses water in the power production steam cycle but unlike fossil fuel power, does not threaten water supplies from inadvertent petroleum spills. With regard to solid and hazardous waste, renewable energy is significantly better for the environment. Solar, wind and hydroelectric power production results in no waste materials at all.

Renewable energy technologies provide a number of important economic benefits as well. By expanding the diversity of the province’s fuel mix, renewables reduce dependence on traditional fossil fuels and the associated exposure to fuel price fluctuations. In addition, since economies of scale are achieved at relatively small plant sizes for several renewable technologies, such units can be tailored to load growth and may be more easily distributed geographically, helping to reduce transmission and distribution system bottlenecks and losses. Biomass technologies have also been shown to result in significant local employment.

3. Market Demand for Green Power

While a key motive behind restructuring of the electricity industry is to reduce electricity prices, it has also seen the rise of product differentiation in the marketplace and creative marketing strategies. A number of retail suppliers are currently offering customers clean and renewable sources of power, often called "green" power. Consumer research in the U.S. shows that, on average, 70% of residential consumers indicate a willingness to pay at least $5 per month more for electricity from renewable sources; 38% are willing to pay at least $10 per month more; and 21% report willingness to pay at least $15 per month more.

Market experience to date bears out a preference among a significant segment of consumers for green energy. While only 2% of customers in California have chosen to switch to competitive suppliers from their incumbent utility, virtually all of the residential customers that have switched are purchasing some form of green power. However, to some extent this has been driven by a generous state subsidy for the purchase of renewable energy equal to 1.5 cents per kWh. In Pennsylvania, where 20% of eligible customers have chosen a competitive supplier 15% of this group has chosen a "green power" supplier. Similar results have been reported in other states now open to full retail competition.

4. Adoption of Alternative Energy Technology
1. Research and Development Opportunities

New Brunswick has important research and development capabilities in the area of alternative and renewable energy. The Energy Conversion Engineering Group (University of New Brunswick) and the Research Center for Energy Conversion (l’Université de Moncton) have made considerable progress in the development of ground source heat pumps. The Research Group on Thin Films and Solar Energy (Université de Moncton) is active in photovoltaic research and development. In addition, the Centre de génie éolien (Wind Power Engineering Centre) at l’Université de Moncton is active in the field of wind energy. The Province will continue to promote research and development in renewable/alternative energy, and related economic development opportunities.

2. Demonstration Projects

The Province will look for opportunities to undertake demonstration projects that showcase the benefits of renewable and alternative technologies and that help jumpstart the market to manufacture, sell and maintain renewable and alternative technologies. Examples include solar wall systems for preheating ventilation air, fuel cells and micro-turbines. In addition, emphasis will be placed on expanding the use of renewables and alternative technologies for off-grid applications such as communications, lighting and public safety equipment, where renewables and alternative technologies, particularly photovoltaics and fuel cells, are likely to be a cost-effective option.

3. Promotion and Development of Bio-fuels

Alcohol is a low emissions fuel that can displace a portion of gasoline volumes without special modifications to engines if used as a blend. The potential production and use for ethanol and other alcohols as a fuel and/or fuel additive has been evaluated a number of times in New Brunswick.

Ethanol production using agricultural feedstock has not proven to be a feasible option in New Brunswick due to an agricultural base which is not sufficiently large to support an ethanol plant of the scale necessary for economic viability. The emerging technology of converting lignin and cellulose (wood products) to ethanol has been monitored and is showing promise for New Brunswick.

On the demand side, the most immediate market for alcohol would be as a gasoline additive to replace more environmentally controversial petroleum-based octane enhancers. Alcohol blended with gasoline of 10% or higher is common throughout North America.

The Province will work with the federal government to closely monitor progress in alcohol production technology and examine the potential for production and use of alcohol as a transportation fuel and/or fuel additive in New Brunswick. If the technology offers sufficient potential, the Province will work with industry to seek strategies for demonstrating the feasibility and potential benefits of the use of ethanol as a gasoline additive.

4. Small-Scale On-Site Electricity Generation

Environmentally sound, small-scale electricity generation technologies such as solar, wind, biomass, and fuel cells can help increase the efficiency of energy production and use in New Brunswick. However, there are many barriers, including metering and interconnection issues that prevent such technologies from gaining more widespread use and acceptance. These technologies have a role to play in the competitive market. The Province will direct the market design committee to review and make recommendations on the role and treatment of small-scale, on-site electricity generation.

5. Green Pricing

Green pricing is the opportunity for electric utility customers, who do not have retail choice, to support a greater level of investment in new renewable or "green" power resources relative to the traditional mix of resources offered by the utility. To date more than 50 utilities, including several in Canada, have offered green pricing programs. There have been two basic types of programs offered: capacity-based and energy-based. With a capacity program, the utility offers the customer the option to select the number of renewable capacity "blocks" (typically 100 watts per block) they would like to fund. Monthly premiums range from $2.50 to $6.50 per 100-watt block. The customer’s green price premium is based solely on the number of blocks selected by the customer, not on usage. Energy-based programs allow the customer to choose the percentage of kilowatt-hours consumed that support green energy. Usage-based green price premiums range from 0.5 to 5 cents/kWh. In effect, either the capacity- or energy-based program allows the customer to select the desired shade of "green."

Given the importance of introducing new renewable technologies to the province and the potential interest of customers in supporting renewables, the Province will require the Crown utility and other distribution utilities in the province to develop a green pricing option and market it to interested customers. Subsequently, the Province will direct the Crown utility and other distribution utilities to use any funds derived from a green pricing option to promote the development of renewable technologies in New Brunswick.

6. Renewable Portfolio Standard
   
   In the U.S., twelve states have adopted some form of Renewable Portfolio Standard ("RPS"). A RPS is a requirement that a minimum percentage of a retail supplier’s energy portfolio be from qualifying renewable energy sources. The definition of an "eligible renewable resource" varies from state to state; some include hydro and others do not, some focus on new and existing resources while others focus only on new resources. Another difference is how compliance is verified; some states are using a certificate-based approach where generation attributes are traded in a secondary market, separate from the electricity commodity. Other states are using contract-path tracking in which the electricity and its attributes are bundled together and can’t be traded separately. There is a proposal for a 7.5% national RPS as part of its restructuring legislation, which has not yet been passed by the U.S. government.
   
   New Brunswick currently uses a relatively high proportion of renewable energy, with 15% of primary energy demand from renewable energy sources (Table 3.5.4).

Accordingly, the Province will monitor the development of Renewable Portfolio Standard programs in other jurisdictions and assess the benefits for New Brunswick.