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PublicConsultation

Document

Prince Edward IslandEnergy Strategy

Discussion Document

April 2008

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CONTENTS

i Prefacei Submissionsii Premiers Message

ii Ministers Message

SECTION I- INTRODUCTION1 Background1 Energy Strategy Vision1 Energy Strategy Objectives2 Energy Strategy Consultative Process

SECTION II- ENERGY OVERVIEW2 World Energy Markets2 Canadian Context2 Regional Perspective3 PEIs Current Energy Profile4 Energy Prices and Trends4 Projected Supply and Demand

SECTION III- ENERGY EFFICIENCY4 Overview5 Why Energy Efficiency?5 The Potential for Energy Efficiency on PEI6 Energy Efficiency Challenges6 Leadership7 Program Delivery7 Demand Side Management8 Space Heating Efficiency8 Transportation Efficiency9 Financial and Institutional Support

SECTION IV- RENEWABLE ENERGY10 Overview11 Wind12 Role of Government12 Solar Technologies13 Earth Energy

SECTION V- BIOFUELS13 Overview14 The Biofuel Potential in Prince Edward Island14 Biomass15 Biomass Challenges

15 Liquid Biofuels15 Pure Plant Oils16 Biodiesel16 Ethanol16 Liquid Biofuel Challenges17 Biogas17 Leadership

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SECTION VI- GOVERNMENT POLICY AND ECONOMIC DEVELOPMENT18 Overview18 Energy Efficiency18 Renewable Energy / Biofuels18 Distributed Generation: Community-Based Energy Projects19 Green Power19 Net Billing19 Feed-in Tariffs19 Renewable Portfolio Standards20 Green Heat20 Green Fuels20 Renewable Fuel Standards21 Green Technology Cluster

SECTION VII- THE PATH FORWARD21 Public Consultation22 Final Strategy

SECTION VIII- APPENDICES23 Submissions Received

24 Reference Materials26 Glossary of Terms

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PEI ENERGY STRATEGY- DISCUSSION DOCUMENT

i

Preface

This document is intended to stimulate public discussion and help shape Prince Edward Islandsenergy future. With rising energy costs, decreasing supply and increasing demand, it is importantfor provinces and the country to implement effective energy policies that focus on energyefficiency and conservation, renewable energy alternatives, biofuels and economic development.

Feedback received through public consultations and written submissions will be collected andconsidered in the development of a Provincial Energy Strategyfor Prince Edward Island for thenext decade. The revised strategy will build and expand on the Energy Framework andRenewable Energy Strategyreleased by the Provincial Government in 2004.

This discussion document outlines the current energy situation on PEI and presents informationon various opportunities that could be pursued relating to energy efficiency, renewable energyalternatives, biofuels and economic development. A central theme of this discussion document isthe role of the Provincial Government in implementing and promoting measures that will increasePEIs energy security, ensure environmental sustainability and strengthen the economy.Throughout the document, a series of questions is posed to the reader to stimulate discussionand solicit feedback on these important issues. The input received will then form the basis for thedevelopment of a flexible Provincial Energy Strategythat focuses on the issues that are importantto Islanders.

Submissions

We welcome and appreciate all feedback concerning the information contained in this discussiondocument. A public consultation process will take place with meetings held in communities, cities,and towns across the province. During the public meetings, a facilitator will present the highlightsof this discussion document and pose questions to encourage discussion and solicit feedbackfrom the attendees. The public consultations are expected to take place in mid-May; times andlocations to be announced. In addition to feedback received at the public consultations, writtenand electronic submissions will be accepted.

Written Submissions

Written submissions can be mailed to the following address:

Prince Edward Island Department of Environment, Energy & ForestryJones Building, 4

thfloor

11 Kent StreetP.O. Box 2000CharlottetownPrince Edward IslandC1A 7N8

Electronic Submissions

Electronic submissions can be sent to the following email address:

[email protected]

All submissions will be considered public documents and may be published on the governmentwebsite. Any submission that contains confidential information should clearly indicate whichsections of the submission are to be treated as confidential.

The deadline for written and electronic submissions is 5:00 pm, Friday, May 30th

, 2008.

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PREMIERS MESSAGE

Energy is a vital component to our everyday lives, be it providing heat and lighting for our homes,businesses and institutions or fuel for transportation vehicles and industrial applications. For avery long time, Islanders have relied on imported petroleum products to deliver an overwhelmingamount of this energy. As the world price of oil continues to hover near historical highs, resulting

in increased costs for acquiring petroleum products, it is time to rethink how we acquire andutilize our energy resources. We can no longer continue with our dependence on oil and mustsearch for answers near home in terms of exploiting local renewable resources and being moreefficient with our energy consumption.

It is my pleasure to provide you with the PEI Energy Strategy Discussion Document. Thispublication is the result of input from a wide cross section of stakeholders who took the time andeffort to propose a variety of initiatives that will improve PEIs energy security. The DiscussionDocumenthad also been deigned to stimulate focused dialogue about the possibilities ofpursuing an energy future that is considerably less reliant on fossil fuels.

It is your turn. Public consultation will be an integral component in formulating the final PEIEnergy Strategythat will be released later this year. I invite all Islanders to express their opinion

at the upcoming consultation sessions or through other forms of written correspondence.

Premier Robert Ghiz

MINISTERS MESSAGE

As Minister of Environment, Energy and Forestry, I recognize the link between energy

consumption and the environment. Our heavy dependence on petroleum products to heat ourhomes and power our vehicles has consequences on the health of our air, soil and water. Greaterutilization of renewable resources, with attention to the efficient use of all energy fuels, will enablea sustainable energy system for Prince Edward Island and improve our economic prosperity.

Within this Discussion Document are possible initiatives for utilizing biofuels created from forestand agricultural operations, increasing the development of renewable energy resources for heatand electricity, and reducing consumption through enhanced energy efficient initiatives. Thesestrategies can provide much needed economic development opportunities, greater energysecurity and improved environmental sustainability.

I look forward to the upcoming public consultation sessions and invite all Islanders to participatein the discussions or provide comments that will lead to a renewed PEI Energy Strategy.

George WebsterMinister of Energy, Environment and Forestry

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SECTION I- INTRODUCTION

Background

PEI has always been viewed as an innovator in developing, demonstrating and deployingrenewable energy systems with due regard for the environment. From the days of the Institute of

Man and Resources, which led to the PEI Energy Corporation, there has been a progressiveapproach to energy policy and the Corporation has become a critical agent of change over theyears.

In June 2004, the Prince Edward Island Department of Environment and Energy released itsEnergy Framework and Renewable Energy Strategy. Integral to the production of this documentwas input received from interested stakeholders and the general public. The outcome of thisconsultative approach to the Islands energy policy development was a list of 19 action items forthe government to pursue. Today, nearly all of these items have been accomplished withsignificant advancements made towards the incorporation of renewable energy (wind power) intothe provincial energy mix.

General comments and feedback surrounding the 2004 strategy were positive:

The previous Energy Framework and Renewable Energy Strategy for Prince Edward Islandcontained much strength as a provincial energy strategy. It is a comprehensive document whichprovided a wide array of opportunities for PEI to consider when looking towards a moresustainable energy system on the Island. Its strong focus on wind energy has been important toinitiate renewable energy development and deployment on PEI. Stakeholder submission, 2008

The 2004 strategy outlined a commitment for the province to have 15 percent of its electricityneeds met by renewable sources by 2010. The province met this target in 2007, three yearsahead of time. With this strategy, PEI became the first North American jurisdiction to introduce afeed-in tariff in more than 20 years.

The PEI government is now seeking to build and expand on the success of the 2004 strategy.This discussion document was developed to stimulate discussion and solicit feedback from the

general public. It will help identify the role of the PEI government in implementing energyefficiency and conservation measures, promoting renewable energy, encouraging new economicand development opportunities, raising public awareness and education, as well as outlining keyrecommendations for a flexible policy framework that is capable of adapting and reacting tomarket and technological changes.

Energy Strategy Vision

To ensure a prosperous future for residents and businesses of Prince Edward Island based onthe objectives of energy security, environmental sustainability and economic development.

Energy Strategy Objectives

1. Energy Securitya. Greater self-sufficiencyb. Improved price stabilityc. Diversity of supply

2. Environmental Sustainabilitya. Increased energy efficiency and reduced consumptionb. Renewable energy developmentc. Reduced GHG emissions and other pollutants

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3. Economic Developmenta. Support growth of local industries and new job opportunitiesb. Research, development & demonstration of new technologiesc. Strengthen and diversify local economy

Energy Strategy Consultative Process

Primary research, in the form of several customized questionnaires, was conducted with 10identified energy stakeholder groups, with a total of 31 submissions. The purpose was to solicitinput and initial guidance on the direction for a comprehensive and coordinated Energy Strategyfor PEI that will serve to guide the provinces efforts over the next decade. Secondary researchrevealed successful elements of energy policy and program development in other jurisdictions inNorth America and around the world, which has been incorporated into this document.

SECTION II- ENERGY OVERVIEW

World Energy Markets

World energy markets are facing three unfavorable conditions: increasing demand, dwindlingsupply, and rising costs. As economies develop and populations grow, particularly in countriessuch as China and India, energy supply is struggling to keep pace with rising demand. This, alongwith global terrorism, instability of the Middle East, geopolitical pressures, and commodityspeculation, has resulted in rising energy prices. Large consumers such as Canada areespecially vulnerable to the effects of rising costs and decreasing supply.

Canadian Context

Energy is an important part of the Canadian economy in terms of both production andconsumption. Canada is one of the largest users of energy per capita in the world and rankssecond in the world in terms of oil reserves, behind Saudi Arabia. Like other countries around theworld, Canada is experiencing a number of energy challenges including high and volatile energyprices; decreasing conventional reserves; the need to diversify supply; an ageing and constrained

delivery infrastructure; and growing environmental concerns. Despite the challenges and a recentdecrease in Canadas total energy demand, the latest projections indicate that total future energydemand in Canada will grow by 1.3 percent each year until 2020.

Regional Perspective

Through the Council of Atlantic Premiers(CAP), the Atlantic Energy Ministers Forum(AEMF) and the Conference of New England Governors and Eastern Canadian Premiers (NEG/ECP), the Atlantic provinces have been working together on energy issues for severalyears. Most recently, in January 2008, the Atlantic Premiers releasedthe Atlantic EnergyFramework for Collaboration. The document highlights three priority areas for regionalcollaboration:

Enhancing energy efficiency programming Increasing renewable energy development Assessing biofuel potential

The Atlantic Energy Ministers will guide the implementation of this framework, with a progressreport expected later in 2008. The NEG/ECP have expressed increased emphasis on energy inrecent years and in June of 2007 adopted a series of recommendations for the promotion anddevelopment of energy efficiency, energy trade, renewable resources, and improvedtransportation initiatives.

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PEIs Current Energy Profile

Without a local supply of natural gas and oil resources, Prince Edward Island is heavily reliant onimported sources of energy. Imported oil accounts for 76 percent of PEIs total energy supply,with the transportation sector being entirely dependent on this fuel source. The economic impactsof the provinces reliance on imported energy are significant considering that more than $440million is spent on off-Island energy resources annually.

As shown in Figure 1, the current energy supply in Prince Edward Island consists of four sources:petroleum products, imported electricity, wind-powered electricity, and biomass.

Figure 1: Prince Edward Island Current Energy Sources

Petroleum

Products

Biomass

Electricity

Wind

Imported

Electricity

76%

10%

14%

18%

82%

Wind resources meet approximately 18 percent of the provinces electricity supply with theremainder tied primarily to oil and nuclear power. Most of PEIs electricity needs are supplied bythe New Brunswick Power Corporation and imported via two submarine cables connected to themainland. Figure 2 shows Prince Edward Islands current electricity mix.

Figure 2: Prince Edward Island Electricity Mix

49%

19%

18%13%

1%

NB System

Nuclear

WindDalhousie

Maritime Electric

Company Ltd.

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Ten percent of energy in PEI is supplied by biomass, which includes fuel wood, sawmill residueand municipal waste. PEI Energy Systems in Charlottetown uses municipal waste and woodbiomass to supply thermal energy to commercial, residential and institutional buildings in the city.Developed in the 1980s and early 1990s by the PEI Energy Corporation, the CharlottetownDistrict Heating System is another example of the Province of PEI leading in the development ofrenewable energy.

Energy Prices and Trends

As shown in Figure 3, energy prices have steadily increased in recent years. Electricity priceshave increased 37 percent from 2000 to 2007 while gasoline prices and home heating costsincreased 48 percent and 53 percent, respectively, over this time period. Much of the increase infuel costs can be attributed to increasing oil prices, which more than doubled over this timeperiod, and a combination of increasing demand and decreasing supply of conventional energyresources. At present, there does not seem to be any relief in sight as oil prices hit a record highof $100 per barrel in January of this year. In addition, Maritime Electric Company, Ltd. isforecasting price increases of 9 percent for Island residents and 19 percent for Island businessesin 2008-2009.

Figure 3: Prince Edward Island Energy Costs, 2000 2007

35

45

55

65

75

85

95

105

115

2000 2001 2002 2003 2004 2005 2006 2007

cents/litre

10

11

12

13

14

15

16

17

cents/kWh

Gasoline prices Home heating costs Electricity prices

Projected Supply and Demand

Total energy demand in Prince Edward Island over the next decade is projected to increase 8percent. However, all of this projected growth in energy demand can be offset by aggressivelypursuing cost-effective energy efficiency options and the further development of renewableenergy and biofuel resources.

SECTION III- ENERGY EFFICIENCY

The least costly energy is the energy we don't use.

Overview

A central feature of sound energy planning is to ensure that there is a balance between energydemand and supply. A lack of balance and heavy reliance on imported fossil fuels on the Islandcan lead to high prices, lack of energy stability, and uncertainty throughout the economy. WhilePEI is a recognized leader in the use of renewable energy, the province has yet to aggressivelypursue energy efficiency opportunities.

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Energy efficiency refers to programs, initiatives, products, technologies and systems all with thesame goal in mind: to reduce the amount of electricity and/or fuel required to perform the same

job or better than conventional means. Energy efficiency is considered to be the least costly, mostreliable, locally abundant energy resource with the greatest potential to reduce greenhouse gas(GHG) emissions and protect the environment.

Improving the efficiency in the way energy is consumed on the Island will have direct benefits toindividuals, businesses, governments, institutions and the environment. Energy efficiency coversa very broad spectrum of improvements in:

Building practices- residential, commercial and institutional Energy-saving appliances Lighting & space heating Industrial & agricultural processes Transportation

Why Energy Efficiency?

The potential benefits for energy savings through increased energy efficiency have far-reachingimpacts for all Islanders:

Reduces residential, commercial and institutional energy bills and in particular, reducesthe impact of high energy prices on low-income families and individuals

Reduces environmental impact- lowers emissions of GHGs and other pollutantsassociated with energy production and consumption

Stimulates the PEI economy by reducing outflow of consumer energy dollars Increases local economic development opportunities and employment creation Enhances the reliability of our energy system Improves energy supply security and helps mitigate fluctuating energy prices Avoids or defers capital expenditures for upgrades to the electrical transmission and

distribution infrastructure Increases the percentage of energy use met by on-Island renewables by decreasing

energy demand

The Potential for Energy Efficiency on PEI

In 2007, PEIs Department of Energy, Environment and Forestry commissioned a report by theVermont Energy Investment Corporation (VEIC) to examine the potential of cost-effective energyefficiency initiatives that would substantially reduce energy use and lower greenhouse gasemissions in PEI by 2017. The study examined the potential in the following sectors:

Residential Commercial and Institutional (C&I) Transportation

The analysis of achievable potential, defined as the amount of energy cost savings that couldbe attained through energy efficiency initiatives, was the primary objective of this study. By 2017,if implemented, the proposed programs in the Residential and C&I sectors would reduceforecasted electricity use by 11 percent and non-electric use by 8 percent. This translates into acost savings of $148 million over the ten-year implementation timeframe and would reduce GHGemissions by nearly 145,000 tons by 2017.

There is considerable cost-effective energy savings potential that could be pursued on PEI.Several programs have been recommended for consideration in PEI and developed with thefollowing considerations:

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Promote the benefits of energy efficiency to all Islanders Provide opportunity for all residential customers to participate Minimize barriers to participation for low income customers Include all fuels initiative- electricity, transportation and home heating fuels Strengthen relationships with on-Island product retailers, builders and contractors

Energy Efficiency Challenges

While there are clear benefits to pursuing energy efficiency and conservation, achieving thesegains has its challenges. Energy is consumed to produce a huge variety of products and services,heat homes and businesses, generate electricity, and power the transportation sector. Thereforeany energy efficiency initiatives, to be successful, must be directed at addressing some of thesechallenges:

The required coordination among diverse stakeholders- energy suppliers, utilities,governments, regulators, builders, equipment suppliers, and consumers (individuals andbusinesses)

The associated costs for implementing energy efficient products and services The lack of energy efficiency information available to individuals and businesses

The availability of energy efficient products and services in the PEI marketplace The lack of experienced and qualified trades persons and professionals

Despite these apparent obstacles, it has been demonstrated in many other leading NorthAmerican jurisdictions that to save a unit of energy is still more cost effective than purchasing thatsame unit of energy.

Questions

1. Should the Provincial Government direct the Island Regulatory and AppealsCommission (IRAC) to consider energy efficiency as a supply option or an alternativeto traditional supply options?

2. Should utilities be compensated for incorporating energy efficiency options if they arecheaper than traditional supply options?

Leadership

Demonstrating leadership by the Provincial Government in recognizing energy efficiency as apriority resource in the development of energy policy is a crucial step. There has been somecriticism of the 2004 Energy Framework and Renewable Energy Strategys lack of in-depthconsideration for the value in pursuing energy efficiency options. The government is in a uniqueposition to develop closer ties between the diverse stakeholders involved in the administrationand implementation of energy efficiency in PEI.

Since 2004, the Provincial Government has demonstrated some leadership in this area by:

1. Introducing transportation efficiency standards for new or replacement vehicles in its

government fleet2. Implementing electricity efficiency programs within its public buildings3. Initiating residential energy efficiency programs4. Introducing a hybrid vehicle tax incentive

QuestionsShould the Province be leading by example? How?

1. Enhance green procurement standards? (e.g. ENERGY STAR, EcoLogo

TMetc.)

2. Use advanced energy/environmental codes for publicly funded buildings?3. Install/demonstrate leading-edge technologies? Other methods?

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Program Delivery

Developing comprehensive programs to address the different market and non-market barriers toadopting energy efficient products and services has lead to the formation of dedicated agenciesfor program delivery with regular review cycles to quantify the resource and update itscontribution. Dedicated agencies are able to provide a one-stop-shop for energy efficiencyinformation and programs.

In August 2007, Premier Ghiz announced the establishment of the Office of Energy Efficiency(OEE), demonstrating the commitment of the new government to this important local resource.The OEEs mission is to provide Islanders with advice and programs that will promote sustainableenergy use and reinforce the importance of sound energy management for the economic, socialand environmental well being of Island residents and businesses.

Questions1. What direct role should the Provincial Government play in promoting energy efficiency

in PEI?2. Should the Province, through the OEE, attempt to increase awareness through

educational and public awareness campaigns?

3. Should the Province implement regulations/legislation (i.e. building and applianceenergy codes) to improve energy efficiency in PEI?

4. Should the Province provide programming/financial incentives to help Islandersreduce their energy consumption?

5. Should the Province coordinate training for energy efficiency providers in PEI?Through the OEE, industry associations, educational institutions? Others?

6. Should the Province, through the OEE, do all of the above?

Demand Side Management

The Renewable Energy Act required Maritime Electric Company, Ltd (MECL) to file an electrical

energy efficiency plan and demand side management strategy with the Island Regulatory andAppeals Commission (IRAC). Demand Side Management(DSM) refers to the planning,implementation, and monitoring of utility activities designed to encourage consumers to modifypatterns of electricity usage, including the time of day and level of electricity demand.

MECLs Demand Side Management and Energy Conservation Planwas first filed in 2006 andnow consists of six programs with elements designed to address barriers limiting markettransformation, public education and awareness, community-based initiatives, energy efficientproduct retailers, and research and evaluation of program effectiveness:

1. Winter Challenge Program- challenges residential customers to reduce electricityconsumption during the month of December by 10% through energy conservation

2. Energy Efficient Lighting Rebates- offers rebate coupons on selected energy efficientlighting products

3. Community Partnership Program- community partnerships and tradeshows will bepursued with organizations to deliver energy efficiency initiatives across PEI

4. Town Hall Energy Efficiency Community Workshops- a series of workshops conducted inpartnership with community groups and/or the Office of Energy Efficiency

5. Education Curriculum Development- multi-year educational materials developed for thepublic school curriculum

6. Research and Evaluation- a comprehensive protocol to help monitor and measure theeffectiveness of the above programs

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In addition to the above programs, other utilities in North America are pursuing initiatives withincentives to shift a households electric use from peak to off-peak hours. This requires a smartmeter that tracks how much electricity you use and when you use it. This empowers consumerswith this knowledge to switch electric use and take advantage of less expensive off-peak hours-especially for large appliances like dishwashers, air conditioners, electric heating systems, ovensand clothes dryers. Due to the relatively small differential between on-peak and off-peak prices(1.5-2.0 cents per kWh), MECL believes this difference is insufficient to justify the cost ofinfrastructure needed to implement time-of-use rates. However, for large industrial consumersthis differential may present cost-effective savings by diverting significant energy intensiveprocesses to off-peak hours.

Questions1. Are utilities doing enough to address energy efficiency in PEI? Can more be done?2. Should the Province direct electrical utilities, through the Island Regulatory and

Appeals Commission, to implement proper market signals through appropriate ratestructures? I.e. time-of-use rates, eliminate the declining block rate structure, etc.

Space Heating Efficiency

Next to the transportation sector, space heating is the largest user of energy in the province,consuming approximately 30 percent of our total energy requirements. Improvements to existinghomes and buildings to reduce energy consumption for space heating include:

Improved efficiency of the heating source (furnaces, boilers, etc.) Improved efficiency of the home or building structure (insulation, windows, etc.)

It is important for Island residents and businesses to understand the most cost-effective approachto increase space heating efficiency. Increasing the efficiency of the heating source does notnecessarily lead to energy savings if the structure is drafty and poorly insulated. Often greatersavings can be achieved by reducing the energy demand of the building and maintaining theexisting heating system- i.e. sealing drafts, adding more insulation, replacing inefficient systems

and equipment, etc. Residential and commercial energy audits, performed by qualifiedprofessionals, can provide valuable information to consumers on the best and most cost-effectivesolutions for space heating efficiency.

The incorporation of energy efficient practices and technologies in all new construction on PEIwould ensure savings over the entire lifespan of the building. There are numerous obstacles toachieving this end that include up front capital costs and educating consumers, contractors andrealtors. PEI does not have a province-wide building code. The municipalities of Charlottetownand Summerside do require new buildings to comply with the National Building Code, but they donot attach an energy standard to it. The implementation of a province-wide building and energycode would ensure that all new buildings meet minimum standards for energy efficiency.

QuestionShould the Provincial Government introduce a province-wide building and energy code that

sets minimum requirements for energy efficiency in all new construction in PEI?

Transportation Efficiency

Historically, Prince Edward Island has been more dependent on automobiles than any otherprovince. The Island has the most extensive network of roads and highways, limited urban transit,an automobile dependent tourism industry and a heavy reliance on the trucking industry to movegoods in, out and around the province. As such, the transportation sector consumes 43 percent of

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our energy and is the single largest source of greenhouse gas emissions. Over 80 percent ofregistered vehicles on the road in PEI are considered light duty vehicles. Despite the rising costsof gasoline and diesel, more Islanders are purchasing trucks, vans and sport utility vehicles(SUVs). In addition, the number of annual kilometers traveled has increased by nearly 20 percentsince 1990.

As mentioned previously, the Provincial Government introduced a hybrid tax incentive in 2004 toencourage the purchase of hybrid vehicles. The Government of PEI operates hundreds ofvehicles in their fleet and purchasing more fuel-efficient vehicles has been part of their strategy toreduce fuel costs and cut greenhouse gas emissions for the past several years. The ProvincialGovernments Transportation Efficiency Standard requires that fuel efficiency be part of vehicleprocurement considerations for all future leased or purchased vehicles.

Public transportation, in some jurisdictions, has been shown to be an effective means to improveair quality, relieve traffic congestion, and reduce fuel consumption and greenhouse gasemissions. A public transit system was launched in Charlottetown in 2005 and currently operatesseven different routes across the city with plans to expand into Stratford this year. Two hydrogen-powered buses were added to the fleet in 2007. Invariably, transit systems are a highlysubsidized public service. The costs of implementation and ongoing annual operation can be

significant. In the absence of a critical mass of transit users in PEI and relevant market researchdata concerning the number of daily users, it is difficult to quantify what effect, if any, the transitsystem is having on meeting the Islands energy and environmental objectives.

In addition to the efforts outlined above, there are many initiatives that could be implemented toreduce our energy consumption in the transportation sector:

Anti-idling and speed reduction campaigns Telecommuting and compressed work weeks Traffic signal synchronization Efficient traffic signal and highway lighting technologies Public outreach and education Ride sharing/car pooling

Questions1. Should the Provincial Government continue to offer a hybrid tax incentive?2. What additional efforts should the Provincial Government consider to encourage

Islanders to purchase more fuel-efficient vehicles?3. Should the Provincial Government consider implementing disincentives (i.e. levies,

gas-guzzler tax, or increased registration fees) for vehicles that achieve poor fuelefficiency?

4. What should the Provincial Government do to encourage more fuel-efficient drivingpractices? Anti-idling legislation? Speed reductions? Driver training? Etc.

5. What other methods should the Province pursue to decrease the number of vehicleson the road? And to decrease the amount of vehicle miles traveled?

Financial and Institutional Support

While recognizing the potential for energy efficiency as the most cost effective energy resourceand setting aggressive targets for the future are essential elements of any energy strategy, toeffectively utilize this resource requires permanent long-term funding. There are several keyelements for successful energy efficiency programs:

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Long-term funding Dedicated agencies for program delivery Regular review cycles Clear measurement and verification to assess program effectiveness

Historically, energy efficiency programming in North America has suffered from inconsistent

levels of funding and attention. To address this issue, nearly 20 states in the U.S. have developedpublic benefits funds(PBFs) also commonly referred to as systems benefit charges. A smallcharge is added to consumers electricity bills- it is collected by the utility for the governmentdepartment or agency responsible for the delivery of energy efficiency programs. It provides aconsistent source of funds to support energy efficiency and renewable energy development. Theannual amount collected is relatively consistent and therefore enables delivery agencies to betterdevelop programs with longer-term implementation plans.

Questions1. How should the Province or utilities provide stable and long-term funding for energy

efficiency?2. Are Islanders willing to pay a fee to develop and implement the types of programming

required to increase energy efficiency? And if so, how much?

3. Where and how should this public benefit fee be applied? To electric bills? Oil?Gasoline tax? Carbon tax?

SECTION IV- RENEWABLE ENERGY

Overview

Prince Edward Island is the only Canadian province without substantial resources in fossil fuels,hydroelectric or nuclear energy. As a result, the province imports nearly 85 percent of its energy

needs from mostly petroleum-based off-Island resources. This heavy reliance on out-of-provincesuppliers makes PEI consumers and residents particularly vulnerable to fossil fuel price volatilityand supply disruptions. Pursuing renewable energy development offers an alternative toconventional sources and will provide greater control on the Island of energy prices, security, anddiversity of supply. Promoting renewable energy development will address many environmentalissues- particularly climate change and the reduction of greenhouse gases. For the purposes ofthis discussion document, the renewable energy sources considered in this section include wind,solar and earth energy. Biofuels will be addressed separately in the subsequent section.Despite being surrounded by water, there is currently little potential for wave and ocean energytechnology applications in PEI and were therefore not considered within the scope of thisdocument.

In 2004, the Department of Environment, Energy and Forestry oversaw the development and

implementation of the Renewable Energy Act, which provided a number of policy instruments(e.g. net metering, feed-in tariffs, designated development zones, and a renewable portfoliostandard) to increase the development of renewable energy. A Renewable Portfolio Standard(RPS) was introduced requiring utilities to acquire at least 15 percent of electrical energy fromrenewable sources by 2010.

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Wind

As a percentage of domestic use, PEI is a North American leader in the development of windenergy. The Provincial Government, through the PEI Energy Corporation, developed AtlanticCanadas first utility-grade wind farm in 2001 at North Cape before the economic feasibility ofthese projects was proven for this region. Since that time, the PEI Energy Corporation hasexpanded its North Cape facility and developed the East Point Wind Farm that has resulted in theProvince owning and operating 40.56 MW of wind power. Now that electrical generation fromwind has been demonstrated to be competitive with non-renewable sources, there are privatewind developments that have been completed. Several more private wind farms are in theplanning stages.

In addition to proving the economic feasibility of utility-grade turbines, the Province has promotedwind development through regulatory measures. Under the Renewable Energy Act, utilities onPEI must meet at least 15 percent of their electrical energy sales from procuring power fromrenewable resources by 2010. Presently, almost 18 percent of the electricity on PEI is acquiredfrom wind power and the renewable portfolio standard has been met. The electrical utilities onPEI have met their regulatory requirements in terms of incorporating renewable energy into theirsupply mix. Because wind power is an intermittent resource, there is a limit as to how much ofthis energy may be incorporated into the provincial grid. However, there remains an opportunity

for smaller wind projects, of less than 100 kW, that will not impact the ability of the utilities toadjust.

QuestionIs there further need for regulatory initiatives to further promote small wind developments?

Prince Edward Island has a world-class wind resource and there continues to be strong interest inlocating wind farms in the province. Most of the future development of wind must be marketed off-Island and may be sold at a premium to offset electricity from traditional sources that releaseharmful air and greenhouse gas emissions. The benefits to PEI for exported wind power aremainly accruing from lease payments for landowners where the turbines are situated, theeconomic stimulus from short-term construction opportunities, a limited number of operations and

maintenance jobs, and provincial revenues from the environmental attributes associated withgreen power production. There is an opportunity to maximize these benefits through thepromotion of additional large-scale wind farm developments.

Questions1. Do Islanders wish to limit the amount of wind development, given that future projects

will mainly provide electricity for export markets?2. Should the Government limit the number of turbines in PEI, given that each turbine

occu ies between 15-20 acres of land?

Maritime Electric Company, Ltd. has drafted an Open Access Transmission Tariff (OATT) thatis before the regulator, Island Regulatory and Appeals Commission. The OATT will provide

nondiscriminatory access for wind developers and other potential users at a regulated rate forservice. MECL has proceeded with a process to determine transmission requirements for futurelarge-scale wind projects in PEI that may lead to increased transmission capacity for wind powerdevelopers. Both these initiatives will enable future wind developers transmission capacity fortheir exported power but there remains a constriction to off-Island transmission via the 200 MWundersea connection with New Brunswick.

QuestionIs there a role for the Provincial Government to assist Island utilities and other winddevelopers by improving transmission infrastructure for wind development, particularlythrough expanding the interconnection facilities for exported power?

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Wind energy is PEIs most prospective renewable energy resource. Given its intermittent nature,it is a challenge to incorporate a high percentage of wind into the electricity grid. The schedulingof wind energy is also problematic due to the intrinsic variables of weather forecasting. Researchand development (R&D) groups, particularly the Wind Energy Institute of Canada (WEICan,formerly the Atlantic Wind Test Site) at North Cape, advance wind technology through variousprojects and initiatives with other private and government agencies. Pursuing a high integration ofwind on PEI provides R&D opportunities for WEICan that have application in other provinces,remote parts of Canada and other parts of the world. Given our unique situation in PEI, energystorage R&D initiatives involving hydrogen fuel are also being developed to address theintermittent nature of wind power generation.

QuestionShould the Province be taking a lead role in the promotion of R&D opportunities relative towind integration and energy storage systems?

Role of Government

The PEI Energy Corporations ownership of the North Cape and East Point wind farms is aninvaluable asset to WEICan. Provincial ownership means that data for research and developmentis accessible to WEICan and has enabled the Corporation to be an active partner inunderstanding and promoting wind energy developments in PEI. Having access to actual publicassets in the field is an important element to the success of research and developmentopportunities for WEICan and PEI. In addition to the above, significant revenues are now beinggenerated by the PEI Energy Corporation and flowing back to the province, thereby contributingto the diversification of supply and stabilization of the cost of electricity.

Questions1. Should the Province, through the PEI Energy Corporation, continue its role as

developer and operator of wind projects?

2. Should the Province divest itself of its existing wind operations?3. If it is determined that governments role is not as developer or owner, should the

Province assist private developers? What form of assistance should be provided?

Solar Technologies

Solar energy technologies capture the sun's energy for practical applications. There are manymodern technologies for harnessing solar energy to produce food, heat, light and electricity.Applications span the residential, commercial, industrial, agricultural and transportation sectors.The pervasive use of solar technologies peaked in the 1970s and early 80s during the first fuelcrisis- government grants, incentives, and demonstration systems caused an explosion of growthin Canada. PEI at one time, had the highest per capita residential use of solar hot water units in

the country.

Passive solar design in new construction can provide practical lighting, comfortabletemperatures, and improved air quality by tailoring building orientation, proportion, windowplacement, and material components to the local climate and environment.

Solar thermal applications make up the most widely used category of solar energy technology.These technologies use heat from the sun for water and space heating, industrial process heat,cooking, water distillation and disinfection.

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Electricity can be generated from the sun by photovoltaic technology (PV). The primaryobstacle to increased use of photovoltaic systems is their high initial cost. Continuous pricereductions have been occurring. In some off-grid locations photovoltaic systems can be costeffective versus the costs of running power lines. With many jurisdictions now providing tax andrebate incentives, PV installations make up the largest part of the solar residential marketworldwide.

With increased public concern over escalating fuel prices and regard for the environment, the useof solar technologies as a renewable fuel source will no doubt regain momentum. Solartechnology maturation and the rising cost of fossil fuels are making solar systems a moreattractive alternative to conventional sources of energy.

Earth Energy

Earth energy systems, or geothermal systems, are terms used to describe a renewableenergy alternative to traditional oil-, gas- or coal-fired heating, ventilation and air conditioning(HVAC) systems. This technology transfers the heat located immediately under the Earth'ssurface into a residence or building in winter, and is able to provide cooling functions in thesummer when the outside temperature is higher than ground temperature (8-12 0C).

Twenty percent of the average energy demand in a residential home is for water heating, andmost geothermal units include a component to heat water for potable or sanitary use. Earthenergy systems are ideally suited to meet the HVAC needs of commercial, industrial andinstitutional (e.g. schools and post-secondary) users. Natural Resources Canada (NRCan) andthe US Environmental Protection Agency state that earth energy systems are the most energy-efficient, environmentally clean, and cost-effective space conditioning systems available in themarket today.

Questions1. What role should the Provincial Government play in demonstrating solar and earth

energy systems?2. Given that the price of crude oil has just hit record highs, should the Province be

taking a closer look at the economic viability of these systems?

SECTION V- BIOFUELS

Overview

Growing crises in the agricultural and forest sectors, rising fuel prices, concerns about thesecurity and supply of energy resources, and growing awareness of the impact of traditionalenergy resources on the environment (e.g. climate change) have greatly increased interest inrenewable and sustainable energy technologies, and in particular, biofuels. Biofuels represent apotential opportunity to transition to a sustainable bio-economy in which agricultural and forestryproducts, co-products and waste materials are used to produce energy. An aggressive biofuelsportfolio, incorporating less carbon intensive fuels into the current energy mix could complementPrince Edward Islands efforts to further renewable energy development, reduce greenhouse gasemissions, and provide an additional revenue source for the agricultural and forestrycommunities.

Fuels made from renewable resources are referred to as biofuels or renewable fuels. Primarysources of feedstock for biofuels include: agricultural crops and crop residues, residues fromfood processing industries, livestock and deadstock, trees, logging and forestry products, industry

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residues, organic portion of municipal solid waste, sewage sludge, and industrial, commercial andinstitutional waste.

Common biofuels include wood, crop by-products like cereal straw or perennial grasses, pureplant oils, ethanol, biodiesel, waste cooking oil, and biogas. Biofuels can be used for spaceheating (Green Heat), electricity generation (Green Power), and transportation (Green Fuel).Pure plant oils are processed from biomass or field crops (e.g. canola). Biodiesel can be madefrom seeds or animal fat, while ethanol can be made from high starch crops, such as corn, wheat,sugar cane or sugar beets. All liquid biofuels can be blended with fossil fuels and used intraditional applications to reduce our reliance on petroleum products and reduce greenhouse gasemissions.

The Biofuel Potential in Prince Edward Island

In September 2007, Executive Council established and directed the Environmental andRenewable Industries Committee (ERIC) to examine the potential for local biofuel development.With members from eight government departments and agencies, ERIC was mandated to collectrelevant data on the quantity and quality of available feedstocks from primary resource sectorsand submit policy recommendations regarding the sustainable development of these resources.

In determining the potential for biofuel development in Prince Edward Island, a number of factorsneed to be considered. Specifically:

Availability of and/or potential to grow feedstocks for biofuel development Local and/or regional markets for biofuels Benefits to Islanders (economic, environmental and social) from local biofuel

development Evaluate biofuel potential based on full life-cycle sustainability criteria

Biomass

Ten percent of energy in PEI is currently supplied by biomass, which includes fuel wood, sawmillresidue and municipal waste. PEI Energy Systems in Charlottetown uses municipal waste andwood biomass to supply thermal energy to commercial, residential and institutional buildings inthe city. There are many biomass resources in PEI that, if developed properly, could contribute toadditional incorporation of renewable energy into the provinces overall energy mix.

Biomass from forest and agricultural sectors are the most readily available feedstock for biofueldevelopment in Prince Edward Island. Wood supplies from Island forests (softwood, hardwood,post-harvest material, plantation thinnings, roadside material etc.) could represent a significantfeedstock for space and water heating. Agricultural crops such as straw and hay could be furtherdeveloped as potential feedstocks.

Markets for biomass systems include the residential, commercial and institutional sectors. In2006, 38 percent of Island homes had wood burning units, but only half of these homes usedwood as their primary heating fuel. Tax exemptions for wood heat systems (wood and wood

pellets) has increased the popularity of these systems and resulted in a larger market for woodpellets. However, unlike other small-scale renewable systems, the current tax exemption for woodcombustion systems expires March 31

st, 2008.

QuestionShould the Province extend the exemption on small-scale biomass systems?

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Biomass fired district-heating systems for municipalities or small communities could represent aviable market and provide long-term employment to many rural Islanders. With sustainable forestmanagement systems and practices, larger-scale forest biomass production could facilitateimprovements in the productivity, quality and value of PEIs struggling forestry sector. Thedevelopment of markets for agricultural biomass could also help strengthen the farmingcommunity.

Biomass Challenges

There are a number of perceived obstacles to further the development of biomass fuel in PEI:

The need for a clearly defined policy and strategy to further biomass development The need to modernize labour regulations for the staffing of small heating plants Grid access with fair market prices for the production of green power from biomass fuel

sources Environmental and health concerns associated with biomass emissions (i.e. wood

smoke)

Questions

1. How should the Provincial Government be actively promoting the use of biomass?2. What types of support should the Government be providing?3. Should the Province be setting aggressive targets for solid biomass production &

use?4. If yes, then how? A Renewable Portfolio Standard? Other incentives?5. What role should government play to create a suitable biomass fuel supply

infrastructure?

Liquid Biofuels

The Federal and most Provincial Governments outside of Atlantic Canada have supported thegrowth of liquid biofuels to mitigate the environmental impacts of fossil fuel combustion and

create new markets for the agricultural sector. More than half of Canadian provinces haveexisting policies relating to the production and/or consumption of biofuels. The FederalGovernment recently announced a regulation requiring a 5 percent and 2 percent averagerenewable content in Canadian gasoline and diesel fuel by 2010 and 2012 respectively. The 2007Federal Budget indicates an investment of $1.5 billion over seven years as an operating incentiveto producers of renewable alternatives to gasoline and diesel, i.e. ethanol and biodieselrespectively. While policies have yet to develop in Atlantic Canada, there has been clear directionfrom the New England Governors and Eastern Canadian Premiers (NEG/ECP) and the Council ofAtlantic Premiers (CAP) regarding the need to assess and develop local biofuel opportunities. Inorder for PEI to achieve its environment goals and greenhouse gas objectives, the introduction ofa biofuel policy is imperative given that 43 percent of energy consumption in PEI is from thetransportation sector.

Pure Plant Oils

Canola and soybeans are currently grown on just over 2 percent of Prince Edward Islandscropland or improved pasture. Canola is particularly well suited for our climate, and has highenergy content. Acreage of canola and soybeans are currently not sufficient for broad-scale useof pure plant oils, but could support pilot initiatives and be further developed once market demandis demonstrated.

Pure plant oils have a number of applications and potential markets. Pure plant oil can displacelight fuel oil for space and water heating applications and diesel in transportation applications,

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however modifications to combustion equipment may be required. Major manufacturers ofagricultural machinery are on the leading edge of liquid biofuel development for application in on-farm machinery. Large commercial, institutional, and industrial users of oil may also represent asuitable market for pure plant oils. Canola and waste vegetable oil are already being used insome commercial fleets in Prince Edward Island.

Biodiesel

Currently, there are limited feedstocks available for the production of biodiesel. Oil-seed crops,such as canola, could be further developed on Prince Edward Island provided enough agriculturalland is available. Biodiesel is more likely to be compatible with residential and commercial heatingapplications than pure plant oils as its use requires little or no modification to existing combustionequipment.

Biodiesel markets are rapidly expanding in the Maritime provinces. The potential market forbiodiesel for heating is significant, with 76 million litres used each year in Island homes and 62million litres used in commercial and institutional facilities. Demand for diesel and light fuel oil inthe region exceeded 3 billion litres in 2006. At blends of 5 to 20 percent, regional demand forbiodiesel could exceed 600 million litres.

From a life-cycle sustainability perspective, biodiesel (depending on the feedstock) can produce60 to 100 percent fewer greenhouse gas emissions than diesel or light fuel oil. The use ofbiodiesel, produced domestically or imported, will help the Province to meet its renewable energyand environmental goals.

Ethanol

Ethanol is a transportation fuel, suitable for use in vehicles in blends of up to 10 percent, withoutthe need for any engine modifications. The current availability of local feedstocks (e.g. corn,wheat, sugar beets) to produce ethanol is limited on PEI. Similar to biodiesel crops, concernsexist around the type of feedstocks for ethanol production and the availability and effect onagricultural land. However, many sectors of the Islands agricultural industry are facing seriouschallenges from declining revenues- switching to the cultivation and production of energy crops

could help mitigate and improve this downward trend.

Current annual gasoline demand in PEI is 234 million litres with regional demand at 2.5 billionlitres. At a 10 percent ethanol blend, provincial demand for ethanol would be approximately 23million litres with regional demand potentially exceeding 250 million litres. An Island-basedcommercially viable ethanol production facility would likely require a broader market outside ofPEI and may require imported supplementary feedstock.

Like biodiesel, ethanol can reduce greenhouse gas emissions, depending on the feedstock andtechnology platform. Concerns regarding the environmental sustainability of ethanol productionhave been directed primarily at older first generation facilities in the corn-based industry in theUnited States. Second generation technologies, new plant designs and the advent of cellulosicethanol have addressed these concerns resulting in substantially lessened environmental

impacts.

Liquid Biofuel Challenges

Biofuels produced from energy crops grown on Prince Edward Island could reduce ourdependence on imported fossil fuels, reduce the emission of greenhouse gases and other airpollutants, and potentially provide the agricultural and forestry sectors with alternative sources ofrevenue.

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There are, however, challenges to be considered in the development of liquid biofuels in PEI:

Availability of locally grown feedstocks to meet market demand Potential displacement of agricultural land for food production Consideration of the full environmental, social and economic impacts of individual

feedstocks and technology platforms for the production of l iquid biofuels

Questions1. Should the Province implement policies relating to the production and consumption of

biofuels in PEI?2. How important is it to Islanders to have feedstocks produced and consumed on PEI?3. Are Islanders prepared to support, through tax dollars, a local biofuels industry?

Biogas

Biogas is a type of biofuel, in the form of a gas that is produced by the anaerobic digestion orfermentation of organic matter. Agricultural and marine byproducts, sewage sludge, municipalsolid waste or any other biodegradable feedstock, under anaerobic conditions, can produce

methane and carbon dioxide. The production of biogas could represent a significant biofuel forspace heating applications or electricity generation.

Despite the considerable sources of raw material for the production of biogas on PEI fromagricultural, marine-based and waste resources, the potential for this biofuel may be limited tospecific and localized applications. While large quantities of manure are generated on Islandfarms, 90 percent is used for on-farm nutrient management. Fish processing waste from themussel, lobster and crab industry could be used as a feedstock to produce methane. However,the logistics and necessity of removing shell from the feedstock have proved challenging and thepotential for nutraceutical and pharmaceutical uses may represent a competing market.

Biogas production is occurring in Prince Edward Island. Methane is being used on site atwastewater treatment facilities and industrial operations. Cavendish Farms is currently building alarge bio-digester fuelled by food processing waste. The Central Composting Facility may also

represent a significant source of untapped material for the production of biogas. Whether it is inexisting markets, isolated industrial users, or as part of other biogas initiatives, the mostappropriate and economic use of these feedstocks requires further assessment.

QuestionGiven the limited opportunities for biogas, is there a role for Government in promoting its usein PEI?

Leadership

Government has traditionally played a role in the development and implementation of renewable

energy initiatives. As a significant energy consumer, government could lead by example anddemonstrate the use of biofuels at public facilities (offices, schools, hospitals, etc.) and ingovernment fleets. The Provincial Government alone uses more than 10 million litres of light fueloil and 2.5 million litres of diesel in fleets and facilities. Biodiesel was piloted in select vehicles inthe Department of Transportation and Public Works (B10 blend) fleet in 2006 and 2007. As amajor energy consumer on the Island, government could contribute to the development of biofuelmarkets.

QuestionGiven the potential environmental, social and economic benefits of pursuing biofueldevelopment, should Government be demonstrating biofuel applications within its operations?

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SECTION VI- GOVERNMENT POLICY & ECONOMIC DEVELOPMENT

Overview

Aggressively pursuing energy efficiency and renewable energy development will not onlycontribute to a sustainable energy future but will also help transition the Island to a prosperous

knowledge-based economy. There is broad recognition that PEI has already begun to make thisshift and is evidenced in the growth of the aerospace, bioscience and information technologyclusters. These industries have experienced rapid success in part because of the ProvincialGovernments support and attention to prioritizing these high growth economic opportunities.

Energy Efficiency

There are many simple and inexpensive ways for all Islanders to help contribute to a moresustainable energy future while increasing the strength of PEIs economy. The economic benefitsto decreasing energy consumption and increasing efficiency will have a positive impact on thecompetitiveness of the Islands economy in many ways:

Puts more money back in the pockets of consumers

Lowers operating costs and improves bottom line for commercial and industrial sectors Contributes to the local economy in the purchase of energy efficient equipment Presents new opportunities for local trade contractors and professionals Creates new jobs

Renewable Energy / Biofuels

Government policy approaches to support renewable energy development are normallydistinguished based on each major use of green energy:

1. Green Power- wind, solar, biomass & biogas for electrical generation2. Green Heat- thermal energy from biomass, solar or earth energy systems3. Green Fuels- ethanol, biodiesel & home heating fuel blends

The PEI Government can play a primary role in building new local markets for clean renewablepower technologies through selective financial incentives, rebate programs, regional collaborationand strategic community-based economic policies.

Distributed Generation: Community-Based Energy Projects

Strong, diverse, local economies are the backbone of a vibrant Island community. Realizing theadvantages that can accrue through local ownership of distributed or community-basedenergy projects has resulted in the most accelerated and successful growth of renewableenergy in other jurisdictions around the world. This model is designed and implemented toaccomplish the complementary goals of environmental and regional economic sustainabilityresulting in the local control and retention of substantial revenues from the sale of power back tothe grid operator (local utilities).

When the revenues generated by these community-owned projects flow back into the localmunicipalities, the whole community benefits from the economic spin-off. Long-term fixed pricecontracts for the various forms of renewable energy sources (wind, solar, biomass & earthenergy) are a key economic policy mechanism that benefits the broadest spectrum of localcommunities and residents.

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Questions1. Should the Province support and promote community-based energy projects? How?2. If yes, which types of projects require support? Wind? Solar? Biomass? Earth energy

systems? Others?

Green Power

The 2004 Renewable Energy Strategy introduced three progressive and substantial policymechanisms to support the growth and use of renewable energy for electricity generation in PEI:

Net Billing

The terms net-billing and net-metering are often used interchangeably when referring to thepractice of enabling a small generation system being operated in parallel with the electricaldistribution facilities of a public utility and receiving the value of the retail rate for any powersupplied to the grid. In Prince Edward Island small renewable energy generators, those with anominal capacity of 100 kilowatts or less, may be eligible for the benefits of net-metering.

In the context of community-based energy, a net-billing system does not have to be configured inparallel to the electrical utilitys network and may be directly wired to the grid. Power generatedfrom the renewable energy generator is thus eligible to offset the electrical energy from one orseveral billing accounts that are held by a municipality or cooperative. For example, a small windturbine owned by a community could be utilized to offset the power bills of several end users,including recreation facilities, street lighting and water and sewer infrastructure. The turbine couldbe situated in a location that was most favourable for generating power and away from the loadsthat it was offsetting. The existing legislation in Prince Edward Island does not enable net-billingapplications.

Feed-in Tariffs

Feed-in tariffs, also known as advanced renewable tariffs or standard offer contracts were

introduced in PEI following the 2004 Strategy. The Government of PEI mandated MaritimeElectric, through the Island Regulatory and Appeals Commission, to provide a long-termcommitment to the purchase of green power from locally distributed power generation projects.Most leading jurisdictions are providing different pricing strategies for each technology i.e. wind,solar technologies, earth energy and biomass. Fees can be adjusted if it becomes apparent that aparticular technology appears to be lagging in development and use, providing a flexible meansto react to market and technology developments.

Innovative feed-in tariffs can promote the uptake of decentralized power generation employing agreater use of more diverse technologies and having a greater effect on local economicdevelopment. A community-based renewable energy sector has yet to be established in PEI.Farmers, rural landowners, First Nations, co-ops, municipalities, small businesses and individualscan benefit from renewable energy development with smaller decentralized community-based

initiatives.

Renewable Portfolio Standards (RPS)

A Renewable Portfolio Standard or RPS is another successful policy mechanism that definesthe percentage of energy to be accessed on the Island by local utilities from green energysources. Prince Edward Island was the first province in Canada to commit to an RPS forelectricity of at least 15 percent by 2010, and met this target three years ahead of schedule in2007. Most RPS approaches around the world set escalating targets for utilities to reach. Due tothe intermittent nature of wind, the possibility of incorporating more than 20 percent of the total

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electricity supply from wind may not be feasible. However, co-generation facilities involvingbiomass or other renewable energy sources may provide alternatives to wind energy andcontribute to a higher percentage of green power and greater diversity of supply in the overallprovincial energy mix.

Questions

1. Given the limitations of wind, what actions should the government take to incorporateother renewable energy sources into the provincial energy mix?

2. Should the Province consider introducing an RPS and feed-in regulatory requirementforbase-load generationfrom renewable energy resources?

Green Heat

Water and space heating requirements make up the greatest proportion of energy use inbuildings and residences. There are few examples of government policies that focus onincreasing the use of renewables to meet these thermal energy requirements. Solar hot water,earth energy systems, and biomass district heating systems have been the focus of specific fiscalincentives in several European countries. Providing tax incentives or implementing a renewable

heating obligation (similar to an RPS for heat) with specific targets has helped other jurisdictionsmitigate environmental impacts and has served to increase the overall percentage of renewableenergy use.

Questions1. Should the Province consider an RPS for home heating?2. What other incentives should Government pursue?

Green Fuels

There are several policy mechanisms available to government to encourage the use of greenfuels in the transportation sector and for home heating. In both cases, as discussed above, it will

be important to establish clear sustainability criteria for the further development of the biofuelsindustry here in PEI. Whether it is to invoke new sustainable forest management practices forbiomass harvesting or agricultural policies for sustainable energy crop management, theintroduction of new government policies will require further investigation and research.

Renewable Fuel Standards

A similar concept to Renewable Portfolio Standards is the notion of Renewable Fuel Standards(RFS). RFSs set targets for a percentage of transport fuel to be acquired from domesticrenewable sources such as ethanol or biodiesel. The introduction of RFSs in other countries haslead to the rapid development and growth of the biofuel market and has produced significanteconomic benefits. The Federal Government recently announced a regulation requiring a 5percent average renewable content, such as ethanol, in Canadian gasoline by 2010. There are

however no assurances that renewable fuels will be available in all Canadian jurisdictions.There are also many tax exemption policies for biofuel development that have been implementedin other jurisdictions aimed at offsetting the price difference with conventional fossil fuels.

Questions1. Should PEI introduce its own biofuel mandate?2. Should the Provincial Government consider tax incentives for biofuel production and

consumption in PEI?3. What other policies could Government consider to promote consumption and/or

production of biofuels in PEI?

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Green Technology Cluster

A business cluster is simply a geographic concentration of interconnected businesses, suppliers,and associated institutions in a particular field. While agriculture, fisheries and tourism havehistorically been the drivers of the Island economy, emerging sectors like aerospace, bioscienceand IT are now contributing more to the overall shift to a knowledge-based economy. A criticalcapacity, a North American reputation and a firm track record in renewable energy developmentalready exists on PEI. A strategic plan could be designed and implemented to leverage thestrengths of the Islands current resources to guide the growth and development of a GreenTechnology Cluster (GTC).

The Wind Energy Institute of Canada(WEICan) is a leader in the development of this localrenewable resource and has attracted international collaborations between academic institutions,researchers and the private sector. Holland Colleges strong focus in applied education makes itideally positioned to assist this industry initiative by graduating skilled technicians in efficienttechnologies and renewable energy. The University of Prince Edward Island has been a leader ingreening its campus and supporting research and development. PEI Energy Corporation, PEIEnergy Systems, local utilities, the agricultural and forestry sectors can all work together instrengthening a Green industry and promoting economic development on the Island. Several

private sector companies have established or are interested in establishing renewable energyindustries and technologies in PEI.

Policy incentives and the support of a made-in-PEI GTC could greatly enhance the economicbenefits and opportunities for Islanders:

Attract investment dollars for companies, institutions and governments Forge relationships and collaborations locally, regionally and internationally Accelerate technology transfer and commercialization Build capacity - new industries will attract experts from various fields Contribute to the creation of new jobs Lead to export opportunities

The key to success for the growth of Technology Clusters are governmental policies andmechanisms that stimulate capacity building, research and development, technologycommercialization (proof of concept) and transfer, small business support, and public outreachand education. There is a key opportunity for PEI that should not be overlooked- the potential forthis region to become a world-renowned hub or cluster for green tech companies, R&D activities,and showcases for the Island itself to walk the walk in its use of energy efficiency andconservation, renewable energy resources and biofuel development. The payoffs can besubstantial in terms of overall economic growth and provides additional opportunity to overhaul aregions image into a place that attracts more conventions, more tourism and more people whowant to live in Prince Edward Island.

All conventional energy industries are highly governed sectors. Coal, natural gas, nuclear, and oil,to the transmission and distribution of electricity, are guided and impacted by government policies

and regulations. The issue for green technologies is not if they should get support, but howrapidly governments will shift their focus from conventional fossil fuel industries to emerging, high-growth green technology sectors.

Questions1. Should the Province support the notion of creating a Green Technology Cluster on

PEI?2. How important is it to Islanders to be seen as leaders in the development and use of

renewable energy technology?

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SECTION VII- THE PATH FORWARD

Public Consultation

The Province of PEI has developed a North American, if not global, reputation as leader in thedevelopment of renewable energy. The purpose of this discussion document is to solicit the input

of Islanders on the direction of future energy developments in the Province. Since theimplementation of the Renewable Energy Strategyreleased in 2004, the Province has madesignificant progress incorporating wind energy into the provincial energy portfolio and hasdecreased our reliance on imported fossil fuels. The intent of this document has been to presentnew action in areas such as energy efficiency and conservation as well as other policymechanisms to promote the use of renewable energy and economic development. TheGovernment of PEI would like to hear from the public on the ideas and information presented inthis paper before developing a final Energy Strategy that will guide their efforts over the nextdecade.

Final Strategy

All of the stated objectives of (1) energy security, (2) environmental sustainability and (3)

economic development will require Government action in the form of support, incentives,legislation or regulations. With input from the public, the Province will be able to gauge theinterest and support of Islanders in the different areas affecting energy use in PEI to produce aProvincial Energy Strategy. Following this public consultation exercise, all feedback received willbe analyzed and incorporated into a detailed document that will serve as a framework for futurepolicy decisions and action.

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SECTION VIII- APPENDICES

Submissions Received From:

Bedeque Bay Environmental Management Association (BBEMA)Canadian Bioenergy Association

Cavendish FarmsEastern School BoardEnvironmental Coalition of Prince Edward Island (ECO-PEI)Environmental and Renewable Industries CommitteeEnvironment NortheastHolland CollegeInstitute for Bioregional Studies Ltd.Island Regulatory and Appeals CommissionMaritime ElectricNatural Resources CanadaNew Brunswick System OperatorNoonan PetroleumPEI Business Development

PEI Department of AgriculturePEI Department of Development and TechnologyPEI Department of Environment, Energy and ForestryPEI Department of Fisheries and AquaculturePEI Department of Provincial TreasuryPEI Department of Transportation and Public WorksPEI Federation of AgriculturePetroWorth ResourcesProvincial Office of Biosciences and Economic InnovationQueen Elizabeth HospitalSky PowerSoutheast Environment AssociationSummerside ElectricUniversity of Prince Edward IslandWestern School BoardWind Energy Institute of CanadaWind-works.org

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Reference Materials

Reports/Documents

33rd

Annual Statistical Review 2006. Prince Edward Island Provincial Treasury. June 2007.Available at: http://www.gov.pe.ca/photos/original/pt_annualreview.pdf

Assessing the Opportunities in Renewable and Alternative Energy for Prince Edward Island.Jacques Whitford. February 2007.

Atlantic Energy Framework for Collaboration. Work Plan Document. 2007.

Canadas Energy Outlook: The Reference Case 2006. Natural Resources Canada Analysis andModeling Division.

Canadian Bioenergy Association and Maritime Bioenergy Working Group. Submission to theProvince of Prince Edward Island. December 2007.

Canadian Attitudes Towards Energy Efficiency. Canadian Electricity Association.

www.canelect.ca

Climate Change in Nova Scotia. A Background Paper to Guide Nova Scotias Climate ChangeAction Plan. Nova Scotia Department of Energy. October 2007.

Consultation Paper: Nova Scotias Renewed Energy Strategy and Climate Change Action Plan.Nova Scotia Department of Energy. 2007.

e.Catalog Product Acceptance Criteria. BC Hydro. November 2006.

Economic impact study for a canola-based biodiesel industry in Canada. BBI Biofuels CanadaReport for the Canola Council of Canada. July 2006.

The Efficiency Paradox. Jeff Rubin. CIBC World Markets StrategEcon. November 2007.

Electricity and Climate Change. Canadian Electricity Association. October 2002. www.canelect.ca

Energy Efficiency Initiative Designs and Achievable Potential for Prince Edward Island. VermontEnergy Investment Corporation et al. September 2007.

Energy Framework and Renewable Energy Strategy. Government of Prince Edward Island. 2004.Available at: http://www.gov.pe.ca/infopei/index.php3?number=1001539

Energy supply and demand 2006. The Daily. Statistics Canada. December 20, 2007.

Environmental and Renewable Industries Committee Biofuels Report. January 2008.

Focusing Our Energy. Newfoundland and Labrador Provincial Energy Plan 2007. Available atwww.nr.gov.nl.ca/nr

New Brunswick Energy Policy White Paper 2001. New Brunswick Department of NaturalResources and Energy.

New England Governors and Eastern Canadian Premiers Ministerial Forum on Energy and theEnvironment. Recommendations and Outcomes. June 2007.

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Pathways to Sustainable Energy Prosperity on Prince Edward Island. Leslie Malone,Environmental Coalition of PEI. 2007.

Power Generation in Canada: A Guide. Canadian Electricity Association. 2006.

Prince Edward Island Electric Power Act. PEI Legislative Counsel Office.

Prince Edward Island Fuel Wood Survey 2006

Prince Edward Island Oil and Natural Gas Act. PEI Legislative Counsel Office.

Prince Edward Island Renewable Energy Act. PEI Legislative Counsel Office.

Promoting Wind Development on Prince Edward Island. Request for Expressions of Interest.Maritime Electric Company, Ltd. December 2007.

Report on Energy Supply-demand in Canada. Statistics Canada. Catalogue no. 57-003-XIE. 2005

Roadmap to a Self-Sufficient Energy Future. Toby Couture and David Coon. ConservationCouncil of New Brunswick. November 2007.

Standard Offer Program Renewable Energy For Small Electricity Generators, An IntroductoryGuide. Ontario Power Authority. www.powerauthority.on.ca/SOP

Successful Strategies for Energy Efficiency. A Review of Approaches in Other Jurisdictions andRecommendations for Canada. Alison Bailie et al. August 2006.

The Clean Tech Revolution. Ron Pernick and Clint Wilder. 2007

White Paper on an Energy Efficiency System for New Brunswick. New Brunswick Department ofEnergy. September 2004.

Websites

National Energy Board. www.neb.gc.ca

Natural Resources Canada. www.nrcan.gc.ca

Presentations

Advancing world-leading energy efficiency policies, practices and technologies in BC.Presentation by Markus Zeller, BC Hydro Power Smart. November 28, 2007.

Environmental and Renewable Industries Committee Presentation: Energy Strategy

Considerations. Presentation by Wayne MacQuarrie, PEI Energy Corporation. November 2,2007.

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Glossary of Terms

Achievable potential the amount of energy cost savings that could be obtained through energyefficiency initiatives.

Anaerobic digestion the process in which micro-organisms break down biodegradable matter

in the absence of oxygen.

Atlantic Energy Ministers Forum (AEMF) a committee consisting of the four Atlantic Canadaenergy ministers formed to strengthen the level of co-operation throughout the Atlantic region.More specifically, the AEMF was asked to identify where the four provinces should focus theircollective efforts to ensure that the energy sector in Atlantic Canada continues to grow into thefuture to the benefit of all Atlantic Canadians.

Base-load generation - a base load power plant (or base load power station) is one thatprovides a steady flow of power regardless of total power demand by the grid. These plants run atall times through the year except in the case of repairs or scheduled maintenance. Examplesinclude nuclear and coal-fired power generation. Typically these plants are large enough toprovide a majority of the power used by a grid- fluctuations, peaks or spikes in customer power

demand are handled by smaller and more responsive types of power plants.

Biodegradable organic matter such as plant and animal matter and other substancesoriginating from living organisms.

Biodiesel a type of liquid biofuel. Biodiesel is typically created through a chemical reaction ofoils or greases with methanol to create methyl ester (also known as biodiesel). It can be useddirectly in internal combustion engines at full concentration, or blended with petroleum diesel. Itreduces atmospheric emissions in conventional applications.

Biofuels fuels (solid, liquid or gaseous) made from renewable resources. Primary sources ofbiofuels include: agricultural crops and crop residues, residues from food processing industries,livestock and deadstock, trees, logging and forestry products, industry residues, organic portion

of municipal solid waste, sewage sludge and industrial, commercial and institutional waste.

Biogas a type of biofuel generated by the anaerobic digestion (no oxygen) or fermentation oforganic matter such as manure, sewage sludge, municipal solid waste, biodegradable waste orany other biodegradable feedstock. Biogas can be burned to produce steam or used directly insome internal combustion engines or turbines to generate electricity.

Biomass forms of energy derived from living things - heat produced by burning wood, biofuelsmade from canola or sugar beets, biogas extracted from sewage sludge and animal andvegetable waste in landfill sites.

Cellulosic ethanol - is an alternative fuel that can help reduce reliance on fossil fuels. Whileconventional ethanol is derived from soft starches (corn for example), cellulosic ethanol is derivedfrom a wide variety of sources of cellulose (cell wall) plant fiber. These range from stalks and

grain straw to switchgrass and quick-growing trees (poplar and willow)and even municipalwaste.

Co-generation the process in which an industrial facility uses its waste energy to produce heator electricity.

Community-based energy projectsrenewable economic development projects implementedin rural areas for the benefit of the community as a whole.

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Conference of New England Governors and Eastern Canadian Premiers (NEG/ECP) Established in 1973, the Conference assembles meetings of state and provincial officials,organizes roundtables and workshops, and prepares reports and studies of issues of regionalimportance. At their annual conferences, the Governors and Premiers discuss issues of commoninterest and concern, and enact policy resolutions that call on actions by the state and provincialgovernments, as well as by the two national governments.

Council of Atlantic Premiers (CAP) Established in 2000, the Council is committed to workingtogether on behalf of Atlantic Canadians to: strengthen the economic competitiveness of theregion; improve the quality of public services to Atlantic Canadians; and improve the costeffectiveness of delivering public services to Atlantic Canadians.

Demand Side Management (DSM) using electricity efficiently and scheduling some energyintensive activities away from the peak consumption times of day. These initiatives can make ahuge difference in electricity pricing and reducing environmental impacts. It involves the planning,implementation and monitoring of utility activities designed to encourage consumers to modifypatterns of electricity usage, including the time of day and level of electricity demand.

Designated development zones specific areas in which wind energy developments arepermitted.

Distributed generationthe generation of electricity from many small energy sources such assolar panels or small wind turbines. It reduces the amount of energy lost in transmitting electricitybecause the electricity is generated very near where it is used.

Earth energy systems this technology transfers the heat located immediately under theEarth's surface into a residence or building in winter, and is able to provide cooling functions inthe summer when the outside temperature is higher than ground temperature (8-12

0C).

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