Making the Case for a Canada-Wide Solar Incentive

In just a few short months, the coronavirus pandemic has profoundly destabilized the world’s economies and brought on a devastating recession sure to have lasting impacts. Governments around the world have scrambled to unload a tsunami of government expenditure and social programs to avoid economic collapse. Where countries choose to direct this expenditure will have serious structural and economic implications moving forward, heightening the pressure on incumbent governments to make the right decisions.

Canada’s left-leaning Liberal Party has been applauded for its response to Covid-19, which has prioritized public health over reopening the economy. As a direct result, Canada has experienced less economic turmoil than other nations and has successfully “flattened” the country’s curve. In contrast, the United States disregarded expert opinion, sought to prioritize the economy over public health, and has subsequently failed on both counts.

The Liberal’s post-pandemic recovery plan has been far from perfect, though. Investment in cleantech is not even close to on par with fossil fuels, creating a rift between Liberal platform policy and actual government policy. This is despite the pandemic providing an excellent opportunity to rapidly decarbonize, thanks to low-interest rates and the public’s willingness to allow governments to spend seemingly endless amounts of money. For ideas on how to stimulate cleantech, Trudeau’s Liberals should look south at the American solar investment tax credit (ITC).

The ITC is a federal policy mechanism that encourages the production of solar energy in the United States. It offers a rebate for solar installations that can be applied dollar for dollar towards an individual’s income tax. Currently, the rebate is 26% of the cost of a solar module. Since the ITC’s enactment in 2006, the American solar industry has grown by more than 10,000%. Continued renewal of the ITC has provided stability for cleantech innovators and investors, producing jobs and helping to lower electricity costs by driving market competition. The ITC is an excellent example of a public policy success story, with solar energy now making up 2.5% of energy production across the United States. This is well above Canada, which garners 0.5% of its electricity from solar power. A key strength of the American ITC is that it’s a federally administered program, allowing any homeowner to take advantage of it. This has permitted solar production to bypass partisan and ideological concerns that would harm the industry’s growth.

Unfortunately, in Canada, solar production incentives have not been able to bypass the country’s political arena with the same success. This is because there exists no federal framework promoting renewables. Clean energy incentives are up to the discretion of each province, which has provided relatively little stability for the industry and made the production of solar energy far more partisan than it should be. Ontario is an excellent example of this. Before the 2018 provincial election (which saw Doug Ford’s Conservatives win), the Liberal government of Ontario, under the leadership of Kathleen Wynne, aggressively pushed solar incentives. Wynne’s government developed the Micro-FIT program, which subsidized solar production on residential properties above market rates. Unfortunately, the design of the program made it easy to abuse. The program will cost billions of dollars because of long-term contracts, while only providing roughly 0.3% of Ontario’s electricity generation. After the Liberal defeat in 2018, all solar and green energy incentives were torn up, severely damaging Ontario’s clean energy market. While the Micro-FIT program ultimately failed, it demonstrated how incentives are capable of electrifying the solar market. This principle should be applied on the federal level to boost the demand for cleantech in every province, regardless of political culture.

Trudeau’s Liberal Party may not be as green as they’ve lead on, but legislating a Pan-Canada solar rebate framework would significantly improve their track record on environmental initiatives. Internal disagreements between Finance Minister Morneau and Prime Minister Trudeau about the scope of funding for green projects have recently come to light. It highlights the growing focus within the Liberal Party to address climate change and other environmental challenges. Trudeau has argued in favor of more spending for green projects, whereas Morneau has opposed such measures, deeming them too costly. On this issue, Trudeau’s intuition is serving him well.

Adopting a Canada wide solar rebate would make for an incredibly efficient investment into the government’s post-pandemic recovery, as it would accomplish a myriad of social, economic, and environmental goals. First and foremost, a federal solar rebate would boost the demand for cleantech, producing thousands of much-needed jobs. A federal solar rebate would also increase the share of renewable energy in Canada’s electrical grid. Supporting the development of net-zero homes is another benefit that a solar rebate would produce. Net-zero homes are those that are so energy efficient, they only use as much electricity as is produced from on-site renewables. This policy would help Canada progress towards achieving its goals under the Paris Climate Accord, in which it’s agreed to reduce emissions by 30% of 1990 levels by 2030. Trudeau’s Liberals have repeatedly said that they’re on track to meet this goal; however, this claim is misleading. Finally, a national solar rebate would improve community health, wellness, and help promote energy independence.

Designing and administering such a comprehensive policy would be highly complex. As such, it would be in the best interest of Canada’s government to deliver this kind of rebate through a new independent government agency. The independent agency would ideally be responsible for administering the program, certifying and monitoring companies performing solar installations, developing regulations for the solar industry, and ensuring compliance. Existing organizations, such as the Independent Electricity System Operator (IESO) in Ontario, are already plagued by internal complexities and bureaucracy, making them less suitable for handling such a policy.

The coronavirus pandemic has provided an excellent opportunity for world leaders to make great strides in fighting climate change. A federal solar rebate program would make for a worthy investment, as it would provide thousands of jobs and give homeowners a way to reduce their bills, improve their health, and fight climate change. Trudeau’s Liberals should not pass this opportunity up.

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