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Market News

 June 12, 2007
Fostering Renewable Electricity Markets in North America

 The Commission for Environmental Cooperation (CEC), an international organization created by Canada, Mexico and the United States, has released an overview of the key market demand and supply-side drivers for renewable electricity in each of the three North American countries.

The paper identifies regulatory mandates, voluntary purchases, self-supply and financial incentives as the most important drivers of a renewable electricity market in North America today. The report also explores the opportunities for growing the renewable electricity market in each of the three countries.

The CEC concludes that there is tremendous opportunity for renewable electricity to meet an increasing proportion of the North American electricity market. Many states and provinces in the United States and Canada have adopted some type of target for the supply of renewable electricity. At the same time, there has been an upsurge in the growth of the voluntary market from large corporate and other commercial purchases, particularly in the United States.

Rising prices for natural gas and other fossil fuels have allowed suppliers to position renewable electricity as a hedge against fuel price volatility- demonstrating the economic value of renewables beyond environmental benefits. In Mexico, two new pieces of legislation will address some of the legal and market constraints on renewables if they are enacted and private developers find creative ways to develop wind electricity projects. These and other factors show great promise for a continued growth of a renewable electricity market in North America.

Notwithstanding these achievements and positive trends, there is still room for improvement, notes the report. Effective public policies supporting renewables need to be more widely implemented and lessons-learned about programs that worked or did not work need to be more widely disseminated. More effort needs to be made to bring low-impact hydro renewables on par with non-renewable generators in terms of subsidies, tax incentives and other favorable government financing policies. Consumer understanding of the value of renewable electricity and their green pricing options is low, and voluntary markets for renewable electricity are still in their infancy in all three countries.

The purpose of this paper is to assist governments of the three North American countries in supporting renewable electricity development by addressing informational and transactional barriers that add to renewable electricity costs, and by more actively assisting with policy implementation. It concludes with a series of brief recommendations for the market overall and for the Parties of the North American Agreement on Environmental Cooperation (NAAEC) to help foster a North American renewable electricity future.