North America Renewables

Ernst & Young - Proponents of renewable energy in the US and Canada say there has never been a better opportunity to replace carbon-based fossil fuels - coal, natural gas and oil -with alternatives such as wind, hydroelectric and solar power. The governments of both countries are evaluating their long-term energy policy, and the Obama administration has touted renewable energy as a driver of future growth. Despite the favourable environment, however, businesses are only tentative consumers of renewable energy.

And many energy producers are still waiting to see if there are significant opportunities to generate new revenue. To investigate the views of Canadian and US senior executives with regard to renewable energy, the Economist Intelligence Unit conducted an online survey of 132 executives, interviews and related research and found that the most significant drivers for renewable energy are public perception and government, while cost and technological immaturity are still significant barriers. These are the main findings.

Despite recently announced government incentive programs, renewable energy still remains expensive for both consumers and suppliers in Canada, impeding the shift to new energy sources. Canadian suppliers are clearly concerned with the cost of generating renewable energy - with 64% saying high costs make renewable energy unattractive to their customers. It appears that their concerns are not unfounded, as 68% of energy consumers surveyed say their organization has not taken steps to develop and adopt a renewable energy strategy.

As a result, suppliers aren’t moving quickly to add renewables to their portfolio. Only 38% of suppliers see growth of their renewable energy portfolio as a high or extremely high priority, with almost as many (34%), indicating that it is not as much of a priority. 57% of suppliers say that positive public perception is the biggest benefit to their organization incorporating renewables into its energy mix. In order to make significant progress with renewables, both suppliers and consumers agree that government has a crucial role to play in providing the necessary impetus.

Government regulation is particularly important in Canada, where 73% of supplier-respondents see it as a barrier, compared with only 42% in the US. 46% of respondents say that recent policies or those being proposed in their country are a step in the right direction - although more incentives are needed. Here are some highlights from the final report: In any business environment, the bottom line matters. So making renewable energy production and consumption attractive boils down to cost.

Supply of renewables is limited by the need for heavy investments in infrastructure and relatively lower margins. Uncompetitive pricing vis-a-vis fossil fuels constrains demand from energy consumers. The bottom line matters - For renewable energy to contribute significantly to reducing North America’s heavy reliance on fossil fuels, the cost of renewable forms of energy must fall.

Surprisingly, one concern trumps financial results for energy suppliers: public opinion. The public eye matters - for suppliers . Public perception is a significant driver for energy suppliers, pressuring them to commit to incorporating renewables into their energy portfolio.

In contrast, there is less pressure on energy consumers. For all the debate about the exact means of lowering infrastructure and cost barriers, there is one point of near-perfect consensus: the solution will come via government intervention. Whether through regulation or incentives, government has a crucial role to play.

Governments are in the driver’s seat . - If renewables are to meet public expectations, governments must pursue a clear agenda to provide incentives for suppliers and consumers alike. Both groups say that governments have a key role in creating an environment favourable to renewable energy. Consumers are most influenced by government tax incentives.

For suppliers, government regulation remains the biggest barrier to greater investment in renewables. The Ernst & Young report, href=”http://www.ey.com/Publication/vwLUAssets/RenewableEnergy/$FILE/RenewableEnergy.pdf” target=”_blank”>Renewable energy in North America: Moving toward a richer mix , was produced in cooperation with the Economist Intelligence Unit (EIU). Cathy Cobey and Melanie Steiner of Ernst & Young worked with EIU to develop this report.