If Canada's fledgling green power industry cannot crack the burgeoning U.S. market, which pays rich rates for electricity from renewable sources, their growth may be stunted by a much smaller home market.
As things stand, developers of power from wind, solar energy, biomass and water sources are heavily dependent on winning long-term electricity contracts from big provincial utilities like BC Hydro and Hydro-Quebec.
But with about 30 U.S. states implementing rules that require a set percentage of renewable power, new markets may be opening up for Canada's independent power producers (IPPs).
"The resolution of the export issue for IPPs over the next three or four years will determine whether this industry as a whole thrives, or merely survives," said Paul Manson, Chief Executive of Sea Breeze Power Corp , a small British Columbia-based clean power developer.
Long-Term Contracts Needed
Canadian provinces like British Columbia and Ontario have a long history of trading power across the border, much of it on short-term contracts aimed at making a quick profit.
When it comes to signing long-term contracts with the United States, however, Quebec, with its abundant hydroelectric power, is the province to emulate.
In August, the mostly French-speaking province signed a 26-year, C$2 billion ($1.96 billion) contract to export power to Vermont at higher rates than it charges domestically.
IPPs in British Columbia are especially keen for the Pacific Coast province to follow Quebec's lead and tap power-hungry markets in states like California.
"The more trade that goes on and the more long-term contracts that B.C. enters into for the supply of electricity, the greater the opportunity there will be for companies like us," said Donald McInnes, CEO of Plutonic Power, a small developer of hydroelectric projects in British Columbia.
"If they don't open up the export market, our opportunities are limited to what the local economy is growing at," he said.
Although IPPs could enter into export contracts themselves, utilities like BC Hydro, with size, reputation and experience behind them, are far better placed to spearhead negotiations.
Costly Fix for Gridlock
But it takes patience, persistence and deep pockets to develop the big cross-border transmission systems needed for enough clean power to flow south.
"The limiting factor here is transmission," Jacob Securities analyst John McIlveen said. "There needs to be more interconnection going north-south."
But building transmission lines is an expensive business. As an example, Tonbridge Power Inc began work on a C$230 million, 345 km (214 mile) power line linking Lethbridge, Alberta, with Great Falls, Montana, in 2005 -- but didn't get permits until late 2008.
It costs about C$600,000 to build one mile of transmission line in projects not complicated by environmental issues. The cost climbs to C$1 million including financing and other fees.
The myriad of renewable energy rules in different U.S. states poses another hurdle for export wannabes.
California, for example, represents a pot of gold for western Canadian exporters, as state utilities are mandated to get one-third of their power from renewable sources by 2020.
Wind, solar and biomass producers could be export contenders, but larger run-of-river hydro projects -- 30 megawatts and above -- could not, because California doesn't consider them renewable sources because of their environmental footprint.
High U.S. unemployment is another obstacle for Canadian exporters as states pump money into their own green energy sectors as a way to create jobs.
"We can't all create jobs by exporting to each other," said Martin Merritt, vice-president of Engage Energy.
Despite the many obstacles, producers remain optimistic.
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