Infrastructure Canada tera aca MEMORANDUM TO THE HONOURABLE JOHN BAIRD AND BRIAN JEAN DPS KINETIC RENEWA! ELECTAI EN! IN (FOR INFORMATION) ~~ SUMMARY : + Green Power Generation, on behalf of Renewable Energy Group Inc. (REG), is seeking a federal contribution to construct 40 Dragon Power Stations (DPS) at various locations across the country. According to information provided, a DPS would allow for the conversion of kinetic energy from heavy motor Vehicles into electricity. The proposed multi-phase initiative will have a total Project cost of $80 million. No specific federal funding request was identified. + DPS technology was developed and licensed by Alternative Energy Sources Technology Inc. (AESTI), in the United States, REG is the licensed distributor for OPS in Canada. REG Is proposing to install this technology on existing roads and bridges, including federally owned bridges, where heavy truck traffic would normally be required to slow down, The technology was developed and licensed by AEST! in the United States, + The initiative proposed is not a single project; rather itis a series of small, ‘Separate projects that may or may not go ahead. In addition, all of the Potential proponents are for-profit, private sector bodies. As a result, the Government of Canada must take into consideration the effect of its Contribution through the Green Infrastructure Fund in acting as a subsidy to boost private sector profits, versus the public benefits of the project. Itis therefore important that the public and environmental benefits of the project | Set it apart in some way from the many other similar projects in order to justly | the feceral contribution. That does not appear to be the case with the project Proposed. In addition, as it does not appear that the company has secured the contracts for installation of the technology, federal funding in this instance would likely act as a subsidy to the company to install its technology at various locations across the country. + As all of the potential proponents would appear to be private, for-profit companies, Treasury Board approval of the project would be required. In addition, Treasury Board policy requires that the federal contribution Is repayable, although an exemption could be sought based on the public Denes ofthe project. For the above reasons, isnt recommended that | this project be given further consideration at this time. CanadBACKGROUND Description + The proposed initiative consists of installing 40 DPS across Canada at commercial entry and exit lanes for heavy motor vehicles, The proposed first phase would include the installation of 8 DPS facilities at 4 international bridges in Ontario (Peace Bridge, Queenston Bridge, Ambassador Bridge and Blue Water Bridge). Green Power Generation estimates that these OPS sites will produce 30,000 megawatt hours of electricity a year. It is proposed that the subsequent phases would involve the installation of the remaining 32 DPS at unspecified locations across Canada, + The DPS converts the kinetic energy of heavy motor vehicles passing over the DPS road plates into electricity. This system consists of two components: road plates and a power house. The road plates are installed at areas where vehicle speeds are less than 30 mph. The kinetic energy captured by the DPS is sold to the grid in the form of electricity. + Itis not known whether the company has already entered into negotiations or agreements for the installation of the DPS systems. ic Eligibility + Eligible Category: The project falls within an eligible category (Green Energy Generation infrastructure) of the Green Infrastructure Fund. + Eligible Recipient: REG, as a private sector body, is an eligible recipient of federal funding under the Green Infrastructure Fund. + Eligibility Costs / Cost Sharing: The proponent estimates the total cost for the project will be $80 million. Insufficient information has been provided to assess the eligibility of the costs. Under the Green Infrastructure Fund, the federal share of funding for-profit private sector projects is 25 percent. AS Such, the maximum federal contribution of this project would be $20 million. Benefits + According to Green Energy Generation, the DPS system will make a significant contribution to improved air quality and reduced greenhouse gas emissions. The proponent states that DPS will provide clean power to the port authority, bridge and highway facilities and excess power will be sold to the electrical grid.-3- * Based on information provided by the proponent, the proposed project could Potentially contribute to some of the desired project benefits under the green energy generation infrastructure category: Increasing the security of Canada’s clean energy supply: Providing increased number of private sector and public sector installations and/or use of clean energy technologies. However, further information would be requited to assess the scope and validity of the project's benefits, CONSIDERATIONS + The prototype for this technology was installed in the Port of Oakland in 2008, According to the Bridge Policy and Programs Group at Transport Canada, a DPS was also installed at the Otay Mesa border crossing near San Diego The test results at these sites are pending. More information is required to determine the commercial feasibility, as well as the environmental benefits, of this technology. + REG has not reached an agreement for the installation of their product with any of the asset owners (e.g. federal bridge authorities, including the Peace Bridge Authority, Niagara Falls Bridge Commission, Biue Water Bridge Authority, and the Canadian Transit Company), infrastructure Canada has contacted the Bridge Policy and Programs group at Transport Canada, who indicated that, to the best of their knowledge, there were no immediate plans {or the installation of DPS at any of the four federally owned international bridges in Ontario which have been identified by GPG for the first phase of the project. The Peace Bridge Authority has agreed to accept REG's Proposal, pending the results of the above-mentioned test sites, +. The proponent is a for-profit, private sector body. As a result, the Government of Canada must take into consideration the effect of its Contribution through the Green Infrastructure Fund in acting as a subsidy to boost private sector profits, versus the public benefits of the project. It is therefore critically important that the public and environmental benetits of the Project set it apart in some way from the many other similar projects, in order to justify the federal contribution. That does not appear to be the case with the projact proposed. + It should also be noted that, in the case of the international bridges proposed at the first phase of this initiative, the federal bridge authorities that own and manage the bridges would not be eligible recipients under the Green Infrastructure Fund, Federal bridge authorities are designed to be self“4: sufficient entities, and are not generally eligible for federal infrastructure funding. In addition, the Treasury Board's Policy on Transfer Payments, to which the Green Infrastructure Fund is subject, does not permit funding of federal assets through grant and contribution programs, + Finally, pursuant to the Treasury Board approved terms and conditions of the Green Infrastructure Fund, Treasury Board approval is required for contributions to for-profit, private sector entities. Additionally, the terms and conditions of the Green Infrastructure Fund explicitly state that the federal Policy on Transfer Payments will be followed and contributions to for-profit private sector entities are repayable, unless a non-repayable contribution can be justified by the public benefits of the project. Treasury Board approval would be required for an exemption to this policy. RECOMMENDATION + Although the installation of DPS technology, as per Green Power Generation’s proposal, would appear to fall within an eligible category of investment, there are serious concerns regarding the nature of the proposed project in relation to the environmental benefits outlined, As such, it does not appear that the policy rationale for providing funding to this project is strong, as compared with other for-profit, private sector projects. + As two separate proposals have been received trom Green Power Generation, a single letter has been prepared informing them only that they will be contacted should the project be selected for further consideration; however, it is not recommended that either project be pursued at this time. The letter is attached to the memo in respect of the Solar Photovoltaic Electricity Generation proposal. QOS. font Forster 7 Yaprak Baltapioglu Prepared by: Tom Horan ae Phone number: (613) 954-8073 ‘Approved by: Adam McLeod, Policy Analyst Phone number: (613) 248.3307 Sonya Read, A/Director Phone number: (613) 260-6004 Taki Sarantakis Associate ADM, Policy and Communications Phone number: (619) 946-5188, Date: October 7, 2009 CIMS: o24365