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Canada

Canada

Market Status: Canada - On track to surpass 1GW target in the year ahead

CANADA: There is reason to assume the future is bright for the Canadian wind energy sector.

Nearly 8.6GW of wind projects are due to come online by 2016 and 2011 could be the first year Canada passes the 1GW point in terms of newly installed capacity.

If Canada hits this target it will be a significant improvement on last year, when only 690MW was installed, around three quarters of what was introduced in 2009. Despite this, the Canadian market has still managed to grow by 46% a year on average since 2005.

Speaking about the 2010 figures, Robert Hornung, president of the Canadian Wind Energy Association (CANWEA) says: "It doesn't represent a significant drop-off and has clearly moved us into an area of sustained and ongoing growth going forward. In fact, we do expect 2011 to be Canada's first year for surpassing 1GW in a single year, and expect that to become the new normal for the next five years."

Ontario led the way among Canadian provinces for the third year in a row with six projects totalling 289MW. Nova Scotia completed five wind farms totalling 124MW after seeing construction stalled in 2009 because of the global economic crisis. Alberta was the only other jurisdiction to add multiple projects in 2010, with three wind farms totalling nearly 217MW coming online to vault the province to second place in the country.

But the burst of activity in Alberta, which has Canada's only competitive power market, was driven as much by the looming end of the government's ecoEnergy for Renewable Power programme, which pays a C$0.01/kWh (US$0.01/kWh) production incentive for the first ten years of a project's life. The incentive is set to expire at the end of this month, with little hope it will be renewed or replaced.

The on-the-ground impact of the end of the incentive, which has been in place since 2007, will vary from province to province. Ontario's feed-in tariff (FIT) rate of C$0.135/kWh for large-scale onshore wind, for example, is generous enough to attract investment without a federal boost. But development in Alberta is likely to suffer. Low gas prices and surplus supply pushed the market wholesale price down to an average C$52/MWh last year, and little recovery is expected until after 2012. The broader impact of the end of federal support for wind deployment could be on investor confidence, adds Hornung.

At a provincial level, Ontario cemented its position as one of North America's most active wind markets. It signed a C$7 billion deal with Samsung that will see the Korean company and its partners build 2GW of wind and open blade and tower factories in the province. It will also issue the first contracts under its FIT programme, which will add 1.53GW of new wind, and release a long-term energy plan leading to a total of 7-8GW of wind capacity by 2018.

British Columbia accepted bids for six wind projects with a combined capacity of 534MW in a call for tenders in 2010. It also unveiled a new Clean Energy Act that laid out a framework for attracting investment to its renewable energy sector by tapping export markets and committing the province to sourcing 93% of its domestic supply from clean, non-nuclear sources.

Policy standard

Quebec awarded contracts to 12 smaller-scale wind projects totalling 291MW, taking it one step closer to meeting its target of 4GW by 2015. On the east coast, Nova Scotia fleshed out a policy framework for the future, legislating a renewable energy standard of 25% by 2015, up from about 11% today, and signalling its desire to increase that to 40% by 2020.

The new contracts and the Samsung deal increased Canada's construction pipeline to nearly 8.6GW of wind projects projected to be online by 2016. Those projects will not only drive the industry's growth over the next five years, but will also leave the sector ripe for consolidation as wind producers, along with solar and small hydro developers that also have contracts for hundreds of megawatts of projects, look for the money they need to get hardware in the ground.

Finding capital is a tough challenge for the sector right now, says a recent report from advisory firm PricewaterhouseCoopers. "The Canadian market for renewable energy finance is young and traditional banks struggle to meet the long-term capital requirements sought by developers for their projects.

Although life insurance companies are active in the sector, with a limited amount of capital to allocate to renewables, the market for Canadian project finance is a major impediment for development," it says.

The situation will help drive international lenders to Canada, says Mike Bowman, vice-president of corporate finance at PricewaterhouseCoopers. But he also expects to see more mergers and acquisitions as smaller developers strike deals with large, capital-rich investors such as European utilities, big independent power producers, infrastructure funds and traditional energy companies.

Ontario is the Canadian market most likely to attract investor attention, says Bowman. "What drives investment is a long-term plan that people believe will be executed. They've sent the right messages to the market to date, and if they continue to do so, then I think Ontario will be very attractive."

At the same time, Ontario's wind industry faces considerable challenges in 2011. The province's local content requirements, set at 25% of project costs now and scheduled to jump to 50% in 2012, have sparked a World Trade Organisation challenge led by Japan. Its FIT programme has also become a political battlefield as the province heads towards an October 6 election.

The provincial government is facing mounting anger over power bills that are expected to rise by 46% over the next five years. Some wonder if the government will cut its FIT rates, which are up for review ithis year, in an attempt to quell concerns. However, the bigger threat may be to the programme itself. The opposition Progressive Conservative Party has attacked FIT subsidies as expensive and unsustainable. Ontario also has a very vocal and dogged anti-wind lobby.

It will be "a significant job" to ensure the coming debate about the benefits of wind to Ontario and its costs is well informed, says Hornung. But it is not the only challenge facing Canada's wind sector in 2011. While thousands of new megawatts will come online in the next five years, the market for wind after 2015 is "highly uncertain" in most parts of the country, Hornung says.

"If we are going to have projects built after that time, the development work and the preparatory work have to begin now," Hornung insists. "Without some stronger signals and commitment to wind energy beyond 2015, it makes it more challenging for developers to put their development efforts into Canada compared to other jurisdictions."

The industry is trying to jump-start some action, releasing a proposal late last year urging Quebec to target 12GW of wind by 2025. This year, says Hornung, it will work on a similar pitch for British Columbia, where the government-owned monopoly utility is working on a 30-year integrated resource plan. The industry also wants to bring some ideas to the table to help bolster the market in Alberta, he adds. "This is a priority that needs to be addressed."

ON THE WAY
Pipeline end-2010*

Province MW
BC 711
Alberta 889
Saskatchewan 55
Manitoba 138
Ontario 3,823
Quebec 2,721
Newfoundland 0
PEI 40
Nova Scotia 92
New Brunswick 110
Yukon 0
NWT 0
Nunavut 0
Total 8,579
*Under construction, awarded a PPA or, in the case of Alberta, with an
announced construction schedule

A GROWING MARKET
Wind farms completed in 2010
Project Owner Turbine MW
British Columbia 1.5
Eye of the Wind Grouse Mountain Leitwind 1.5 1.5
Resorts Limited
Alberta 216.6
Summerview 2 TransAlta Corporation Vestas 3.0 66.0
Ardenville TransAlta Corporation Vestas 3.0 69.0
Ghost Pine NextEra Energy Res. GE Energy 1.6 81.6
Ontario 289.1
Talbot Enbridge/RES Siemens 2.3 98.9
Gosfield Brookfield Ren. Power Siemens 2.3 50.6
Harrow International Power Vestas1.65 39.6
Thames River 1 Boralex Enercon 2.0 40.0
Thames River 2 Boralex Enercon 2.0 50.0
Arthur Schneider Power Enercon 2.0 10.0
Quebec 4.1
Site Nordique TechnoCentre eolien Repower 2.05 4.1
Experimental
en eolien CORUS
New Brunswick 54.0
Kent Hills Expan. TransAlta Corporation Vestas 3.0 54.0
Nova Scotia 124.4
Maryvale Horizon Legacy Energy Vensys 1.5 6.0
Point Tupper RES/Nova Scotia Pwr Enercon 2.0 22.55
Nuttby Mountain Nova Scotia Power Enercon 2.0 45.1
Digby Neck Nova Scotia Power GE Energy 1.5 30.0
Glen Dhu Phase 1 Shear Wind Enercon 2.3 20.7
Newfoundland and
Labrador 0.3
Ramea Wind- Nalcor Energy 3 Northwind 0.3
Hydrogen-Diesel
Project 100 kW
Total 690.0

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