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Analysis: Quebec RFP likely to favour established players

CANADA: Hydro-Quebec's recently issued request for proposals (RFP) for 450MW of wind energy is likely to attract significant interest, even though some of its requirements may favour companies already established in the region.

The 128MW Jardin d'Eole project in Quebec
The 128MW Jardin d'Eole project in Quebec

The government-owned utility posted the long-promised RFP on its website in December, setting a deadline of 3 September for developers to submit their bids.

The long lead time will give developers a chance to figure out how to respond to demands that include local content rules requiring at least 60% of total project costs be spent in Quebec and 35% of turbine costs be spent in the Gaspésie region, a price cap of C$0.09/kWh (US$0.08/kWh), and a stipulation that companies cede at least 50% of control over projects to local governments or indigenous First Nations.

Wind producers have been waiting a long time for this latest chance to move projects forward in Quebec, said Jean-Frédérick Legendre, Quebec regional director for the Canadian Wind Energy Association (CANWEA). He does not expect them to be discouraged by the complexity of the RFP requirements. "I expect a very competitive process," he said.

Louis-Nicolas Boulanger, a Montreal-based partner at law firm McCarthy Tétrault, believes established players will have the upper hand. While neither he nor Legendre expect the C$0.09/kWh cap to be an obstacle given declining wind cost in recent years, the utility has made it clear that it is hoping to see prices below that threshold.

"I think the companies that are going to be best positioned to take advantage of this RFP will be those who already have operating projects in Quebec and are able to leverage those assets to drive costs down," said Boulanger.

Strong relationships with municipalities and First Nations will also be key, given the RFP’s local control requirement. The provision does not mean local governments have to invest in a 50% ownership stake in a project, said Legendre, but rather that developers will have to come up with governance structures that give local groups at least an equal say in project development and operation. The government originally wanted local communities to have majority control, explains Boulanger, but backed off under pressure from the industry.

"It’s not as easy as being in the driver’s seat and being able to call all the shots, but now people feel with a 50-50 partnership they at least have a chance of setting up a structure that is fair and workable," he said.

"We know that at least some of our clients and other stakeholders are well advanced in their conversations with public bodies and First Nations."

Boulanger believes the province set the requirement for local control in an effort to head off the kind of local opposition that has forced the relocation or cancellation of some recent projects. "In Quebec, I don’t think we are going to see wind development undertaken exclusively by private players anymore. The general mood in the population is that in order for a community to maximise the benefits it receives from a wind project, they have to be part of it."

The local content requirements are also unlikely to be a stumbling block for bidders, given that they have been part of Quebec wind purchases for more than a decade.

Legendre said he did he not think it was a "big deal". The government is hoping, however, that it can drive new investment in facilities that manufacture strategic components such as converters, generators, control systems and gearboxes by awarding projects using those types of locally produced parts extra points during the bid evaluation process.

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