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Analysis: Ontario gears up for 565MW

CANADA: Bidding is likely to be highly competitive as Ontario goes to the market to buy wind energy for the first time since scrapping its fixed-price feed-in tariff (FIT) programme for large-scale projects 20 months ago.

Ontario's parliament building in Toronto
Ontario's parliament building in Toronto

The province has already prequalified 42 companies in a requests for proposal (RFP) for 565MW of renewable energy, tentatively scheduled to be released in early February. Half of those have expressed an interest in competing for the 300MW of available wind energy contracts.

"At lot of them are companies you would recognise as being big and active in the space, so I think that's a good sign that there will be interest," said Andrew Lord, a partner in law firm Davis. "With 21 parties competing for 300MW, it seems like it is going to be very competitive if they all follow through."

Feeding this is the fact it will be the only RFP for wind energy developers in Canada this year, and one of the limited prospects developers are finding to obtain long-term power purchase agreements in the broader North American marketplace.

"With demand tight and opportunities tight in North America, people will be hungry," said Luke Lewandowski, research manager at Make Consulting. "I think it will be super-competitive. I just don't know what the basement will be when it comes to price."

The RFP represents a major shift in direction for Canada's largest power market. Ontario's Liberal government launched its FIT programme in 2009 to drive renewable energy deployment and help kick-start a green manufacturing sector, awarding purchase contracts to nearly 3.2GW of wind in 2010 and 2011. It also committed to an additional 2GW under a separate side deal with a Samsung-led consortium, a number later scaled back to 1.07GW.

But the programme proved controversial. Its project approval process attracted sometimes fierce opposition in rural communities that felt they did not have enough of a say over development, its local content provisions fell foul of World Trade Organisation treaties, and its pricing, including C$0.135/kWh (US$013/kWh) for wind, became a hot-button political issue that threatened the Liberal's hold on power.

Lord suspects it was a combination of all these factors that finally led the government to scrap the programme. Even though the FIT's role in Ontario's rising power bills was overstated by opponents, it gave the government something to react to, he said. "Perhaps moving to a competitive process allows them to tell a different story about how they are managing to cost of the electricity system," Lord added.

Local-content requirements

Part of the government's revamp of its green-energy policies was the elimination of local-content requirements for new projects, a policy that attracted a number of manufacturers to the province, including Siemens and Senvion with blade plants and CS Wind and Shanghai Taisheng Wind Power Equipment with tower facilities.

"It will be interesting to see how competitive those production facilities are now that the competitive flood gates are open," Lewandowski said.

The size of the RFP, after the heyday of the FIT, marks a definite slowing of procurement pace in the province. But it is also a reflection of what has been accomplished. "The installed base is different than it was five years ago, and the needs in the upcoming years are different and that is reflected in the province's long-term plan," said Lord.

Ontario plans to follow this RFP with another in 2016 that will also seek 300MW of wind, along with 235MW of other renewables. Its ultimate target of 10.7GW of renewables remains the same as it was under FIT, except that the completion date has been extended to 2021 from 2018. The province has held out the prospect of a third RFP to fill any gap in meeting that goal.

"There is certainly opportunity over the next three years or so. Beyond that I think it is going to have to be a bit of wait and see what the next policy or procurement move is," said Lord. "But I think three years in the business world is a decently long length, enough to keep people interested for that period."

Brandy Giannetta, the Canadian Wind Energy Association's regional director for Ontario, expects to see new opportunities arise. The province has promised to review its renewable energy targets as demand picks up. It will also start refurbishing 8.5GW of nuclear capacity in 2016, a process scheduled to continue through to 2031.

"The nuclear refurbishment experience will tell us a lot about the choices ahead for Ontario for power system planning. It needs to go well, it needs to go on time, and it needs to go on budget," Giannetta said. "There are certain obligations that have to be met, and if they aren't, other decisions can be made."

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