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Special Report - A Guide to Wind Power Investment in Canada - Quebec - More green power lined up than wanted

With close to 3000 MW of already contracted wind power to come online over the next seven years and two new manufacturers preparing to set up shop in the province, Quebec is emerging as a market leader in Canada. But in the midst of all the activity, project developers with thousands of megawatts of prospective wind farms still on the drawing board are wondering what comes next.

Quebec's energy strategy targets the installation of 4000 MW by 2015, a goal that has already largely been met by contracts signed and planned new requests for proposals to be made by municipal governments and First Nations groups for 500 MW of smaller projects. The strategy opens up the opportunity for still more to come, with a provision to add another 100 MW of wind for every 1000 MW of new hydro to come online, maintaining wind penetration at about 10% of total system capacity.

The plan, however, is still far from matching the potential. "Really, the next step is exploring the possibilities beyond the current energy strategy," says Sean Whittaker, vice president of policy for the Canadian Wind Energy Association (CanWEA). It is a discussion the wind industry wants to start right away.

In a recently completed call for more wind power issued by the government-owned utility for the province, Hydro-Quebec, bids for a combined capacity of 7724 MW were received, nearly four times what the utility eventually bought. That left a long list of projects, representing substantial volumes of money already spent on them, with no clear path to market. Without a major policy change, says Gaetan Lafrance of the University of Quebec's Insitut national de la recherche scientifique, that path is unlikely to appear anytime soon.

Dearth of demand

An analysis by Lafrance shows that under Quebec's current strategy, there will not be enough demand to drive significant new wind development in the province for at least another 20 years. The core of the government's plan is a C$25 billion large hydroelectric construction program that will add 4500 MW to Quebec's power grid, more than enough to meet the expected growth in demand from 2015-2025. Lafrance points out Hydro-Quebec's surplus available for export is actually going to increase, from 25.3 TWh a year in 2015 to 37 TWh by 2020. "After 2015 we will not need further wind energy," says Lafrance.

At the same time, though, Lafrance believes there is potential to change that. Creating new sources of demand is one option, he says, a possibility that is already starting to emerge. The government launched a pilot project in June to test the use of low-speed electric cars on some Quebec roads, signalling what transport minister Julie Boulet calls "a serious interest for this type of technology" in the province.

Boosting electricity exports to neighbouring provinces and the north-eastern US is another avenue for bringing new wind online, says Lafrance. Right now, Quebec's wind power purchases are being made by Hydro-Quebec's distribution arm to serve domestic load. Although Hydro-Quebec Production, which handles the export side of the utility's business, sells some renewable energy credits into the Massachusetts market from two 54 MW wind farms it signed bilateral contracts with earlier this decade, the company's Marie-elaine Deveault says there are no plans to make similar arrangements in the future. "All new wind energy projects will continue to be done by tender, under Hydro-Quebec Distribution's responsibility. Since HQD acquires energy to meet Quebec's needs, this energy is not available for exportation."

Why not export?

The province currently has 18 interconnections providing a total export capacity of more than 7100 MW, including a 450 kV high-voltage direct current line into the heart of the New England states. CanWEA's Quebec policy manager, Jean-Francois Nolet, says that exports should be on the table when looking at what is next for wind in the province. "If we want to export it and have some benefits for the province in doing that, it means we have to build transmission lines, it means we need to socially agree on those kinds of projects. It is a huge debate and it takes time to put that in place. That is why we need to begin the discussion now."

Part of the discussion about wind's future should also include a fair comparison of the province's electricity generation alternatives going forward, says Lafrance. "I expect that new hydro will be more expensive than wind power," he says.

The hydro wind match

The foundation for any expansion of wind energy has to be technical comfort with the province's ability to absorb more, says Whittaker. Quebec has a huge hydro base, which Whittaker describes as a "fantastic complement" to wind, and the province's landmass is five times the size of France over which to distribute projects to ease the chance of too much or too little electricity being generated in any one area at the same time. Even so, there are technical challenges with taking wind power onto the power system in Quebec. "One of the basic ones is that their wind is all in the Gaspe and their hydro is all up north, so they are running into issues, for example, with respect to frequency control," explains Whittaker. "It has forced them to be very prudent about how they integrate wind."

Asynchronous connections with neighbouring markets means they cannot help deal with wind fluctuations in real time. "It is a very unique situation, but we certainly have seen that Quebec has been up to the challenge in the past and we really think there is an interest in pursuing it further," says Whittaker.

Andre Boulanger, president of Hydro-Quebec Distribution, says the current wind target is "probably something to build on." But he also says the utility's efforts over the next few years will focus on integrating the wind projects it is already committed to into its power system. "Not that the overall production is that big when you compare it to the overall installed capacity within the Quebec control area. But we have to learn how to optimise it and see what the contribution of wind is to the peak demand," he says.

"We are going to have wind projects in a fairly wide geographical area, so we feel that we have to learn how to be able to forecast the wind production at any given hour of the day. This will be very important in order to be able to optimise our portfolio of supply. That is something we will have to learn and then we will see. It is pretty early to talk about after 2015. Maybe in 2012 we will have a better view."

Jean Piette, a senior partner with the law firm of Oglivy Renault, who is active in the province's energy sector, believes there will be further tenders for wind in the province. "Is that going to occur one year from now or five years from now? I don't know. My impression is that we are looking at a horizon of perhaps between two and five years from now," he says.

Much work ahead

Piette points out that there is still a lot of work ahead to get the 15 projects selected in the most recent call for tenders through the approvals processes and into construction. "Once this is advanced, I think government will be looking at further steps, further initiatives in this area. Also people will be looking at the evolution of energy prices, both in Canada and in the United States. They will be looking at the cost factor also."

Another issue that could influence the provincial government's policy choices is its desire to build a broad-based wind industry. The most recent purchase of just over 2000 MW of wind, announced in May, and an earlier call that ended in 990 MW of contracts, came with requirements that much of the equipment be made locally. That has brought three major turbine makers to the province.

Four factories in the Gaspesie are now manufacturing components for GE Energy, the turbine maker that won the contract to supply the wind farms in the first call. Including spin offs from wind farm development and construction, the sizable investment means that by the end of last year, according to Quebec's TechnoCentre eolien, there were at least 800 direct jobs related to the wind energy industry on the Gaspe Peninsula and 2760 in the entire province.

German presence

German wind turbine maker Enercon, which won contracts to supply 1050.5 MW of the capacity awarded under the competitive tender, will add 200 MW to that total with plans to invest C$30 million to establish a service centre in the province, as well as factories to produce concrete towers and assemble electrical components. REpower Systems, another German wind turbine supplier, is providing machines to five projects with a total capacity of 954 MW. It says it will manufacture turbine blades, towers and electrical converters in the province, although it has yet to release the details of its plans.

Meanwhile, home-grown AAER Inc did not win any contracts from winners emerging from the request for proposals process, but is forging ahead with its plans to build Canadian-made turbines in Quebec under license from Germany's Fuhrlander and American Superconductor's Windtec subsidiary. It plans to produce five turbines at its Bromont plant this year.

While all the facilities are either exporting turbines or plan to export to other markets "there is an assumption that Quebec will continue to be a strong market," says Whittaker. "Wind in Quebec was in large part an economic development initiative for the Gaspe and the government knows that in order for that goal to be achieved in the long run, those jobs have to be maintained and that industry has to strengthen."

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