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Canada

Government slows the pace in Quebec -- Brakes generally welcome

The bid deadline and delivery schedule in Hydro-Quebec's call for 2000 MW of wind power has been extended as part of provincial government efforts to ensure municipalities are prepared to deal with project development in their jurisdictions. The province announced a series of measures in February that it says are designed to "improve the conditions" surrounding the development of wind power in Quebec. Because of the changes, the bid deadline will move from May 15 to September 15.

The multi-year delivery schedule for the power will also change, with the first 300 MW to be up and running by September 1, 2010 instead of December 2009. Deliveries will also be spread out over six years instead of five, which means the final 350 MW will not come into service until 2015. The original schedule saw the final 450 MW come on line in 2013.

Jean-François Thibodeau of Boralex, a Montreal-based developer with plans to make a 400 MW bid, sees the extended deadline for response the request for proposals (RFP) as positive. "It will allow us to better prepare ourselves and further negotiate with potential suppliers, thus increasing our chances of winning our share of the RFP."

Gilles Lefrançois of Longueuil-based Innergex agrees, adding that the delay will also give municipalities that want to become equity partners in projects, or even develop their own, a chance to weigh the risks. "It will give the municipalities more time to look peacefully at the advantages and disadvantages of being partners in a project instead of just receiving royalties every year," he says.

The wider wind industry, however, is concerned about the delivery schedule. "Some manufacturers are worried there are fewer megawatts each year spread over more years, so it will be harder to estimate their costs out in 2014 and 2015," says Marion Hill, co-ordinator of the Canadian Wind Energy Association's Quebec caucus. "Who is going to take the risk and is it going to lead to higher prices being submitted to Hydro-Quebec?"

Easier

At the same time, says Lefrançois, some turbine makers will find it easier to meet local content requirements under the new timetable. "It's going to be an advantage for the manufacturers who wanted to extend the delivery period over a greater number of years in order to reduce the number of turbines they have to produce in any one year and also reduce the size of the manufacturing plant."

The RFP allows bidders to index their prices to inflation, foreign currency exchange rates, steel prices and long-term interest rates. "There are many ways to transfer, if not all, then a good part of the risk to Hydro Quebec, which is the eventual beneficiary of the wind power," says Lefrançois. But Hill points out there are other cost factors that could have a significant impact on wind power costs over the next seven years, including turbine supply and advances in turbine technology. "Are we really going to be using today's generation of turbines in 2014 and 2015?"

The government has been facing mounting pressure from some groups questioning the pace and intensity of project development and from some municipalities demanding a chance to profit from turbines installed in their territories. Things got even more complicated in recent months after some media reports claimed, incorrectly, says Lefrançois, that royalties paid to landowners in Quebec were typically two or three times lower than in neighbouring Ontario. Then in late December, the province's energy board struck down a provision in the RFP giving bidders bonus evaluation points for projects with at least 10% equity participation by municipalities because of a technicality.

In its February announcement, the province promised to restore the requirement. It also set a minimum royalty of C$2500/MW to be paid to landowners who host turbines on their property. "Most of the agreements that have already been signed with landowners are above that level, but this will give some assurance to people that landowners are being treated fairly. This was an issue," says Lefrançois.

Government guidance

The government also released a 21-page document laying out how it expects regional county municipalities (MRC) to deal with wind energy development in their jurisdictions, and promised more detailed information would be issued soon. "There will be more documents coming out providing MRCs with guidance with respect to setbacks, sound issues, zoning and other regulatory matters," explains Hill.

Lefrançois says the guidelines, which emphasise the need to take into account the concerns of local residents, should help ensure projects are accepted. "If these rules help stop one or two projects that would not meet the good standards of building, so much the better. If there are only 58 projects instead of 60 presented to Hydro-Quebec because two of them did not meet the standards or were not acceptable to the local community, no one will weep. This will be good."

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