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First contracts for distributed wind -- Ontario leadership

Fourteen wind power projects totalling 129.5 MW were among the first 22 standard offer power purchase contracts awarded to renewable power projects in Ontario. The wind industry's success is despite rules that keep it out of an area with some of the province's best wind resources.

The Ontario government launched its standard offer program, the only one of its kind operating in North America, last year. It offers a fixed price of C$0.11/kWh for electricity generated by small scale renewable energy projects with rated capacities up to 10 MW. They must be connected into the network at the level of the distribution grid. The Ontario Power Authority (OPA) approved the first round of contracts, representing a total capital investment of C$336 million, at the end of February.

In addition to wind, three bioenergy projects with a combined capacity of 10.2 MW, two small hydro facilities totalling 2.45 MW, and three solar PV installations totalling 22.9 kW received contracts. The OPA has received another 58 applications under the program and will sign power purchase agreements as the projects are evaluated.

Enercon turbines

Toronto-based Schneider Power has been awarded contracts for its Trout Creek and Arthur wind projects, both 10 MW in size. The company expects to start construction this fall using Enercon E82, 2 MW turbines and have both wind farms running at full capacity in 2008.

The program, says CEO Thomas Schneider, fits well with the company's strategy of developing smaller scale, distributed generation. It has a wind power project pipeline of about 200 MW, but all are 10-20 MW in size, a scale that made it difficult to compete in earlier requests for proposals where winning projects ranged up to 200 MW in size.

"Now the pay off is there," he says. "We've very diligently stuck to our guns and stayed in our niche and when the standard offer was released in December we submitted our projects. We just released the first batch publicly. There is plenty more to come."

Schneider expects two more applications to be finalised soon, including an expansion to a site on Manitoulin Island, where the company recently commissioned two Enercon E48, 800 kW turbines. The output is being sold to Bullfrog Power, Ontario's first 100% green electricity retailer, under a 20-year power purchase agreement. The price paid under that private contract is similar to the government standard offer, says Schneider. "They might be a little different in structure, but they certainly over the long run come out very much equivalent."

While there had been speculation the C$0.11/kWh paid under the standard offer would not be enough in an environment where turbine and other costs have jumped dramatically, Schneider says it works for his company. "It is not a lot. The margin is very, very slim," he says. "The only reason we can do it is we do everything in-house. One of our shareholders is also very active in wind in Germany, so that gives us access to a lot of global purchasing power."

Effective mechanism

Robert Hornung, president of the Canadian Wind Energy Association, says the new contracts show the program is an "effective mechanism" for bringing wind power on line. But he says a solution to transmission concerns in a large area around the Bruce Peninsula on Lake Huron would dramatically increase the number of wind projects able to participate. Although there are currently no transmission constraints in the region, plans to bring refurbished nuclear units and new large scale wind projects on line over the next few years have led the OPA to restrict new generation in the area until new transmission is built.

But pressure from industry and environmental groups unhappy with the restrictions have persuaded OPA to form a stakeholder working group to find a way to let standard offer projects proceed. That group is expected to issue its recommendation in April. "Its first priority has been to try to identify and quantify the risk of constraint associated with bringing on new wind capacity. In doing that it wants to put a number on what the constraint payments would be. That work is almost done," says Hornung. "Then the more difficult question comes up, which is who is going to pay for it?"

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