Can competition 
become co-operation?

A shifting market and new political landscape has left the wind sector in Canada's west-coast province facing uncertainty as it looks to bring new projects online.

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But British Columbia’s booming economy and a desire to see this hydro-rich province powered by more clean-energy resources bodes well for strong wind growth over the long term.

"The future looks encouraging if you have the patience to stick around," says Juergen Puetter, CEO of Aeolis Wind Power Corporation, which developed the 102MW Bear Mountain Wind Park, one of the three operating wind farms in the province.

Seven more projects totalling 567MW, all of which have power-purchase agreements with government-owned BC Hydro, will raise the province’s total installed wind capacity to 815MW by 2013.

What happens beyond that, however, is unclear. The answer had been expected to lie in the recent 20-year integrated resource plan of electricity utility BC Hydro. But work on the plan was suspended in April and the province’s energy minister, Rich Coleman, responding to public disgruntlement over rising power prices, set up a review of BC Hydro and its proposal to increase rates by 32% over the next three years.

BC Hydro’s plan should now be presented to government for approval in November 2012. "The delay is going to push the next call for power back that much further," says Nicholas Heap, BC policy manager for the Canadian Wind Energy Association.

The uncertainty facing the BC market goes beyond the question of when the next opportunity to sell wind power will arrive. The integrated resource plan is key to implementing the province’s Clean Energy Act (CEA), released last year. This calls for BC to be energy self-sufficient by 2016 as well as target export markets for selling new clean-power generation. It also requires that 93% of BC’s electricity come from clean or renewable resources and rejects nuclear as an option.

When the CEA targets are combined with the province’s legislated target to cut greenhouse gas emissions by at least 33% below 2007 levels by 2020, the market fundamentals for renewable energy are strong. But the resignation last November of premier Gordon Campbell, the driving force behind BC’s aggressive climate and energy policies, has shaken the industry. "We’re nervous about that," says Paul Kariya, executive director of Clean Energy BC, an industry association representing independent power producers.

"We’ve got the climate action policy. We’ve got the Clean Energy Act. On the surface of it, everything is there," says Kariya. "But if you talk to investors or larger developers, they are saying they want to see in the longer term what the government’s policy direction will be. This is a new government and it needs to brand the landscape. We’re not seeing that at the moment."

Need for reassurance

The government’s expert panel recommends the province relax its self-sufficiency requirement and give BC Hydro the flexibility to import needed supply, a move that would affect the demand for new renewable-energy capacity. There is also a growing debate about the role natural gas should play in BC’s future power mix. "Some developers are stepping in on the gas side, saying they can be ready to go quicker than any of the renewables out there," says Kariya. Companies in the province’s burgeoning shale-gas sector are lobbying the government to scale down its climate ambitions and let them use the gas they produce to power their operations. Even some government caucus members are asking whether BC should not take greater advantage of cheap natural gas — something that may have been "heresy" under the previous administration, says Kariya.

Ironically, the gas industry could be a source of new opportunity for wind producers if BC’s climate and energy goals remain more or less intact. An explosion in shale-gas exploration and extraction, plans for new liquefied gas terminals to ship the output to Asian markets and new mining activity are all having a huge impact on electricity supply and demand dynamics.

New domestic demand

"I think there has been a pretty significant change in what the future holds. A couple of years ago there was a lot of focus on BC’s role as a green-energy exporter. The assumption at that time was demand growth in BC would be quite modest," says Heap. "What’s interesting now is how much the conversation has shifted towards new domestic load growth."
The situation is good news for the renewable-energy sector. When the clean energy act was introduced, a need for BC Hydro to meet 66% of its future incremental demand through conservation and a plan to build the new 900MW Site C dam on the Peace River left both policymakers and wind developers eyeing exports as the best option for bringing new wind projects online, with the massive California market as their main target.

The trouble is that it is not an original idea. "I think when you look across North America, there are a lot of jurisdictions looking to export. Everyone is looking to California," says Matt DaPrato, an analyst at IHS Emerging Energy Research. And BC has limited transmission into the US state, he adds.

"Wind can only really grow within BC," DaPrato says. "It will depend on the domestic market, how willing the utility is to go beyond what it has contracted for and how wind stacks up against the hydro competition."

Both Kariya and Heap believe wind will be competitive when it comes to filling any future supply gap. This has not always been the case. BC’s mountainous terrain is veined with steep and deep creeks accessing glacier and snow melt, allowing run-of-river hydro producers to generate power that has been 10-20% cheaper than wind. There are signs that this dynamic is also changing, as hydro developers are forced to move further afield into areas more expensive to develop. In BC Hydro’s last call for power, wind-energy projects supplied 47% of the power purchased despite being outnumbered more than 3-to-1 by winning hydro projects. Analysis by BC Hydro, adds Heap, found that wind would likely supply half to three-quarters of all new generation going forward. "Wind is a player and I think it’s going to continue to increase relative to what its past has been," says Kariya.

The challenge is to get past the planning delays and ensure BC Hydro is ready to meet new demand with zero-emission energy. Aeolis — which has been measuring what its CEO Puetter calls world-class wind resource along the ridge tops of BC’s Peace region since 2003 — will be ready to go. The company has a 600MW project permitted and another 2.4GW not far behind. "We can produce power all day long for less than C$100/MWh and make very good money," says Puetter. "Sooner or later someone is going to want to have that power."

Perfect partners - Combination of wind and hydro ideal to match supply and demand all year

British Columbia’s extensive reservoir-based hydro system offers the province a unique opportunity to integrate large amounts of new wind energy into its grid, industry experts say.

"The key word is flexibility," says Charlie Smith, executive director of the Virginia-based Utility Wind Integration Group. "When you add wind to the system you introduce more variability into the output of the generation fleet and you need more flexibility in the system to deal with it."

Hydro can be turned on and off relatively quickly to smooth short-term variations in wind output, he says, usually at a very low cost. "It’s a wonderful source of flexibility in a power system. A lot of utilities would die to have the kind of hydro resource British Columbia has."

There are longer-term synergies as well, says Nicholas Heap, the Canadian Wind Energy Association’s BC policy manager. Wind generation is at its highest during the winter, when demand is also peaking. Inflows into hydro reservoirs, on the other hand, are highest in spring and summer.

"When there is little water flowing into the reservoirs in the winter months, we have wind power coming into the system. When the wind is blowing, we can meet our demand directly with it and that enables us to conserve the water in our reservoirs," explains Heap. As BC’s population and economy grows and electricity demand rises with it, he says, that ability to store more water for use when it is needed will become increasingly important.

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