Investors stay focused despite uncertain future

With about 600MW of new wind already online by mid-year, and with projects still scheduled to complete in Ontario, Quebec, Alberta and Prince Edward Island, Canada is on track to set a new record for annual installations that will push total installed capacity over 5GW by the end of 2011.

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The industry is also expected to stack up some pretty impressive numbers over the next few years, says Matt DaPrato, an analyst at IHS Emerging Energy Research.

There are close to 10GW of projects to be built by 2016, much of which will be in Ontario. The province has issued nearly 3.2GW of premium-priced feed-in tariff (FIT) contracts to dozens of projects and has signed a special deal with a Samsung-led consortium for another 2GW.

This is attracting the interest of international investors, says Amy Grace, a wind analyst at Bloomberg New Energy Finance. "A lot of the people who have won FIT contracts are local companies that don’t have very much previous development experience," she says. "And I know there ?are a lot of companies looking to acquire late-stage development projects and build them themselves, particularly those with secured offtake agreements [to sell their future power output beyond the contract].

"That’s getting more difficult in the US, so they’re definitely looking at Canada, and particularly the Ontario market," Grace explains. "There’s been a few acquisitions already and I think you’ll probably see more of that."

Beyond Ontario

While much of the focus in the Canadian market is on building projects already under contract, several jurisdictions are looking to add to that total. Quebec officials are working out the details of a new request for project proposals for 1GW of new wind, while Nova Scotia is looking to grow its current installed capacity of 285MW to around 500MW to meet its legislated target of sourcing 25% of its electricity from renewable sources by 2015. In Saskatchewan, government-owned utility SaskPower is reviewing bids in its request for another 175MW of large-scale wind.

Underlying all this activity, however, is a very real concern about what the future holds. Ontario has a long-term plan to bring wind on its system to around 7GW by 2018. But the future of that plan, and the province’s flagship FIT programme, hangs on a vote to be held on the final day of the Canadian Wind Energy Association’s (CANWEA) annual conference on 6 October. If the Conservatives oust the incumbent Liberals in the provincial election, they have vowed to cancel both the FIT and the 2GW Samsung deal. Fears that contracts already awarded may be in jeopardy were somewhat alleviated when, in August, the current government altered rules to make them more ?difficult to cancel.

Still, the province’s wind industry potentially faces a significant slowdown, warns Canwea president Robert Hornung. "If there is a change of government in Ontario, I think it is absolutely clear that it will, at a minimum, put a pause on wind-energy development in the province as the new government seeks to determine how it will implement the commitments it has made — and what it will put in place to replace the things it is eliminating," he says.

The result may have a wider impact on renewable-energy policy development too, adds Hornung: "If it is clear that electricity was an issue that either helped keep the Liberals in power or helped defeat them, other politicians across the country will be watching."

Lack of long-term planning

Political developments in Ontario could influence demand for wind elsewhere given that, apart from the relatively small market in Nova Scotia, which recently enshrined in regulation a green-energy target of 40% by 2025, no province currently has plans to add wind to their grids beyond 2015.

This lack of long-term visibility is an issue, says IHS’s DaPrato. "The key long term for Canada is what will happen after the projects that have been contracted in the past few years are built," he points out.

What happens next will depend almost entirely on what individual provinces decide to do. The federal government is out of the picture with the recent expiry of its C$0.01/kWh (US$0.01/kWh) production incentive last March, and nobody expects it to be reinstated.

Hornung is hopeful, however, that high-level political talks that began this summer aiming to come up with some form of national-energy strategy might eventually lead to co-ordinated transmission investments, streamlined environmental-assessment processes and a workable carbon policy. Action on all these fronts would help the wind industry. But given the reluctance of provinces to cede any of their jurisdiction over energy matters, change will not happen overnight, says Hornung.

"Having said that, it’s an issue that is now clearly on the agenda and will be very difficult for governments to ignore," he concludes.  

Diane Bailey is Canada correspondent for Windpower Monthly

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