Analysis: As construction boom ends, manufacturers look elsewhere

CANADA: Turbine manufacturers lured to Canada by multi-gigawatt procurement programmes and local content requirements are recalibrating as the market feeding their manufacturing facilities starts to wane.

The days of long-term, government-backed and wind-specific procurement seem to be largely gone for Canada’s wind industry
The days of long-term, government-backed and wind-specific procurement seem to be largely gone for Canada’s wind industry

For the past five years, Canada has been averaging almost 1.3GW annual installations, peaking at 1.87GW in 2014. Most of the activity has been in Quebec, which has almost met its 2015 target of 4GW, and Ontario, where a now defunct feed-in tariff (FIT) helped set 4GW of contracts.

Siemens opened a blade factory in Ontario to meet the FIT's local content requirement and won about 2GW of orders. It has been operating full-out since shipping its first blade in 2013, said David Hickey, vice-president of wind power and renewables at Siemens Canada. "We've actually been operating at double the capacity we planned for," he said.

The company has a solid order book through 2018, when all FIT-supported projects must be online, according to Hickey. The factory's four-mould operation will drop to two by the end of this year and, with only 600MW still to be contracted under Ontario's new competitive procurement process, is looking elsewhere, including supplying blades to projects in Europe and Latin America.

"We already knew Ontario wasn't going to last forever. Between diversifying into other provinces and the global volume, we have a pretty good plan to support the plant," Hickey said.


In Quebec, Enercon is winding down operations at its factory in Matane, which supplied concrete towers and electrical components for more than 1GW of wind in the province.

"We still have certain products to be produced for our other projects outside of Quebec. We do some export from Matane, but I don't think that's a long-term model," said Michael Weidemann, Enercon Canada's executive vice-president. "It needs a minimum home market."

Quebec's supply chain has received orders via the 446MW awarded last December to Siemens, Vestas and GE, and are now awaiting the new long-term energy strategy from Quebec's government. ]

Like Ontario, the province's electricity surplus makes it politically difficult to justify new wind purchases. "I hope to see a firm commitment, but I'm not sure the government wants to put clear numbers on the table," said Weidemann.

The days of long-term, government-backed and wind-specific procurement seem to be largely gone for Canada's wind industry.

"I think we all know the next 10,000MW won't be like the first 10,000," said Jean-Francois Nolet, vice-president of policy at the Canadian Wind Energy Association. "It will require our industry to become more strategic, more sophisticated in its approach."

Wind will increasingly have to compete against other generating technologies, Nolet said. Ontario is talking about moving to procurement processes that simply seek zero-emissions generation, potentially requiring some level of firm output.

It will also have to seek new markets, whether tied to industrial development in the north or electricity exports to the US.

Balance of Plant

With cost even more critical to success in this new environment, a key challenge in Canada is balance-of-plant costs, which are as much as US$1,000/kW higher than the US, said Michael O'Sullivan, senior vice-president at Nextera Energy.

This is the result of many factors, including tougher permitting, higher labour costs and local content requirements. Smaller projects and less robust wind regimes in Ontario, the biggest market, also drive up costs.

"They all come together to drive a giant cost disadvantage when compared to the US. Compared to other parts of the world, though, it's not a bad number," O'Sullivan said.

There are some promising prospects for Canadian wind, however. Alberta's new left-leaning government wants to phase-out coal in favour of renewable energy, Saskatchewan plans to add 800MW of wind by 2030, and recent national elections have brought the federal government — long absent from the renewables discussion — back into picture.

Enercon, like most of the major players in Canada, will continue to pivot as provincial markets rise and fall. But Weidemann also hinted that the company, which has famously remained out of the US, could use its Canadian base as a springboard to other markets.

"We think there are huge opportunities in North America in general. I know many people doing business in the US. I know many people in Mexico. I think it's my obligation to stay close to these markets and understand what is going on."

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