Canada

Canada

Political dilemma over utility partnerships --Nova Scotia seeks solution for wind projects hit by credit crunch

The government of Nova Scotia is considering allowing the Canadian's province's monopoly utility to invest in wind power developers in an effort to make it easier for them to raise the money they need to get projects in the ground. The utility must meet a legislated requirement to supply 5% of electricity from new renewable energy sources by 2010 and 10% by 2013, but wind projects it has signed power purchase contracts are struggling to get the capital they need to get their projects built on time, says Ross McLaren of the Nova Scotia government's energy ministry.

The utility, Nova Scotia Power (NSP), signed power purchase contracts last year for electricity from seven wind energy projects with a combined capacity of 244 MW. It had issued a request for proposals for more power in March 2007. While the projects are all scheduled to come online by the end of this year, the economic crisis has put the brakes on getting financing in place. Of the six developers contracted to build projects, two have publicly stated they will not get their projects built in time. A third has sought court protection from its creditors and is pursuing a sale of the project.

"I think the situation we're faced with in Nova Scotia, much like the entire industry across North America, is that access to credit is very difficult for wind developers and if they can get credit it is at a lot higher prices than it was half a year ago," says McLaren. "If there's a chance to get those projects up and going, and if it is a matter of changing the regulations to allow NSP to take a minority stake in those companies, that's something we will look at. They are a regulated utility so I'm sure they can get access to capital at a cheaper rate than some of the smaller wind developers."

Monopoly fear

When the government set the renewable energy standard in 2007, it specifically excluded NSP from competing to supply electricity to meet the 5% goal. "We wanted to create space in the industry for the independent power producers to grow and develop and so the way the regulations were written were such that going up to 2010 only independent power producers could bid on the projects," says McLaren.

The response from the private sector was very strong, he adds. "If the credit crisis hadn't hit, we wouldn't be having this discussion. You'd probably be talking to the independent power producers and Nova Scotia Power about how great everything was and whether they were having trouble getting a hold of turbines rather than getting a hold of cash."

Not everyone supports the prospect of Nova Scotia Power muscling into the wind power sector. The province's opposition New Democratic Party is concerned that allowing the investor-owned utility to buy into wind companies puts too much power in its hands. The government, says opposition leader Darrell Dexter, should instead offer loan guarantees through the province's business development agency, Nova Scotia Business Inc. "It won't benefit Nova Scotians in the long run if NSP extends its monopoly to include renewables," he says. Loan guarantees are something the government is considering, says McLaren. "We're looking at all options."

NSP spokesperson Margaret Murphy refuses to comment, saying it is too early in the discussions. But CEO Rob Bennett, appearing before the legislature's Standing Committee on Economic Development in February, said the province should make every effort to ensure the contracted projects succeed. "If we are required to renegotiate contracts or reissue a formal solicitation, I expect prices for Nova Scotian customers to be higher than those in the long term contracts that we have in place today," he said.

Despite the current challenges, the province is looking at boosting the amount of wind and other renewables in its supply mix even further. Meeting the 2010 target will mean about 18.5% of all electricity in Nova Scotia will come from renewable sources and the government's 2009 Energy Strategy and Climate Change Action Plan calls for that proportion to increase to at least 25% by 2020.

A C$300,000 government-sponsored study, scheduled for completion later this year, is examining options for strengthening the province's transmission system and increasing interconnections with neighbouring jurisdictions to better balance variable generation. The work builds on a recent wind study that found that Nova Scotia's ability to surpass its 2013 renewable targets will depend greatly on grid connections inside and outside the province.

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