The project also consolidates the Hydro-Quebec's position as the largest buyer of wind energy in Canada, says CEO André Caillé. "It's something we are very proud of and is, without a doubt, the beginning of a great adventure for Quebec."
Cartier Wind Energy, a consortium that includes energy company TransCanada Corporation of Calgary, Quebec hydro producer Innergex II and Montreal's RES Canada, a subsidiary of the UK's Renewable Energy Systems, will install six projects totalling 740 MW. Toronto's Northland Power and the Northland Power Income Fund will build two projects with a combined capacity of 250 MW.
The developers have guaranteed an annual energy volume of 3.2 TWh from their projects, about 1 TWh more than the utility expected when it designed the RFP, but still less than 2% of Quebec's 167 TWh of demand in 2003. The 990 MW will bring the province's installed wind capacity to 1211 MW, about 3.4% of Hydro-Quebec's current generating capacity of 36,000 MW.
Jobs and investment
The RFP contained a number of unique features designed to bring jobs and investment to the economically depressed Gaspésie, including minimum local content requirements of 40% for projects coming online in 2006, 50% for those that start delivering power in 2007, and 60% for the remainder. To meet those targets, says GE's Sylvain Bulota, at least 260 jobs in manufacturing and 100 in ongoing operations and maintenance will be created. There will also be an estimated 250 jobs a year in wind farm construction.
Some observers had feared those jobs would come at a cost, speculating that the strict local content and siting restrictions imposed by Hydro-Quebec and the government would push up the price of the wind output. But the winning bids were competitive and "attest to the vitality of the wind power industry," says the utility. "We are impressed. This is a very, very good price. It is a little bit lower than we expected," says Hydro-Quebec's Marc-Brian Chamberland. "I think it is a new standard."
The size of the purchase and the 20-year term of the power purchase agreements were factors in arriving at a competitive price, says Gilles Lefrancois, chairman of Cartier Wind Energy. The quality of the wind sites, which will allow for an average capacity factor of 36.6%, was another. He points out that the Gaspésie has the best wind regime in the province, and Hydro-Quebec had nearly 4000 MW of bids at 32 sites from which to choose. "So you've got the cream of the cream."
The local content requirements meant that bidders had to provide a statement from a turbine manufacturer guaranteeing that manufacturing and assembly facilities would be set up in the region. Although Spain's Gamesa and Vestas of Denmark were also in the running, it was GE that grabbed the brass ring. Chamberland says GE won it all because its turbines were attached to the bids that offered the best prices to the utility. "It was Northland and Cartier that choose GE."
Manufacturers, however, were able to specify the minimum level of orders they would accept. Bulota says GE decided early on it needed at least 400 MW in order to meet the RFP requirements. "We were strongly hoping to get the whole thing and very happy to get the whole thing. We couldn't really see the logic of splitting it and having those local content conditions," he adds. Lefrancois agrees. "It was the only way. If you want to have as low a price as possible and you want the manufacturer to be committed and you want it to last beyond 2012, it has to be one company."
Bulota says GE will not set up factories in the region, but will guarantee contracts for the next seven years to suppliers who located there. The company is in the process of finalising agreements with those suppliers, so Bulota is not prepared to divulge details, but he says two plants will be established. Matane, a port city on the south shore of the St Lawrence River, will be the centre of tower manufacturing and nacelle assembly. Blades will be made at a plant in the city of Gaspé, located at the tip of the peninsula. Both facilities will be devoted primarily to supplying the Quebec projects, although the RFP allows GE to claim local content credit for components exported to other markets in Canada and the US.
"This will help us achieve and surpass the 60% local content. We will do some exporting out of there, not on a grand scale for the time being. But if they are competitive, they will have the opportunity to become a permanent supplier to the GE chain," says Bulota. "The door has been opened to them."
As a developer, Cartier has been waiting for the door to open for the past four years. Innergex, which holds a 30% stake in the company, began wind monitoring in 2000 and since then has installed 29 met towers on 12-15 sites. When it became obvious the RFP would be larger than originally anticipated, says Lefrancois, Innergex brought in RES, which has a 20% share of Cartier. The two then approached TransCanada, which took a 50% stake.
TransCanada's involvement marks the entry into wind of one of Canada's leading energy companies, with C$20.5 billion in assets. It owns and operates 39,000 kilometres of natural gas pipeline and 20 power plants with a combined capacity of about 4700 MW. It is the process of constructing a 550 MW cogeneration plant in Quebec, and will sell the output to Hydro-Quebec's distribution arm under a 20-year contract for C$0.06/kWh, a price just lower than the wind bid, though it could vary along with the exchange rate and the price of natural gas.
TransCanada's Hejdi Feick says the company is always looking for opportunities to expand its power generation business. "We evaluate opportunities on a number of criteria, and for TransCanada this showed up as a strong fit with our strategy," she says. "It is within our core geography, the area we focus on. We've been in business in Quebec for more than 40 years. It allows us to diversify our fuel source. Right now, we are involved in natural gas, cogen, woodwaste, hydro and nuclear. Also, once the PPAs are finalised, which we expect will be in December, it will give us 100% contracted to Hydro-Quebec Distribution for 20 years."
Northland is a recent entry into the Canadian wind business and one of the developers of the 54 MW Miller Mountain project under construction near Murdochville on the Gaspe Peninsula. The Northland Power Income Fund (NPIF) acquired the project in August. The new projects, says NPIF, "represent a significant opportunity for the fund to expand its involvement in wind power generation."
Lefrancois credits the provincial government and Hydro-Quebec for consulting with industry to ensure what was a complex process succeeded. "This is a wonderful example of private-public partnership," he says. The public setting up the right policy and Hydro-Quebec deciding it would be better served by asking for proposals from the private sector. And from the private sector, the answer has been overwhelming."