Canada

Canada

Local manufacture proves challenging -- Up to 100 MW set to be delayed in Quebec

The challenges of getting local manufacturing up and running means that half of the 200 MW of wind power scheduled to come online this year in Quebec will be delayed. Cartier Energy, which won power purchase agreements for six projects totalling 740 MW in Hydro-Quebec's 1000 MW request for wind proposals in late 2004, was contracted to have the 109.5 MW Baie-des-Sables and 100.5 MW Anse-à-Valleau projects online by December 1. But GE Energy is unable to deliver turbines for Anse-à-Valleau until next year.

GE was selected to provide turbines to all of the winning projects under a multi-year delivery schedule that begins this year and goes to 2012. It is meeting the "made-in-Quebec" requirements imposed by Hydro Quebec by working with suppliers of towers, blades, nacelle shells and nacelle assembly who have set up manufacturing facilities in the Gaspé region. "It was too much to ask to have two big projects in the very first year of the contract with new plants coming on line at the same time," says GE's Sylvain Bulota.

The leap in demand for turbines in across North America and worldwide has also played a role, he adds, taxing suppliers of other components. "It is a combination of everything," says Bulota. "It is also, I think, accommodating both the customer, being Cartier, and Hydro Quebec because they both have their hands full, in one case with site preparation for Cartier, and in the case of Hydro-Quebec, the need to get a power line and power station installed. So everybody agreed, let's not rush things. Let's do it in a correct way, in an organised way."

Cartier, agrees chairman Gilles Lefrancois, "Is not too disappointed with the fact that we cannot do Anse-à-Valleau in 2006." Work at the site has begun and the company expects to have most of the roads and foundations complete by the end of the year. It will begin erecting turbines in early 2007, with the project expected to be up and operating by next October. Baie-des-Sables is on track to come online by December 1, with commissioning of some turbines expected this month.

Penalties

Cartier's contract with Hydro-Quebec imposes late delivery penalties of C$55 per megawatt per day. GE has guaranteed Cartier it will bear the cost of the penalties it causes, says Bulota.

Since GE was awarded the Quebec supply contract in 2004, turbine costs have jumped significantly and it has become a problem for the manufacturer, says Bulota. "Some are covered by indexation, but not all. For example, transportation costs have gone through the roof, not just the cost of steel or the cost of composite materials. Everything, even the components, because the demand has driven those costs higher," he says. "Definitely this is a difficult issue for us."

Bids are due by May in Hydro-Quebec's current 2000 MW request for proposals, which also imposes regional and provincial local manufacture requirements and asks for delivery over five years beginning in 2009. GE, says Bulota, is looking closely at how it can participate and yet protect itself against cost pressures over the long term. "It is forcing us to make quite a reflection and make sure we know what we are getting ourselves into."

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