All about keeping the momentum going

Despite coming off a year packed with positive policy initiatives at both federal and provincial levels of government, delegates to the Canadian Wind Energy Association's 23rd annual conference were not in the mood to merely sit back and reflect on how far the market has come in a few short months. The past year's calls for wind power proposals in no less than four provinces, the awarding of the first contracts in Ontario's ground-breaking program of "standard offer" power purchase contracts, and the reinstatement of key federal funding support were events consigned to history by the industry members who gathered in Quebec City.

The Canadian wind market may have taken off big time, but it was the limitations to growth appearing on the horizon that concerned delegates at the Canadian wind industry's annual show. The big potential south of the border was a talking point for many

Despite coming off a year packed with positive policy initiatives at both federal and provincial levels of government, delegates to the Canadian Wind Energy Association's 23rd annual conference were not in the mood to merely sit back and reflect on how far the market has come in a few short months. The past year's calls for wind power proposals in no less than four provinces, the awarding of the first contracts in Ontario's ground-breaking program of "standard offer" power purchase contracts, and the reinstatement of key federal funding support were events already consigned to history by the more than 1500 industry members who gathered in Quebec City from September 30-October 3. Instead, the focus was on the future. Much of the discussion -- on the platform and in the corridors -- centred on how to keep the opportunities coming during what one delegate, a veteran of more than 20 years in the industry, called a great time to be in the wind business in Canada.

Federal Natural Resources Minister Gary Lunn, who took a detour on a trip from Vancouver to Calgary to attend the event, helped set the tone by calling the development of wind energy a "national priority" and acknowledging it can help lead the way in his government's desire to see Canada emerge as a global energy leader. "It's not enough just to be an energy super power. It's critical that we emerge as a clean energy super power and that's where you play such a key role. This is a must.

"We need energy if we're going to continue to grow our economy, but we cannot do it at the expense of our environment, at the expense of our health or at the expense of the planet," he told delegates. "We need to find a balance, a balance between producing enough energy to continue to grow our economy with the need to protect our environment and our health. We need a lot more clean energy."

Carbon offsets and wind

Just how Lunn's words translate into more supportive policies for wind power was a question very much on the minds of industry players. Federal officials are in the process of designing a greenhouse gas emission offset trading system that large industrial emitters can use to meet regulated reduction targets that come into force in 2010. But Environment Canada's Suzanne Loney told delegates no decision has been made on whether wind power projects will be allowed to participate.

For wind project developers who had already won the battle with the previous Liberal government to ensure their facilities would be eligible to create and trade offset credits, the frustration was obvious. Shell Canada's Paula McGarrigle pointed out that the Alberta government has allowed wind a role in its own provincial offset trading scheme. "So are you encouraging two systems for offsets, one where a tonne of carbon in Alberta from wind is permissible under its specified gas emissions program, but not permissible in the federal system?" she asked. "I would support a harmonisation between Alberta and the federal system so you don't have two types of currencies of wind offsets."

Similarly, delegates were left wondering what happens when funding for the federal ecoEnergy for Renewable Power (ERP) program runs out. The program, created in January, commits C$1.48 billion over the next 14 years to pay a C$0.01/kWh production incentive for the first ten years of a project's life. Targeting the development of 4000 MW of renewable energy capacity, the program is supposed to run until the end of March 2011, but it is unlikely the money will last that long.

Incentive cliff edge

Jimmy Royer of Natural Resources Canada, the federal department that administers ERP, says his office has already registered 94 projects with a combined capacity of more than 7000 MW, with wind making up about 82%. While not all of that will go ahead, most projects scheduling a 2008 or 2009 commercial operation date have power purchase contracts in hand and will get built. "Those total about 3000 MW out of the 4000 MW. So there is not that much we will be able to do after 2010. That is what it really means," Royer told delegates.

For their part, several speakers and audience members urged the federal government to keep ERP going. Jim Crone, who runs the Manitoba government's Energy Development Initiative, said his province's only wind farm, the 99 MW St Leon project, would likely not have gone ahead without a federal incentive. Manitoba's government-owned utility is in the process of evaluating bids in a 300 MW request for wind proposals and has three more 200 MW solicitations planned between 2013 and 2018, well past the time when ERP funding is scheduled to expire. "I did hear Minster Lunn say this morning that Canada needs wind power and I would encourage the federal government that if there are projects, real projects, sound projects in the pipeline, it just keep on with that support. It really is instrumental in keeping our projects going in Canada."

The pipeline of viable wind projects is large and growing. It includes about 2700 MW either under construction or with signed power purchase agreements -- and the results of the four recently completed calls for more wind power in Quebec, Manitoba, New Brunswick and Nova Scotia will double that. Long term targets in all ten Canadian provinces total 12,000 MW of wind capacity by 2016, a level of development that is enough to supply slightly more than 5% of Canada's electricity demand and account for about 35% of all new electricity expected to come online between 2005 and 2015.

The 12,000 MW mark should actually be considered a minimum, said CanWEA president Robert Hornung, pointing to the growing number of provinces conducting detailed examinations of just how much wind capacity they can safely and economically add to their systems. "We have seen tremendous progress in Canada with respect to wind integration studies and an increasing confidence in the utility sector that we can integrate more and more wind," he told delegates.

Market limitations

Despite the significant growth prospects, project developers are already clearly chafing at the limitations inherent in a market almost entirely reliant on the wind power purchase plans of provincial government and their utilities. In the weeks prior to the conference, Ontario announced plans to add another 2000 MW of renewable energy to its system mix starting with an immediate request for proposals for 500 MW (Windpower Monthly, September 2007). But for wind producers who had been waiting since November 2005 for the government to announce its plans for large scale procurement, the tentative schedule presented at the CanWEA event by Barb Ellard of the Ontario Power Authority (OPA) was not nearly soon enough.

The OPA, said Ellard, is looking at launching a request for expressions of interest before the end of this year, followed by a request for proposals (RFP) in the first part of 2008 and the awarding of contracts by the end of that year. "I am absolutely aghast that we would say it is going to take a year from today before someone can have a contract," said Echo Power's Chuck Edey, an Ontario developer. Long lead times to fill turbine orders and the limits on winter construction, he said, means it will be into 2010 before work can begin on winning projects.

The more quickly the province can move, agreed Mike Crawley of AIM Powergen, the better. "The issue with waiting is you never know what is going to happen with interest rates, you never know what is going to happened with currency, you never know what is going to happen with turbine supply. The production tax credit in the US could be extended at the end of the year. All these factors could significantly drive up the bid prices in an RFP," he said. "From a ratepayers perspective, the sooner you can move ahead the better because the circumstances right now are quite favourable."

The disconnect between plans and potential is evident in other provinces as well. Manitoba Hydro received 84 proposals in a 300 MW RFP that closed earlier this year, with the result that unsuccessful bidders are facing a five-year gap between the time when contacts are awarded to when projects from the next planned RFP are expected to come on line.

British Columbia (BC), which will see its first wind farm completed in 2008, plans to release an all-source call for 5000 GWh of clean electricity a year sometime next spring. But the province already has 15 wind energy projects that have either completed or are in the process of going through its rigorous environmental assessment process. Together they total 5110 MW, with build out potential of 6540 MW. Yet they represent only 2.5% of all the investigative use permits taken out by developers laying claim to potential wind project sites on BC's vast publicly owned lands.

Quebec has set a wind power target of 4000 MW by 2015. But by this time next year, said Gaetan Lafrance of the University of Quebec's Insitut National de la Recherche Scientifique, all of the projects needed to meet the goal will be known. And without changes to the province's energy strategy, he said, there will be little demand for new wind power capacity in the province for the next 20 years or more, leaving thousands of megawatts of projects that do not win a contract in Hydro-Quebec's recently closed 2000 MW call for wind proposals with no obvious path to market.

One result of the limitations on growth evident in a market controlled by provincial governments, delegates heard, is that Canadian companies are increasingly exploring opportunities south of the international border. Although competition from very large and aggressive incumbent players is strong, said Matt Kaplan of Emerging Energy Research, some Canadian entities are entering the US wind development market. Calgary's TransCanada Corporation's 132 MW Kibby Mountain project in Maine and Toronto-based Skypower Corporation's joint venture agreement with three Native American groups to develop projects on tribal lands in North Dakota are two examples, he said, with more to come. "We've heard of a lot of players who are eying the US market," Kaplan told delegates.

The driving force, he said, is access to a much larger market with a broader range of customers than most Canadian jurisdictions offer. "Canada has really been focused on the RFP for procuring wind in most provinces. That has been very successful, but with any form of off-take there are always drawbacks," he said. "In most provinces there is a single power off-taker available to developers. As well, the nature of some of these RFP processes means there is a narrow window of opportunity. In the US there are some markets that offer greater flexibility."

Looking south

Another path into the massive US market is through the export of power and renewable energy credits (RECs) from projects based in Canada. Passage earlier this year in the US House of Representatives of a national renewable energy mandate requiring 15% of the country's electricity to come from renewable sources by 2020 opens up new possibilities if it gets signed into law, said GE Energy's Seth Dunn. "This represents a significant opportunity, not only for suppliers but also for Canada in the form of wind exports to its neighbour, which will be especially challenged to meet this 15% requirement," he told delegates. "There has been some interesting dialogues this week regarding options for wind exports."

While a national mandate still faces an uphill battle in both the US Senate and the White House before it can become law, similar standards now in place in many US states are already providing markets for some pioneering Canadian companies. In May, West Cape Wind Energy Inc became the first independent producer to export wind power and RECs across the international border into the US, wheeling the electricity from a 19.8 MW project on Prince Edward Island into the New England Power Pool. In June, Hydro-Quebec received permission to sell RECs from the Mount Copper and Mount Miller projects, two 54 MW wind farms located in Quebec's Gaspésie region, into the Massachusetts market.

In British Columbia (BC), says the provincial energy ministry's Neil Banera, independent power producers have had little access to export markets across the US West for a variety of reasons, including wheeling charges amounting to C$15/MWh, line losses of 20%, congested transmission lines in the US and customers looking for dispatchable power. But he believes the situation will change. "I think the future for wind lies in the potential for export of electricity from British Columbia," he said. "There has been interest shown down in the United States with respect to renewables in BC," he added. "I think there is significant opportunity there."

On Canada's other coast, the province of New Brunswick has embarked on an aggressive energy development agenda that includes wind power and increased electricity exports into the New England market, said deputy energy minister Claire Lepage. "They are predicting 8000 MW of green power demand, so our proximity to the New England market is strategic for us," she told delegates. A new 345 kV international transmission line crossing into Maine is scheduled to come on line in December, boosting the province's export capacity from 700 MW to 1000 MW, said Lepage. There is also an appetite in both countries for more interconnections, she added, both to bypass bottlenecks in Maine and bring other provinces in Atlantic Canada, which have exceptional wind resource potential but relatively small domestic loads, into the mix.

"It is not only about New Brunswick, it is about energy solutions in the Atlantic region. We are going to be a force to be reckoned with and transmission is going to be a key. I think it is strategic infrastructure and we will have to collaborate together," she said. "The market has changed quite significantly in the last year or so. Sometimes the perfect storm pushes jurisdictions to find solutions. So I think we are in a great position to offer an interesting energy portfolio."

Transmission constraints

If transmission is key to opening export markets to Canadian wind, delegates heard it is also increasingly becoming a factor in the industry's ability to access markets within the country's own borders. "We are already running into issues in Alberta and Ontario, where developments are not able to go forward at this point because we do not have the transmission capacity to make it happen," said CanWEA's Hornung.

Alberta has more than 5000 MW of wind projects in its interconnection queue and a transmission policy that makes it law to provide them with grid access, said the provincial energy ministry's Kellan Fluckiger. "Some places don't recognise the need for transmission for wind and limit it. In Alberta we've taken a different approach," he told delegates. "The transmission policy is based on the notion that we are not going to get the benefit of our energy market unless we have unfettered transmission access. The foundation of the policy is that any generator can connect and we are going to build transmission for him."

In practical terms, though, the province is far from reaching that goal. New transmission in the southwest is years behind schedule because of siting issues (Windpower Monthly, October 2007). In the southeast, where companies have 2000 MW of wind energy projects in development, a newly filed application for grid upgrades will provide access for only 141 MW -- because planners were working to a 900 MW cap on wind development that was only lifted days before the conference started. With the threshold lifted and the Alberta Electric System Operator promising to initiate a process to look at transmission needs across the whole southern part of the province, Naturener Canada's Claude Mindorff expects progress will be made.

"They recognize they are not doing as good a job as they can with transmission and so they have asked for a closer collaboration, not just with the wind industry but with other stakeholders, on ways to think outside the box as far as transmission goes. Hopefully there will be some interesting things coming out of that," he said. Meantime, grid access in Alberta will continue to be a barrier in what Mindorff calls a vibrant market for wind. "Even though we have the threshold removed, we have a lack of transmission, which means we have no choice but to integrate at a slower rate."

Ontario has already declared a region with some of the province's best wind resources off limits to new generation because of transmission concerns. "The rest of the province is in a situation where there is not a lot of extra transmission capacity available as well," said Mark Graham of Hydro One Networks, which runs the province's transmission system.

With plans to add another 2000 MW of renewables over the next few years and a longer term plan to get to 5000 MW of wind, the OPA is working on getting "enabler" lines built into wind-rich areas. But it is only just beginning to tackle the question of how that will work. "It is a little bit of a chicken and egg thing. Should we build the transmission lines without knowing whether projects will show up or do we get the projects and ask for approval? It is an issue the OPA and Hydro One will have to look at closely. We need more studies on that front," said Ellard.

Whatever the solutions, Hornung told delegates it is clear transmission is the "next major challenge" the industry faces. "We have underinvested in transmission in Canada for twenty years. It is not just a wind issue, it is an electricity sector issue. But it matters for wind. Are we going to build transmission in a way that facilitates wind integration and allows access to wind resources?"

Wind integration

With the rapid growth of Canada's installed wind capacity and the promise that it will continue, system operators across the country are starting to zero in on some of the specific challenges they face integrating large amounts of wind. In Quebec, said Hydro-Quebec Generation's Andre Cauchon, the largest hydro plants are located up to 1000 kilometres from both load centres and the Gaspésie, where wind projects are currently concentrated. That could limit their effectiveness as a balancing tool, while asynchronous connections with neighbouring markets means they also cannot help deal with wind fluctuations in real time.

In Alberta, located in the lee of the Rocky Mountains, early results from a wind forecasting study show the province's complex wind patterns and terrain are making it difficult to predict extreme events. In Ontario, the Independent Electric System Operator (IESO) is already seeing the impact that missed forecasts are having on market clearing prices. The IESO's Don Tench looked at two extremes of forecast error this past summer and found that when wind produced 160 MW less than forecast, the spot price rose C$30/MWh as system controllers dispatched higher-priced generation to make up the difference. When they produced 200 MW more than predicted, the price dropped C$50/MWh. "I think wind operators can do better," Tench told delegates.

Despite the challenges, there was a very real sense at the conference that stakeholders on all sides are ready to make electricity supply systems with lots of wind work. "It seems to me we are in a very good position," said the IESO's Tench. "We're at an ideal point in the growth of wind generation. There is enough that we no longer need to rely exclusively on theoretical analysis, but there is not so much that the risks of the unknown are a big concern. So now is the time to learn from operation and establish practices that carry us through to significantly larger wind penetrations."