Ontario readies huge request for more wind -- Large scale projects back in the frame alongside fixed price program

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The Ontario government is seeking to add an additional 2000 MW of renewable energy to the Canadian province's power grid from projects larger than 10 MW in size. Energy minister Dwight Duncan, whose government is going to the polls in a general election on October 10, announced in late August that he has issued a directive to the Ontario Power Authority (OPA) to procure the new power, most of which is expected to be wind energy.

"We're building a clean and green energy future that supports a healthy electricity system and a healthy environment," Duncan says. "Since 2003, we have reached agreements that will generate over two thousand megawatts of green, renewable power for Ontario families. Today, we're taking steps to double it."

The OPA plans to consult with stakeholders to establish timelines and to determine how the additional power will be procured. It will, however, begin the process of acquiring the first 500 MW by the end of this year. In the past it has issued invitations for competitive bids for large scale wind developments, while currently it administers a program of standard offer contracts for power from facilities of less than 10 MW rated capacity. There are supporters of both approaches among wind industry players.

The Canadian Wind Energy Association (CanWEA), which has been pushing the province for the past two years to make its plans for more large scale renewable energy procurement clear, calls the announcement great news. "Ontario is already one of the leading jurisdictions for wind power in Canada and this will encourage additional investment," says CanWEA's Robert Hornung. But he warns that action is needed on the permitting delays and transmission constraints already hindering wind development in the province.

Duncan's announcement breathes new energy into a wind market that has been in partial limbo for the past couple of years. Earlier this decade, Ontario issued two requests for proposals (RFPs) specifically for new wind power, awarding contracts for 13 projects with a combined capacity of more than 1300 MW. Of those, 395 MW are on line, another 688 MW in five projects are on the way, one project has been cancelled and another put on hold. But since November 2005, when the winners of the second of the two RFPs were announced, the government has been silent on a follow-up call for large scale projects.

Meantime, it launched a program of standard offer (SO) contracts for power purchase from small scale projects late last year. The program offers 20-year contracts at a fixed price of C$0.11/kWh for electricity generated by facilities of 10 MW or less rated capacity connected at the level of the distribution network. Solar projects receive C$0.42/kWh. By the end of July, the OPA had awarded standard offer contracts to 46 wind projects under the program with a combined capacity of 388 MW.

The awards, however, are of concern to supporters of so-called community scale wind development. They fear their projects are being nudged out of the frame for the standard offer purchase contracts specifically designed to encourage small scale wind power.

Not happy

Wind industry veteran Paul Gipe, who is working with the Ontario Sustainable Energy Association (OSEA), says 71% of those contracts have gone to large commercial developers who are, in some cases, splitting up what would have been larger projects to qualify for standard offer contracts.

"It is a problem for us, as proponents of community power, because with many of these transformer substations where we would like to connect some of our projects, the commercial developers of course are way ahead in queue," he says. "We are not happy and we make that known to everybody who will listen, and even those who don't listen. But in terms of the province and in terms of the development of wind energy, well, it is still wind."

Both Gipe and OSEA were instrumental in not only getting the standard offer program off the ground in the province, but also in its design. The solution from OSEA's perspective, says Gipe, is to open the program to all renewable energy development and to do it right away.

"Lift the voltage cap and lift the megawatt cap so that these commercial projects, which were always intended to be on the transmission system, can go there," he says. "We believe it would help clear up the problem with the queue on the distribution voltage, where most of our projects will go."

OSEA originally recommended a 10 MW cap on project size because at that time there were some interconnection requirements that smaller projects would not have to meet, but policy has changed so that justification is no longer valid. "There is no longer any advantage to being less than ten megawatt," says Gipe.

Divide by ten

Ventus Energy Lakehead Windpower LP, based in Toronto, has been awarded ten SO contracts in Thunder Bay area for what was originally planned as a 100 MW project. Glen Estill, chairman of Ventus Energy's board, says large developers have been turning to the standard offer because it was the only way they could build projects and sell power in Ontario.

Breaking up a project into small projects adds cost and also makes it more difficult for the system operator and Hydro One, owner of Ontario's electricity wires, to integrate the plant's output into the electricity network," adds Estill. "Clearly, all parties would prefer to have the option to connect to transmission if it is available in the area," he says.

Gipe believes fixed price contracts for large projects are preferable to the competitive request for proposals process the province has use in the past. "First of all, the feed-law system is a superior mechanism for getting massive amounts of renewables quickly on a system and it is the most equitable. So we are saying just face up to the fact that the RFP is cumbersome, time consuming, expensive and doesn't always get you what you want and just open the whole thing up."

Fixed prices

Estill believes opening up the program to large projects would be acceptable to the industry, if the price and conditions were right. "Since there has been considerable price discovery on the cost of wind energy from past RFPs, it would be far simpler for all parties if the standard offer was extended to large projects, with a somewhat lower price to reflect lower connection costs for connecting to transmission and greater ease of integration into the grid," he says.

From the energy ministry, Sylvia Kovesfalvi says the province has asked the OPA to review OSEA's recommendations and will consider its advice, as well as other feedback, when the program comes up for a scheduled public review next year. "While the program is exceeding our expectations, we agree there may also be some opportunity for improvement. In fact, this initiative is designed to adapt as needed over time," she says. Meantime, she says, the OPA "will be exploring how to ensure distribution capacity is not monopolised by sub-divided large projects."

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