Developers tripped up in booming market -- Unexpected hurdles in Ontario cause delay and push up costs

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Regulatory and permitting hurdles have forced one Ontario wind power developer to cancel a project with a 20 year power purchase agreement and left two others facing significant delays and cost increases even as turbine components are being delivered. In each case, the inability of authority officials to complete required procedures in a timely fashion is the root of the problem.

Brookfield Power, based in Toronto, terminated a contract with the Ontario Power Authority (OPA) for its proposed 49.5 MW Blue Highlands Wind Energy Project under force majeure provisions. The company, says its vice president of Ontario operations, Andy McPhee, was unable to obtain the necessary municipal permits in time to meet the contract's May 2007 delivery deadline. Brookfield was awarded the OPA contract in November 2004 and immediately began the permitting process, says McPhee. But Town of the Blue Mountains, where the project was to be located, had no policy for wind development and appointed a working group, which Brookfield participated in, to frame conditions under which projects could proceed. By the time the contract was terminated August 1, says McPhee, it was still unclear when the policy would be completed.

The project ran into opposition, organised as the Blue Highlands Citizens Coalition, concerned about the impact of large scale wind power development on local landscapes, tourism, farming and property values. "There was opposition, but there was also support for projects in the area," says McPhee. "And for whatever reason that I really can't comment on, the township hasn't been able to develop that renewable energy policy." Town officials were not available for comment.

Delaying tactics

Meanwhile, the province's environmental assessment process is holding up two other major projects. In Ontario, wind projects larger than 2 MW have to produce a detailed environmental screening report (ESR) for public review. At that point, anyone can ask the Ministry of Environment (MOE) to elevate the project to a higher level review.

Calgary's Canadian Hydro Developers is facing several elevation requests for its 132 MW Melancthon II Wind Power Project, related to fears about noise, lighting and property values. The company expects the delay to extend Melancthon II's in-service date by up to 12 months and raise its price tag by C$10 million. The added cost, says CFO Kent Brown, is for the storage and handling of turbine components already being delivered to the site and expected price increases in services and materials not already contracted for. If the project is elevated, he says, the project's timing and cost will have to be reviewed.

Enbridge, based in Calgary, has also had elevation requests for its 200 MW Ontario project, including one from Bruce County, where the project is located. The county made the request after it was unable to reach agreement with Enbridge on turbine setbacks. Since then, says Enbridge's Debbie Boukydis, the company has agreed to increase turbine setback from adjacent property lines to 121 metres from the planned 50 metres. The need to reconfigure the wind farm will cost Enbridge an additional C$8-10 million, but as a result of the change, the county has withdrawn its elevation request.

"Bruce County was a significant one because it asked the province, within its request, to develop standards and policies around setbacks and other things. Had the government decided to do that, I don't know when this would have ended," says Boukydis. The company is still facing other elevation requests and like Canadian Hydro, now has new costs related to turbine storage and construction. "We thought we would be building now," says Boukydis. If the elevation requests are denied and potential appeals do not end in a judicial review, it is possible the company could begin some work at the site before winter sets in. If the project is elevated, says Boukydis, it is hard to say when it may proceed.

Enbridge is fortunate in that it has been able to work on municipal zoning in parallel with the ESR process. "I don't believe you will ever see that happen again. I think local planners will say the ESR has to be complete first," says Boukydis. For the most part, agrees Brown, local governments will not look at zoning until the ESR is approved, prolonging the process still further.


Boukydis says although public comment on projects is very important, there should be a way to make the process more efficient. "If there is a group of individuals who decide they don't want this for any reason, there are many, many ways they ultimately hold up progress. The elevations are a perfect example. Anyone can elevate. And for one-hundred-and-fifty dollars you can appeal an official plan in a municipality," she says. The process needs streamlining, adds Boukydis, and clarification is needed on what is municipal and what is provincial jurisdiction.

The province has introduced legislation, known as Bill 51, that the Canadian Wind Energy Association (CanWEA) believes will add some clarity and certainty to the regulatory process. The bill will exempt projects that go through the environmental assessment process from local land use approvals, taking the final decision-making authority out of municipal hands.

Many municipalities and groups like the Blue Highlands Citizens Coalition are angry about the loss of local control, but CanWEA president Robert Hornung argues there is lots of opportunity for municipal issues to be dealt with through the ESR process. What tends to happen now, he says, is that municipalities begin to debate and make decisions on issues already dealt with in the ESR after that process is complete.

"We've really tried to argue that this is an issue of just trying to eliminate duplication, to improve efficiency. If there is an issue of concern, there are mechanisms to ensure that issue is addressed," he says. "We are not saying the issues are not important, we are not saying your voice is not important, but we don't understand why we have to go through two different processes to address all of these same issues."

Generally positive

Neither Hornung nor the developers believe the difficulties encountered by the three projects are a sign of emerging anti-wind sentiment in the province. "Personally, I view the landscape for wind in Ontario as positive," says Brookfield's McPhee. He points to the company's much larger Prince project, where the 99 MW first phase, contracted at the same time as Blue Highlands, and the 90 MW second phase, contracted a year later, are under construction and expected to be operating by the end of this year. "We're looking forward to building other wind projects in the province. We are going to move on," he says.

Hornung points out that in two years, Ontario has gone from having just a handful of turbines to more than 1000 MW under contract and long term plans to add thousands of megawatts more. "In Ontario, as in other parts of Canada, there are still many, many wind projects that are going through without any difficulties at all," he says. "I think what it is showing is that as more projects go forward, there will be more instances of this kind of opposition emerging, even if it doesn't change as a percentage of the total."

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