BC Hydro is expected to issue the request for proposals in the spring and in a recently released draft of terms and conditions for the call for bids, the government-owned utility indicates it wants to buy up to 5000 GWh a year of firm energy from renewable energy projects using proven technologies that will come online between November 2010 and November 2016. It will also buy the associated non-firm energy.
Controversy, however, has risen over its desire to bundle the environmental value of the energy into the package, as is usually the case in Canada. The Canadian Wind Energy Association's British Columbia caucus is floating the idea of providing bids with an energy price only. "If not retired outright, CanWEA believes the environmental attributes should instead rest with the seller who may then sell these attributes into developing [carbon] offset markets. This will allow sellers to diversify their income streams and propose the most competitive electricity-only bids possible to BC Hydro, thus benefiting BC ratepayers," the association says.
Carbon markets form
Most Canadian utility requests for proposals to date have transferred ownership of emissions reductions to the power purchaser, but the potential to sell renewable energy credits to interconnected markets across the US border and the growing acknowledgement that markets for carbon are coming is changing the equation.
In BC, the government has introduced legislation calling for greenhouse gas emissions reductions of at least 33% below 2007 levels by 2020. In neighbouring Alberta, where industrial emitters are already facing legislated emissions reduction obligations, the province is in the final stages of putting a protocol into place for greenhouse gas offsets from wind. Canada's federal government is planning to roll out its greenhouse gas plan this year, and industry insiders are quite confident wind power projects will be able to participate in the proposed emissions trading system.
"Most of the industry is realising that those environmental attributes are another part of the economic equation that will make wind more competitive on a broader scale," says CanWEA's western policy manager, David Huggill. The BC government announced prior to Christmas, independently of its energy plan, that it is going to a cap and trade system to control carbon emissions. "That is something we sat up and took notice of and we want to engage very, very quickly with the government on what they are looking at. Obviously, if that is coming down the pike, then our members are interested in having one more income stream in place."
BC Hydro received six wind power bids in its 2006 all-source call and signed contracts with three of them. At the time, the industry argued the technology would have made a much stronger showing if not for the utility's requirement for monthly firm bids, with liquidated damages for failure to deliver.
This time around, the utility is looking for firm energy bids on a seasonal basis. Although that is an improvement, says Huggill, it could still present some challenges for a variable technology like wind. CanWEA wants BC Hydro to consider using a multi-year rolling average to calculate firm energy deliveries. "If we can do it over a longer time period that would be a big improvement. If they are really stuck on it being seasonal, maybe we look at five winter seasons that are aggregated together," he says.
Whether the seasonal firm requirement will reduce the number of wind projects that are eventually bid into the call is not yet clear. "I don't know that it's a show stopper at this time. But it may very well be," says Huggill. "How much risk developers are prepared to accept and can accommodate, I think, will really dictate how aggressively they are going to get involved," he says.
Another provision that could impact wind power's competitiveness in the call is the utility's plan to add a "wind integration adjustment" when it is assessing bids to cover the cost of adding more reserves to the system to ensure supply security. "BC Hydro is currently reviewing the impact of wind generation on the system. A review of other jurisdictions has shown wind integration costs range from C$5 to C$15 per MWh," the draft says.
The industry believes the range is too high. "I think it is fair to say that everybody is anticipating a cost to integrate wind," says Huggill. But the expectation was a cost of C$2-5, with C$5 being on the high side. "Certainly starting at the high side and going even higher is an issue," he says.