Soft approach tolocal content -- Manitoba's big call for bids

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In Canada, Manitoba Hydro has released its much anticipated request for proposals (RFP) for 300 MW of wind power, leaving questions within industry about exactly how its unique strategy to try and capture long term economic benefits for the province will work. The call for bids is the first step in the province's plan to install 1000 MW of wind on its electricity grid over the next decade.

"This RFP shows our commitment to developing wind power not only as a made-in-Manitoba clean, renewable energy source," says energy minister Jim Rondeau, "but also for its economic opportunities for our rural communities, First Nations, construction firms and advanced manufacturing suppliers, and its exciting employment opportunities for our young people."

Bids are due July 17. Three further RFPs for 200 MW each are planned between 2013 and 2018, in line with when the government-owned utility predicts it will need the power.

Competition in this first round of purchases is expected to be fierce. An earlier request for expressions of interest turned up a whopping 10,000 MW of projects at some stage of development, twice the current installed capacity of the province's entire electricity system (Windpower Monthly, April 2006). Since then, government-owned Manitoba Hydro has opened up even more potential project sites by making its own wind monitoring data and land lease options available to private developers.

OffSET packages

While the province has long said that it wants to use its wind purchases to attract local manufacturing, it decided against the approach taken by Quebec, which set strict regional and provincial content requirements for projects. The RFP says that with "all things being reasonably equal" the utility will give "favourable consideration" to proposals that maximise Manitoba content. It also invites proponents to submit so-called alternative proposals that lay out possible component manufacturing, technology transfer, research and development, or other value-added investments in the province.

If those alternative proposals were to be accepted, the RFP says, the manufacturing and other industrial "offset packages" would be handled under a separate contract from the actual wind power purchase.

Manitoba Hydro's Glenn Schneider says the utility did not want to drive up the cost of wind power by imposing local economic development requirements on projects. "We don't need the wind energy for domestic consumption in the province. It is going to be sold on the export market, and therefore economic viability is a primary consideration." He could not say how the separate contracts for manufacturing or other industrial offsets would be administered and by whom. "We would want to engage with the province on that."

Josh Magee, an analyst with Massachusetts-based Emerging Energy Research, says Manitoba's approach is an interesting one. "I think it is smarter than imposing strict local contact requirements, given the ultimate size of the installation potential in Manitoba. They are not looking to install 4 GW the same way that Quebec is," he says. Whether Manitoba is successful in attracting investment depends on a number of factors, Magee says. The key will be whether manufacturers locating in the province have a strategy to tap into the much larger US market to the south.

"The ultimate question has to be, if a vendor was setting up in Manitoba without an export strategy to the United States, what is the demand they are looking to meet? If the answer is 300 MW over the next six or seven years, then it is nothing. It can't be just that unless they are fools, and none of these guys are foolish," he says.

Manufacturing rumours

At the same time, Magee says, there are rumours that several global turbine makers are looking at the province as a place to locate nacelle assembly or blade facilities. "What makes Manitoba a bit more unique and more conducive to manufacturing investment than some of Canada's other provinces is the fact, and this is an oversimplification, that geographically speaking it is essentially a northern extension of the US Upper Midwest," he says. "Does it make much of a difference transportation logistics-wise whether you are assembling nacelles in southern Manitoba or northern Minnesota? Probably not. So that is a bit of the X-factor here."

The RFP document leaves some unanswered questions about exactly how proposals will be evaluated against each other, says Magee. "It makes it very difficult for any company to adequately position," he says. "The devil is definitely going to be in the implementation details."

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