A municipal ownership model -- Spreading community risk

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Quebec wind power developer Innergex II is partnering with the Fédération Québécoise des Municipalités (FQM) to work with local governments in developing community wind projects. The new limited partnership will focus on an upcoming call from Hydro-Quebec for 250 MW of small scale, community based projects, says the FQM's Nicolas Fleury. The call, the timing of which has yet to be announced, will set an upper limit of 25 MW on project size and target Quebec municipalities.

While many of those municipalities are interested in benefiting financially from wind energy development in their jurisdictions, says the FQM's Nicolas Fleury, they may not have enough familiarity with the technology to develop their own projects. The federation, which represents 920 municipalities as well as most of the counties in the province, is looking for a way to help communities profit from wind development while at the same time reducing their risk.

While the details of the partnership are still being worked out, Fleury says the plan is to aggregate community scale projects. "So, for example, if we can put together six projects of 25 MW each, we give all six municipalities the chance to not just invest in their own project, but to invest in other projects as well. In this way, we think that we can reduce the risk that comes with wind farm development," he says.

Equity participation

"We hear sometimes that this is like the Klondike, but I don't think it is. You can make a lot of money with it, but it can be a risk and small municipalities in particular cannot afford to lose money in that kind of venture." The approach should also help bring economies of scale to smaller projects and provide a voice for community based developers to talk to turbine suppliers, he says.

The role of municipalities in wind energy development has been a long-standing issue in Quebec, with critics arguing there is not enough local payback. The provincial government responded by making equity participation by local governments part of the bid evaluation criteria in Hydro-Quebec's call for 2000 MW of wind. It also promised to follow that up by issuing a request for proposals (RFP) specifically for projects sponsored by municipalities.

With bids in the 2000 MW call due September 18, some commercial developers are looking ahead to the next by forming alliances with communities who want to develop projects. "We know there are some agreements on the ground where, for example, a town has a project with a private partner and that private partner provides 80% of the financing and the municipality 20%," says Fleury. "We don't think that kind of project is a community project. We don't want municipalities being the cover for private projects in the 250 MW call. It is an RFP for community projects and we want the projects to really be community projects."

The partnership with Innergex will allow municipalities to take an equity stake of up to two-thirds in projects, says Fleury, although it can be less. Innergex will take the remaining share. "The agreement is that Innergex will not go under one-third. Under that, for them, it is not interesting," he says.


The FQM decided to partner with Innergex after approaching a number of companies with its proposal, says Fleury. "They presented their conceptions of our idea and we chose the one that appeared to us to be the better one." Innergex is an experienced wind developer in the province. It owns a 38% stake in Cartier Wind Energy a company that won six contracts with a combined capacity of 740 MW in Hydro-Quebec's call for 1000 MW of wind in 2004. The company expects to bid up to nine projects in the 2000 MW call, says Innergex's Julie Boudreau.

It sees the FQM partnership as chance to participate in the next RFP. "If we want to have some megawatts in this next call for tenders we have to be in partnership with municipalities, and we think working with the FQM is a good way to do that."

Boudreau says her company brings its expertise and experience in building and operating wind farms to the table. "It will be easier for municipalities to partner with a company like Innergex that has experience." Fleury says several municipalities have expressed an interest in participating, even though the partners do not intend to start promoting the plan until the fall.

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