The utility's John Duffy says BC Hydro got a good response to its Canadian RFP, but decided it was time to broaden its search. "Clearly the global supply is exponentially greater than the Canadian supply," Duffy explains. "It's our expectation that we'll find more cost effective offsets internationally as well." Duffy declines to reveal the details of the proposals it received from its first RFP until agreements are signed. "We've got four or five deals that are progressing through negotiations. If they come through, it's a substantial quantity of offsets, millions of tonnes in total."
The utility, owned by the provincial government, is voluntarily buying the offsets to help mitigate the environmental impact of two planned natural-gas-fired electricity plants on Vancouver Island. Between them they will increase greenhouse gas emissions by 1.3 million tonnes a year. BC Hydro wants to offset 50% of that increase through to 2010.
The RFP does not set a price range, stating only that the utility has a "preference for lower cost offsets." It wants to acquire offsets occurring between 2003 and 2015, with a minimum project size of 10,000 tonnes of CO2 equivalent reductions per year for ten years. Duffy says BC Hydro wants to develop a diverse portfolio of offsets, including reductions generated by wind power developments. But renewable energy generation projects raise questions of ownership of the greenhouse gas (GHG) offsets that must be dealt with first, he stresses. The reductions generated when a wind project feeds power onto the grid can be claimed by either the wind producer or by the thermal generator being displaced.
"We'll need some kind of paper trail showing the other parties that have a potential claim on the GHG reductions either waived that right or sold it," says Duffy. The issue adds complexity to renewable energy offset transactions, he adds. "It is unfortunate in a sense, in that renewable energy is obviously a major opportunity to reduce greenhouse gases. But because we don't yet have rules on this, it's up to each contract to make sure that some of these legal issues are ironed out."