Utility moves to add more capacity -- Wind cost competitive

The cost competitiveness of wind power and the ongoing scarcity of turbines have prompted Newfoundland and Labrador Hydro (NLH) to move more quickly than planned to add more wind to its supply mix. The government-owned utility issued a second wind power request for proposals (RFP) on the same day it announced the winner of its first RFP for 25 MW, released in December 2005.

The December RFP was to have been the first step in a phased approach to add up to 80 MW of wind power to the East Coast province's Island Interconnected System over ten years. But several things have changed since then, says NLH's Dawn Dalley. Surging oil prices is one. The 490 MW oil-fired Holyrood Generating Station supplies about 30-40% of Newfoundland's annual electricity needs. "The marginal cost of generation at Holyrood, of course, fluctuates with the cost of oil, and with the recent spikes in oil prices that cost has at times exceeded $C0.08/kWh," she says. Combined with an excellent wind resource, demonstrated in the first RFP by several project proposals with net capacity factors in excess of 40%, it has made wind power a competitive alternative.

Conditions in the broader wind energy market also played a role in the utility's decision, says Dalley. "We are also mindful of the scarcity of turbines over the next two to four years," she explains. "Delaying additional procurement at this time will probably lead to capital cost increases or schedule delays."

NLH selected NeWind Group Inc to build the province's first utility scale wind power project from seven bids received. NeWind is a subsidiary of ENEL North America, in turn an offshoot of Italy's national utility. The company has a technical partnership with Newfoundland-based Quadratec Inc, a company with electrical expertise, and FGA Consulting Engineers Ltd, a local structural engineering firm. NeWind will build a 25.2 MW plant, the St Lawrence Wind Project, on the Burin Peninsula on the south cost of Newfoundland. To be made up of 14 Vestas 1.8 MW turbines, the project is expected to be in service by the end of 2008 and offset the burning of about 165,000 barrels of fuel a year at Holyrood.

World class resource

Julie Smith-Galvin, ENEL North America's director of corporate affairs, says NeWind has five years of monitoring data from 11 met towers installed at the project site. "Our measurements show it is a world class wind resource with average speed of about ten metres per second," she says.

NLH included a "price target" of C$0.067/kWh in the first RFP, says Dalley, meaning it was not bound to consider any proposals above that level. Dalley declines to name the winning bid price, saying commercially sensitive information will not be released until both RFP processes are concluded. "We can say that we were very pleased with NeWind's proposal and that cost was a key consideration in our evaluation of proposals." Based on the utility's fuel price forecasts, she adds, the cost of the wind power will be less than the marginal cost of fuel at Holyrood over NeWind's 20-year contract period.

The deal is not the first time NLH and NeWind have attempted to bring utility scale wind to the island. In 2000, the utility issued an RFP for a wind resource study and 5-25 MW wind power demonstration project. NeWind was the successful bidder. It produced a map of the island's wind development potential and began development of the St Lawrence project, but it was never built. "During the last process, the terms were different and Hydro was unable to reach a commercial agreement with NeWind," says Dalley.

NLH's second RFP, released October 2 with bids due October 31, is seeking 25 MW blocks of power. "We were very pleased with the quality of submissions with the first 25 MW RFP and believe that there may be a second or even third project that could meet our criteria," she says. "There is also the possibility that with multiple smaller projects being concurrently developed, there may be some scale economies that could be exploited."

The decision to move ahead with a series of smaller projects will allow wind to be dispersed geographically, says Dalley. It also meets the somewhat unique requirements of the island's power system, which is isolated from the rest of the North American grid.

The utility claims that Newfoundland's 1919 MW grid can economically accommodate no more than about 80 MW of wind generation. Beyond that, according to Dalley, there are concerns around maintaining the system frequency and voltage stability. She also claims there is an increased risk of having to spill water at existing hydroelectric stations, which make up about 65% of Newfoundland's supply mix, during high inflow and low load periods, in order to accept non-dispatchable production like that from wind plant.

Higher penetration

The Canadian Wind Energy Association (CanWEA), however, counters that argument and says the utility needs to work with industry to gain a better understanding of the kind of wind penetration that is possible. A study of how much wind the system can in reality take should be a matter of high priority, says CanWEA. NLH's plans only "scratch the surface" of the province's potential, the association points out.

Newfoundland currently has an installed wind power capacity of 390 kW from an old pilot wind-diesel demonstration project in Ramea, an isolated community off the south coast, where six Danish Windmatic 65 kW turbines are installed.