Good economics in solo approach -- TransAlta builds 72 MW

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At a time when some wind farm developers are pulling back in the face of tough economic times, Canada's TransAlta Corporation, a major power company and wind market player from Calgary, is forging ahead with yet another project in southern Alberta. Construction of the 72 MW Ardenville Wind Farm, being built about eight kilometres south of the community of Fort Macleod, will start in the first quarter of 2010 with commercial operation slated for early 2011.

Ardenville follows on the heels of TransAlta's 66 MW Blue Trail and 66 MW Summerview II wind projects, now under construction in the region and both to use Vestas 3 MW turbines. Blue Trail is expected to be up and operating by the end of the year, with Summerview II following in the first quarter of 2010. Ardenville will again use Vestas 3 MW technology. TransAlta is buying 23 new machines and has also acquired an already operating 3 MW turbine installed by Vestas in 2004 as a test prototype. It will included as part of the project to bring the total capacity to 72 MW.

Approximately 40% of the estimated revenue from the wind farm will be contracted through long-term fixed, price agreements, although the company has not disclosed any details. Other revenue will come from sales of the output into Alberta's competitive spot market for electricity and into available markets for emission reduction credits.

Cheap at the price

TransAlta's Jason Edworthy says the company sees a number of advantages in moving ahead with Ardenville in the current market, not the least of which is turbine availability and pricing. "The inability to order and get turbines and to have any influence on cost has changed in this market. As a result of the recent market demand reduction, we can obtain lower cost turbines," says Edworthy.

Financing is also not an issue. TransAlta carries the cost of wind projects on its balance sheet, which means it does not have to require debt or equity to get the project built. "Project financing for some people is expensive and potentially even unobtainable. But our balance sheet financing that we control, we can do."

Both of those factors have contributed to an estimated project cost of C$135 million, or C$1875/kW. TransAlta does its own construction, which helps towards achieving what is a relatively low capital cost in today's environment, says Edworthy. "We control the costs ourselves, we contract locally as much as we can."

He points out that project sponsors reliant on engineering, procure and construct (EPC) contracts have higher costs, "Because there's a premium, you pay for that. We have enough experience that we can take on those risks," he says.

New transmission

Moving ahead with Ardenville also positions TransAlta to take advantage of the first phase of new transmission construction in an area that is currently constrained. A new C$133 million, double circuit 240 kV line with the capacity to transport about 1 GW of wind is expected to be operating between Pincher Creek and Lethbridge in the second quarter of 2010.

A much larger C$1.83 billion project, which involves building a 240 kV loop to gather output from a series of so-called "wind interest zones" across the southern part of the province, is undergoing regulatory review.

Access to federal incentives is another factor driving the timing of Ardenville, says Edworthy. The Canadian government's ecoEnergy for Renewable Power Program (ERP), which provides a C$0.01/kWh production incentive for the first ten years of a project's operation, expires at the end of March 2011.

Although the program may use up its budget before then, Edworthy says that TransAlta is hopeful it will be able to get a contribution agreement in place while there is still money available.

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