Quebec led the country last year with the commissioning of the 45 MW second phase of the Mount Copper project and the 54 MW Mount Miller project (table). Nova Scotia also saw multiple installations, adding 30.4 MW at four wind farm sites. Manitoba made its first appearance on the wind energy map with a 19.8 MW project and 90 MW of the Centennial Wind Power Facility squeezed under the wire in Sasketchewan. The project's remaining 60 MW is expected to come on line early this year.
With construction now underway on wind farms in Alberta, Saskatchewan, Manitoba and Ontario and set to begin this year on projects in Quebec, Prince Edward Island, New Brunswick and Nova Scotia, Canada will almost certainly surpass 1000 MW of total installed capacity before the end of this year. In fact, Hornung expects new annual records to be a feature of the Canadian market for years to come.
Right now, there are more than 3026 MW of wind projects in Canada that have either started construction or have power purchase agreements in place. More than one-third of those contracts were signed in 2005, for 955 MW of power from eight Ontario wind projects, 43 MW from two Nova Scotia projects, and one 80 MW project in Alberta.
Last year also saw utilities across the country launch new wind purchase plans, led by Hydro-Quebec with a call for 2000 MW to be delivered between 2009 and 2013, Manitoba Hydro with a request for expressions of interest (EOI) for up to 1000 MW over the next ten years, and New Brunswick Power with an EOI for 400 MW. The two provinces currently without any installed wind capacity also took steps to change that in 2005. Newfoundland and Labrador Hydro issued a request for 25 MW of wind, the first step in a plan that could see 150 MW installed over the next decade. BC Hydro released an all-source call for up to 5000 GWh/year of electricity supply, and wind project developers in British Columbia are optimistic that at least one project will be among the winners. Separate solicitations for smaller-scale projects were also issued in 2005, with Ontario seeking 200 MW of renewable energy from projects less than 20 MW in size and SaskPower looking for 32 MW from low-impact generation projects in the 25 kW to 25 MW range.
All told, says Hornung, the activity has lead to "a lot of very positive feelings about the future." At the same time, he adds, there are some real challenges facing the market. "We have seen the cost of wind turbines increase and that clearly is going to have some implications in terms of people assessing how wind fits in relative to the competition. We also have turbine shortages, which are a big deal for governments that want to move quickly and for developers who want to be building and moving forward."
Whether the higher cost of wind turbines, likely to be reflected in bid prices in upcoming requests for proposals (RFPs), cause utilities to rethink their plans remains to be seen, says Hornung. "I think it's not guaranteed that it will be an impediment, but I think it does put an onus on the wind energy industry to do a good job of educating stakeholders," he says. "One of our high priorities within CanWEA this year will be to talk a lot more about the economics of wind energy and get people to understand what the real drivers are in terms of costs and how those factors are changing, both in the short and the long term, so people are able to make an informed assessment of the industry."
At least one industry veteran is concerned developers may try to absorb too much of the 20-30% turbine price hike in their project pro formas in order to "still deliver a price where the customer won't say no." Fred Gallagher, who stepped down in December after 12 years at the helm of Calgary-based Vision Quest Windelectric, believes some developers are not making adequate provision for long term maintenance costs in their project planning and power purchase agreements (PPA). Further, they are relying too heavily on wind resource assessments that are proving, not only in Canada but elsewhere, to overestimate actual production.
"When we first got into the game, if you had a PPA you were golden. That was because it was our money and we were afraid of losing it, so if you actually got a PPA with the pro forma you developed, you were ready to go," he says. "Today, I think there is a disconnect. I think there are people who are doing the pro formas who are either not connected to the money or they are not connected to the production, to how the business is actually performing. They are trying to stretch for a PPA, and it has turned into a process that is designed to drive out the lowest bid." The problem is the lowest bid may not always be the most workable bid and the danger, says Gallagher, is that financiers walk away disappointed or projects fail.
Last year, developers of the 58.5 MW Holberg project terminated their purchase contract with BC Hydro after ongoing monitoring of the site's wind resource determined they could not produce power for the price they bid in the utility's green RFP.
At the same time, says Gallagher, there are some major and long established energy companies entering the wind business in Canada that "are going to deliver the projects." And most plan to own and operate, rather than develop and flip, which will help build the industry's depth of experience. Recent RFP winners include TransCanada Corporation, whose C$22 billion in assets include 41,000 kilometres of natural gas pipeline and 23 power plants with a combined capacity of about 6700 MW, Suncor Energy, an Alberta-based oil and gas producer, Enbridge Inc, which operates the world's longest crude oil pipeline system, and Brookfield Power Corporation, which owns 133 mostly hydroelectric generating facilities totalling more than 3500 MW of capacity.
"Having those companies is obviously positive in terms of enhancing the credibility of the wind energy industry," says Hornung. "It is also a vote of confidence in the industry. They are very successful companies. They haven't got to be successful by making bad business decisions. And they are deciding that investing in wind is a good business decision."
Even with major players moving in, Canada's wind industry is characterized by quite a bit of diversity. Smaller developers and income trusts, which are tax-advantaged investment vehicles that hold income-producing assets, are building projects. "I think there is strength in that diversity, and hopefully that is something that we can maintain," says Hornung.
Governments and utilities in Canada are increasingly looking at ways to encourage smaller scale renewable energy development. BC, Saskatchewan, Ontario and Nova Scotia have all held RFPs exclusively for smaller projects, recognising they have a hard time competing against large scale installations. Some provinces are also looking at alternative procurement mechanisms. In December, Prince Edward Island became the only jurisdiction in North America to offer a fixed price tariff for wind and other provinces may follow suit. Ontario is in the process of developing rules for a standard offer contract for community-based renewables, while Quebec and Manitoba are considering doing the same.
The diversity in Canada's wind industry also applies to the drivers pushing development forward, says Hornung. Climate change, clean air, economic development, volatile fossil fuel prices, energy independence and optimisation of hydro resources are all factors in wind "getting a more serious look" from government and utilities, he says.
"There is a tremendous amount of interest. Wind appears, I think, from the perspective of utilities and governments, to be delivering on its promise at this point. Projects are going forward, they are being constructed and they have public support."
The result is that while the industry continues to face ongoing challenges over environmental assessment, transmission access, interconnection requirements and permitting, "I don't see any of these issues being showstoppers," Hornung says.