Market Status: Canada - Another record year and boom goes on

Canada's wind industry had its biggest year ever in 2009, and 2010 could see nearly as much new hardware installed.

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However, a decision by the federal government on whether to continue providing incentives to spur renewable energy development will be a critical factor influencing whether investors choose this year as a time to start pulling back from the market.

The government's ecoEnergy for Renewable Power programme, which pays a C$0.01/kWh production incentive for the first 10 years of a project's life, was running out of money as 2009 ended. About C$123 million of its original $1.48 billion budget was left to be allocated, with 4.15GW of projects receiving support and nearly 6.8GW still in the queue. Knowledge that the funds were rapidly depleting and uncertainty over whether new support would be coming dogged Canada's wind sector through most of the year - at the same time as the United States was pouring billions of dollars into initiatives to support wind project deployment and new manufacturing capability.

"Has the uncertainty around ecoEnergy meant that fewer projects got built in 2009 than would otherwise have been the case? No," says Robert Hornung, president of the Canadian Wind Energy Association. "And I think you could even argue that the impact on 2010 is not necessarily that significant."

However, Hornung says the gap has made Canada a relatively less attractive place to invest even as its installed capacity numbers climb. "The problem is the investments that are being made now to explore, identify and develop projects that will be built in 2011, 2012 and 2013. A lot of that money is leaving the Canadian wind energy sector and either going to opportunities in the United States or, for companies that are active in a number of areas, maybe moving to some other part of their business," he explains.

"That's the really damaging part. It's had an impact in that it's changed people's perspective on where they should be investing money now to ensure projects are going forward two and three years from now," adds Hornung.

Lack of policy clarity is an issue, says Cathy Cobey, the Canadian leader for Ernst and Young's climate change and sustainability practice group. Her company released a renewable energy report in January that gathered opinions from 132 senior executives of North American companies on both the supply and the demand side of the equation. It found that 73% of suppliers in Canada see government regulation as a barrier, compared with only 42% in the US.

"Uncertainty is definitely part of the risk profile for projects," Cobey says. "Where government can reduce that risk is by showing that they are willing to invest in this type of technology over the long term."

All eyes were on the 2010 federal budget, tabled March 4, where the industry hoped to see either new money for ecoEnergy or some kind of alternative mechanism put in place as evidence of that willingness. But in the weeks leading up to its release, with Finance Minister Jim Flaherty publicly dousing expectations for any new major spending initiatives, few were willing to bet on what would happen.

Cobey, though, believes the government recognises the need to develop cleaner energy sources. While much of its recent focus has been on carbon capture and storage, with funding commitments totalling C$1.4 billion in the last three years, nearly all of the investment has gone to Alberta, which has both a carbon-intensive oil-sands industry and a coal-heavy electricity grid, and neighbouring Saskatchewan, which is also reliant on coal. "I think I could see the federal government, as a balance, putting money towards renewable sources that could benefit other provinces," says Cobey.

Much of the progress in 2009 came at the provincial policy level, and nowhere more so than in Ontario, Canada's largest power market. The province passed its Green Energy and Green Economy Act in May, which laid the groundwork for the launch of North America's first feed-in tariff (FIT) for new renewable energy supply, amounting to C$0.135/kWh for large-scale onshore wind, C$0.145/kWh for small-scale community projects, C$0.015/kWh for aboriginal - First Nations - projects and C$0.19/kWh for offshore projects. It also set up a simplified regulatory structure, established procedures for extending the transmission system to areas rich with wind and other renewables, and put in place domestic content requirements to drive the creation of a local manufacturing base.

"The thing I like about the Green Energy Act is that it provides a 20-year guarantee and that market certainty for companies to say it is worth my time and money to come in and invest," says Cobey. As a result, she expects the Ontario market to draw much of the attention of investors looking for opportunities in Canada.

The province expects to issue the first FIT contracts to developers this month. But Ontario will not be the only province to add to the more than 4.5GW of wind power either under construction in Canada or under contract to be built between now and 2015. This year will also see the awarding of contracts in a number of competitive bidding processes launched by Canadian utilities in 2008 and 2009. These include BC Hydro's call for 5,000GWh a year of clean power supply; Hydro-Quebec's request for 500MW of smaller-scale wind projects that have equity participation from municipalities and First Nations groups; Prince Edward Island's tender for 30MW of renewable energy to meet domestic needs and another 100MW for export off-island; New Brunswick Power's request for proposals for 100MW of new wind capacity and SaskPower's plans for 175MW of large-scale wind projects.

Most of these new power purchase agreements are unlikely to translate into actual capacity in the ground in 2010, but there is a pipeline of contracted projects that will come online. It is almost certain that Canada will surpass the 4GW mark this year, says Hornung, but by how far is not entirely clear.

Alberta, which has seen only one 66MW project come online in the last two years, is heating up again with a new C$133 million, double-circuit 240kV transmission line expected to come into service in the first half of the year. Running through the heart of the province's installed wind base, this will provide much-needed grid access to about 1GW of wind. But producers are facing challenges on the pricing front. The province has Canada's only competitive wholesale electricity market, where long-term power purchase agreements are generally not available, and lower gas prices and demand weakness drove spot prices down to an average of only C$47.81/MWh in 2009. By mid-January, it had dropped to C$40.56/MWh.

In Ontario, the transition to the FIT gave developers who had contracts under the previous renewable energy standard offer programme the chance to take an improved price of C$0.121/kWh, as long as they had all the necessary permits in place and could get their projects built this year. So far, the Ontario Power Authority has no statistics on how many accepted the offer.

In Quebec, the only project scheduled to come online this year has been plagued by turbine supply problems exacerbated by the province's domestic content requirement, while in Atlantic Canada, new construction schedules for some wind farms delayed by trouble accessing financing during the global economic crisis have yet to be revealed.

Still, it will be difficult to match the Canadian industry's 2009 performance. Developers installed 950MW, setting a new record for annual installed capacity and ending the year just shy of 3.32GW. Vestas turbines were used in seven projects representing nearly 50% of the capacity additions, while Siemens machines were used in one project that made up just under 21% of the total market. GE Energy, which was Canada's technology leader in 2008, dropped to third with a 19% market share. Enercon turbines were used in one project representing nearly 11% of total additions.

More projects up

Turbines went up in eight of 10 Canadian provinces in 2009, including the first project in British Columbia (BC) with the commissioning of the 102MW Bear Mountain Wind Park near the community of Dawson Creek. Ontario, as it did in 2008, led the country with the installation of 386MW, split among three projects. The province set its own new record for wind generation, with total output rising 60% over 2008 to feed 2.3TWh onto the grid. At the same time, output from Ontario's coal-fired plants dropped to 9.8TWh, down dramatically from 23.2TWh in 2008, and the lowest output in 45 years.

"Ontario's supply mix is evolving," says Paul Murphy, chief executive of the province's Independent Electric System Operator. "We are making considerable progress in our efforts to integrate energy from cleaner fuel sources."

Policy discussions are under way to boost renewables development in two other provinces as well. BC has appointed four separate task forces to help develop a blueprint for maximizing the province's clean power potential, including a plan for an export development policy. In January, Nova Scotia released the results of stakeholder consultation on options to meet its new goal to supply 25% of its electricity needs from renewables by 2015. The report recommends a strategy that would see the installation of about 300MW of new large-scale wind projects and 100MW of community wind farms.

Those kinds of discussions, says Hornung, will be important in what he hopes will be a year that lays the groundwork for the future. "The challenge in 2010 is not so much to get a lot of projects in the ground in 2010," he says. "The challenge is going to be to ensure we've got the policy clarity and signals in place that will encourage the investments required to ensure that we're going to have further accelerated growth in 2011, 2012 and beyond."

Wind farms completed in 2009

British Columbia 102.0
Bear Mountain Altagas Trust Enercon 3.0 102.0
Alberta 66.0
Blue Trail TransAlta Vestas 3.0 66.0
Ontario 385.9
Wolfe Island TransAlta Siemens 2.3 197.8
Ontario Wind Enbridge Vestas 1.65 181.5
Power Project
Proof Line Sky Generation Vestas 1.65 6.6
Quebec 127.5
Jardin D'eole Northland Power GE 1.5 127.5
Income Fund
New Brunswick 99.0
Caribou Mountain GDF Suez Vestas 3.0 99.0
Nova Scotia 51.0
Dalhousie Mount. RMSenergy GE 1.5 51.0
Newfoundland and
Labrador 27.0
Fermeuse Elemental Energy Vestas 3.0 27.0
Prince Edward Island 91.2
West Cape Ph. 2 GDF Suez Vestas 1.8 79.2
Summerside City of Summerside Vestas 3.0 12.0
Wind Park
Total 949.6

Pipeline end-2009*

BC 169.2
Alberta 455.0
Saskatchewan 24.8
Manitoba 138.0
Ontario 647.2
Quebec 2762
Newfoundland 0.3
Nova Scotia 193.0
New Brunswick 168.0
Yukon 0
Nunavut 0
Total 4,557.5
* Under construction and/or awarded a PPA.

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