In a press conference on July 20, 2012, the Government of Canada’s second most populous province, Québec, announced plans to procure 700 MW of wind energy capacity. This procurement tranche will be in the form of a 450 MW block through a new request for proposals (RFP’s), and a 250 MW block to be procured from Aboriginal communities through a dedicated purchase program.
Québec previously issued three wind energy RFPs totalling 3,500 MW of capacity. This includes an RFP in 2009 for two 250 MW blocks, respectively reserved for community and Aboriginal projects, with private sector participation. As a condition of this RFP, projects were limited to 25 MW and the Aboriginal projects required majority control by the Aboriginal community or nation. Ultimately, only one of the Aboriginal projects (approximately 25 MW) was retained as a result of this RFP.
As in previous RFP’s, the Québec government has articulated its intention to maximize regional and provincial economic benefits through domestic content requirements. This will likely be achieved by requiring that 30% of the cost of the turbines be spent in the regional municipalities of Gaspésie and Matane, and that 60% of the overall costs be incurred in Québec.
Specific details of this new 700 MW procurement have not yet been released, but the announcement indicated the government’s intention to publish draft regulations in the fall in relation to the 450 MW and 250 MW blocks. This call for power is expected to be procured from independent power producers by Hydro-Québec Distribution, which is wholly-owned by the Province of Québec, through a 20-year power purchase agreement.
In recent calls for wind power, the Quebec ‘local content’ component required that at least 30% of turbine costs relate to expenses for the manufacture of the wind turbines in the Gaspésie-Matane region. In these RFP’s, costs associated with the following item were excluded from the determination of this 30% regional content: (i) wind turbine warranties; (ii) transportation of the wind turbines to the project site; (iii) the erection, testing and commissioning of the turbines; and (iv) maintenance and operating costs. In other words, the Government of Québec is seeking hard capital investment in manufacturing plant and jobs.
Québec’s most recent RFP’s also required that 60% of overall costs be spent in the province, allowing for ‘softer’ local content items such as: (i) development costs, including the cost of resource, site and environmental studies; (ii) the cost of the wind turbines; and (iii) total construction costs, including costs associated with transporting wind turbines to project sites, testing and commissioning. However, items such as warranty coverage payments, operation and maintenance costs and payments made to local landowners have previously been excluded from the broader local content requirement wind power calls.
This newly announced procurement will effectively help Québec to fulfil the 4,000 MW of wind power capacity objective stated in its “Energy Strategy 2006-2015”. It is widely seen to replace the so-called “orphan” 700 MW of projects which had previously been retained by Hydro-Québec but which did not proceed and the deficiencies resulting from the 250 MW block of Aboriginal projects of the 2009 RFP.
This announcement has been welcomed by the industry in the province as an affirmation of Québec’s commitment to the ongoing development of wind energy in the province. It is anticipated that this initiative will provide immediate regional and provincial economic spin-offs, including maintaining employment in the Gaspésie-Matane region and its manufacturing sector, which includes nacelle assembly, as well as the production of nacelle components, power modules and converters, turbine blades and turbine towers.
The announcement of this new RFP for 700 MW is also seen to provide greater certainty for the future of the wind energy industry in the province, which is estimated to generate over $10 billion between 2005 and 2015.
It also is expected that an additional 300 MW of wind energy capacity will be procured as part of Québec’s Plan Nord, as previously announced by the Quebec government, although the details of such procurement have not yet been released.