On March 31, 2017, the Alberta Electric System Operator (AESO) issued a Request for Expressions of Interest (REOI) to initiate the first competitive procurement process as part of the Renewable Electricity Program (REP). Concurrently, the AESO released the key provisions of the Renewable Electricity Support Agreement (RESA) that will be awarded to successful participants at the conclusion of the first REP competition. Parties can participate in the REOI by submitting an Expression of Interest (EOI) form to the AESO by the April 21, 2017 deadline.
The REP was announced in November 2016, when the Government of Alberta adopted and released the AESO’s Renewable Electricity Program Recommendations report. As discussed in our earlier bulletin, the purpose of the REP is to incentivize 5,000 MW of new renewable generation in Alberta by 2030 through a series of competitive bid processes administered by the AESO. The first REP competition aims to procure the first 400 MW of this new renewable generation.
Eligible projects in the first REP competition must meet the following requirements:
- 5 MW or greater;
- Achieve commercial operation by December 2019;
- Located in Alberta;
- New or expanded projects;
- Utilize to the existing transmission or distribution system; and
The Alberta Interconnected Electric System (AIES) will not be expanded to accommodate any projects participating in the first REP competition. Eligible projects must be located in a region of the AIES that can accommodate the project’s entire contract capacity. The AESO does not currently post information regarding available capacity on the transmission system to assist in project planning. Participants may refer to the AESO’s 2015 Long-term Transmission Plan for information regarding future transmission facilities.
The purpose of the REOI stage is to identify parties that may be interested in participating in the first REP competition. Participation in a consortium is subject to the AESO’s rules regarding common ownership. An EOI is non-binding and parties are not required to submit an EOI to participate in the latter two stages of the first REP competition, including the Request for Qualifications (RFQ) and Request for Proposals (RFP). The AESO notes that information obtained in the REOI stage may be used to refine the subsequent RFQ and RFP stages of the first REP competition.
At the RFQ stage, participants will be required to submit their qualifications, including technical and financial, and their project proposals. Each party will be required to pay a non-refundable qualification fee. The fee includes:
- CA$1,000 per MW of the aggregate nameplate capacity of all projects submitted, at a minimum of CA$10,000 to a maximum of CA$50,000; and
- CA$2,500 for each project submitted after the first project.
The AESO will determine which participants and proposals are selected to move on to the RFP stage.
Participants selected for the RFP stage will be required to post CA$25,000 per MW of the project’s nameplate capacity in financial security for each project. At the RFP stage, participants will also be required to submit a binding final offer for support – the proposed strike price for the project which will set the price of electricity received on a per MWh basis. Participants will be selected based solely on the lowest price. Participants that are successful at this stage will be awarded a 20-year term RESA, which will govern the relationship between the AESO and the participant.
Submissions at both the RFQ and RFP stages will be evaluated “in accordance with set evaluation criteria by evaluation panels comprised primarily of independent external experts” and subject to oversight by an independent fairness advisor appointed by the AESO. The AESO has not released the evaluation criteria for either stage or the names of the evaluation panel members. The AESO has selected P1 Consulting Inc. as the fairness advisor.
Concurrent with issuing the REOI, the AESO also issued a summary of the proposed key commercial terms that will be included in the RESA. The RESA will use an indexed renewable energy credit payment mechanism which, as discussed in our earlier bulletin referenced above, operates as a contract for differences. The key terms of the RESA were initially released in November 2016, and revised after a stakeholder consultation process that closed in December 2016. The revised summary of terms includes significant changes to the security, curtailment, and change in law provisions. The full form RESA will be provided on April 28, 2017, when the RFQ stage opens.
Anticipated timelines for the first REP competition
The first REP competition is set to last approximately nine months, starting with the issuance of the REOI on March 31 and concluding in December 2017. The target commercial operation date (COD) for successful projects is December 2019. This appears to be an ambitious timeline for an initial procurement process. The AESO initially anticipated that a three-staged procurement process would last between seven to 11 months. Comparatively, the first competition in Ontario’s large renewable procurement process, which procured just over 450 MW of new wind, solar, and waterpower contracts and included only RFQ and RFP stages, began in early 2014 and concluded in April 2016.
Projects selected in the first REP competition will likely have only two years between the selection date and the target COD. Successful project will be required to go through the AESO’s connection process. The time required for this step must be added to the time required to receive approval from the Alberta Utilities Commission (AUC) for the construction and operation of the required facilities, as applicable, and the Needs Identification Document, in addition to acquiring the required environmental permitting and land rights. These timing constraints, combined with limitations that arise from the requirement to utilize existing transmission or distribution infrastructure, likely limits the applicant pool for the first REP competition. This gives an advantage to projects in development that have already met some or all of these requirements.
Anticipated schedule highlights are as follows:
- April 18, 2017: REOI information session
- April 21, 2017: EOI forms due
- April 28, 2017: Issuance of RFQ to interested parties
- June 16, 2017: RFQ submissions due
- June to September 2017: Evaluation of RFQ submissions and selection of qualified respondents
- September 15, 2017: Issuance of RFP to selected participants
- October 13, 2017: RFP submissions due
- December 2017: Successful participants are selected
- December 2019: Target COD
This first REP competition will be an interesting test case for the entire REP. The total generation capacity of a number of wind and solar projects that are either approved or pending before the AUC significantly exceed the 400 MW sought in the first REP competition. If a project is not yet applied for, it will likely not make the 2019 target COD, so the potential pool of biddable projects is likely known at this point. The number of these projects that choose to participate in the first REP competition remains to be seen, along with whether a particular form of renewable generation will be more successful in the first REP competition.