On August 28, 2013, the Government of Québec published a draft regulation regarding the procurement of an additional 450 MW of wind energy capacity through a request for proposals (RFP) process. This is an important step towards the realization of this procurement, which was originally announced in May 2013 as part of a plan to procure an additional 800 MW of wind energy capacity.
The proposed terms and conditions of this 450 MW procurement, including maximum price and deadlines for delivery, are reflected in the draft regulation. It provides that this procurement is to be through an RFP process, with 300 MW allocated to projects in the Gaspésie-Îles-de-la Madeleine and Lower St. Lawrence regions and 150 MW for projects throughout the province.
The draft regulation sets a maximum price of 9.5¢/kWh for this block of energy in 2014 dollars, adjusted for Consumer Price Index, including the cost of balancing service and supplementary capacity. It should be noted that these costs were excluded from the calculation of maximum prices in recent RFP’s for wind energy.
This 450 MW block of wind energy capacity is reserved for suppliers who demonstrate that:
- The local community holds a participation representing more than 50% of the control of the project;
- The project is recognized by a resolution of the regional county municipality and any local municipality where the project is located.
The draft regulation defines “local community” as being composed of one or more of the following:
- regional county municipality;
- local municipality;
- Aboriginal community;
- intermunicipal management board.
These projects must be connected to Hydro Québec’s main network as follows: 225 MW by December 1, 2017 and 225 MW by December 1, 2018.
This draft regulation may be adopted by the Government of Québec 45 days after the date of its publication, and is subject to change in this period. Interested persons may submit written comments to the Ministry of Natural Resources during this period. The final regulation will form the basis for the RFP to be issued by Hydro Québec Distribution, a division of the province-owned power utility. The terms and conditions of the RFP will then have to be submitted to the provincial energy regulator, the Régie de l’énergie, for approval.
The preamble of the draft regulation states that the proposed delivery dates ensure stability in the increase of wind energy supply and manufacturing activity. Although the draft regulation does not mention it, if previous practice is followed, the upcoming RFP may stipulate regional and provincial content requirements.
In addition to this 450 MW block, the Government’s announcement of May 2013 also mentioned a 200 MW block to be allotted to Hydro-Québec Production, a division of Hydro-Québec, the province-owned power utility.
This May 2013 annoucement also referred to a 150 MW block reserved through a dedicated purchase program for the three Mi’gmaq First Nations of Québec, which are based in the Gaspé peninsula where many of the province’s wind farms are located. Legislation was subsequently adopted in June 2013 to permit the Government of Québec to exempt Hydro Québec Distribution, another division of the power utility, from the RFP requirement of that Act for an energy block of up to 150 MW for supply contracts with “suppliers connected to a Native community”.
Currently, Québec is Canada’s second largest producer of wind energy, with a total of more than 1,700 MW of installed wind energy capacity, representing roughly one-quarter of all wind energy capacity in Canada. This additional procurement reflects the goal of Québec’s 2006-2015 Energy Strategy to have a total of 4,000 MW of installed wind energy capacity.
Investors and prospective market entrants will find opportunities in this procurement as there will be significant demand for turbine and balance of plant supply, early and later stage investment capital and advisory consulting services.
With regard to future opportunities for wind and renewable energy development in Quebec, it should be noted that the province is commencing a broad public consultation process early in the fall on the province’s long-term vision for the energy industry. This consultation will be carried out through a Commission (Commission sur les enjeux énergétiques) that will conduct hearings throughout the province. Please refer to the "Public Consultation on Energy Issues in Québec" article for more details on this process.
Among other things, this process will help to shape Québec’s future energy policy which is expected to reflect the province’s commitment to reduce greenhouse gas emissions. The details of Quebec’s new Energy Strategy are expected to be unveiled in 2014.