Sunday, May 09, 2004

Ontario's call for renewable energy production expected to be first of many

Ontario Energy Minister Dwight Duncan. (CP/Tobin Grimshaw)

"It's a dramatic new turn and it represents a first step towards our 10 per cent portfolio commitment," Duncan said, referring to the government's goal to have 2,700 megawatts of energy produced by renewable sources by 2010.

To private sector renewable energy producers, "we're trying to say, 'come to Ontario,"' he said, adding that it likely won't be too long after this round of proposals come forward before the province again turns to the private sector to build more renewable energy.

Ontario's new focus on renewable energy is "a very bold step to get Ontario to start catching up" with American states such as California, Texas, and Iowa and countries such as Britain, Spain and Germany, said Mike Crawley, president and chief executive of AIM PowerGen Corp., a Toronto-based wind power producer.

Wind energy producers such as AIM PowerGen are in the midst of preparing proposals - and Crawley expects the competition to be tough.

Currently, there are only nine wind turbines in Ontario, he said.

"There hasn't been the environment really to encourage large-scale wind power generation in the province, but that's obviously changed now."

Crawley's company is working on four wind farm projects, with Erie Shores being its largest and most advanced project, located on the north shores of Lake Erie in Norfolk and Elgin counties.

Once completed, the estimated $200-million project will have 75 to 100 wind turbines and produce between 100 and 150 megawatts of electricity.

"We will bid in all or part of the proposed Erie Shores wind farm," he said.

"They've stated in the (request for proposal) that there will be several future RFP's as well, which is why we're developing other projects too."

Vision Quest, a division of Calgary-based energy producer TransAlta, has nearly 200 wind turbines operating in Alberta. It is working on several projects in Ontario and intends to put forward a bid.

"The market in Ontario is finally showing indications of life for wind energy," said Jason Edworthy, Vision Quest's managing director of external relations.

The company has a 15-megawatt, eight-turbine wind farm proposal in Kincardine, Ont. along with several larger projects that may be included in its bid, he said.

Wind farms are often located on farm land that's leased by the energy producer, Crawley said. Farmers can still work the land around the wind turbines, and earn a royalty of about $4,000 to $6,000 a year per turbine.

Ontario Power Generation, which owns the majority of the province's power generating facilities, isn't allowed to compete in this bid. Proposals will be chosen starting with the lowest price per megawatt-hour and the government will sign 15-year deals with producers.

Although a number of wind producers are readying proposals, Duncan said the government is looking at all sources of renewable energy including small hydro, wind, solar, biomass and biogas.

Currently, about one per cent of the province's energy supply, between 150 and 160 megawatts, comes from renewable sources - which includes all power sources except large hydro projects.

Any one producer can bid only up to 150 megawatts under the proposal so there will be a variety of suppliers, Duncan said.

But it's too early to say what power prices the province will negotiate, he said. "We want to get the best price possible," he said.

Contracts are necessary for energy producers to get financial backing to build their plants, Crawley said.

Stephen Probyn, chief executive of Toronto-based Clean Power Income Fund and chairman of the Probyn Group, an energy finance company, said some energy developers have already come to the company to talk about financing in relation to this bid.

"Ontario's been characterized by a lot of stop-go policy making in the power sector and that's undermined confidence," Probyn said.

While "there's a high degree of interest," from energy producers, the government has to ensure the bid process is fair and that it offers reasonable deals to those who win the bid, said David Butters, president of the Association of Power Producers of Ontario.

"If it seems to be unduly onerous . . . or if people are squeezed too hard, if there are unfair allocations of risk, people will not want to participate," he said. "Or if they do and they have bad experiences, going forward people are going to be skeptical about the next time."