Five years ago, it would have taken some imagination to think that the western Canadian provinces of Alberta and Saskatchewan would become the dominant markets for wind development. These two bordering provinces, which are sandwiched between British Columbia (BC) and Manitoba, have not been widely acknowledged for their green energy policies in the past. In fact, the bulk of the power production in these regions has traditionally been derived from natural gas and coal, two resource reserves that both prairie provinces are abundant in.
However, in 2015, the provincial governments of Alberta and Saskatchewan announced ambitious renewable energy supply goals to be achieved by 2030 through competitive procurements. Alberta’s existing renewable generation capacity is to jump from 10% to 30% and Saskatchewan’s from 25% to 50%. Throughout 2016, details regarding the implementation of these power supply changes slowly trickled in at a time when renewable generation opportunities in two of Canada’s other promising markets appeared to be drying up.
In BC, construction of the 1,100 MW Site C Dam project in the Peace River Region continued despite increasing opposition from First Nations, as well as the public. In parallel to this, construction of the proposed, anticipated fleet of liquefied natural gas projects that could have potentially increased the level of electricity demand for power beyond BC’s current power supply came to a standstill, due largely to the decreased price of natural gas.
In Ontario, the much-anticipated Large Renewable Procurement II was shelved amidst rising public concerns about energy pricing, as well as a general lack of acceptance of renewable energy development. Although a call for renewable generation may surface in the near future, the Ontario Independent Electricity System Operator has given no clear indication as to when the program may be reinstated.
Given these changes, combined with the reinforcement of Canada’s overall commitment to reducing climate change through ratification of the Paris Agreement in 2016, it is not surprising that renewable energy developers have shifted their interests to greenfield prospecting and project acquisitions in Alberta and Saskatchewan.
The election of the left-leaning New Democratic Party (NDP) to a majority government in May 2015 in what is arguably Canada’s most politically conservative province came as a shock to many, as the Progressive Conservative Party was forced to step down after nearly four decades of power. Policies put in place since then by the newly elected NDP have created significant opportunities for renewable energy developers, thus shifting the current power supply structure over the next decade.
In November 2015, the Alberta government released its Climate Leadership Plan, which contains several initiatives, including the establishment of a goal to achieve an energy supply mix of 30% renewables and 70% natural gas by 2030. In support of the “30 by 30” goal and transition, the Alberta Electric Supply Operator (AESO) was tasked with leading the competitive procurement of up to 5,000 MW of additional renewable electricity through the Renewable Electricity Program (REP). There are four key items for consideration in accomplishing the initiatives of the Climate Leadership Plan.
Renewable Electricity Program. The first REP competition and contract award for 400 MW out of a total of 5,000 MW of renewable electricity is scheduled to take place this year, with subsequent procurements anticipated to be launched on an annual basis through to 2030. Currently, the AESO anticipates releasing a request for expressions of interest in late March, a request for qualifications (RFQ) in late April, and a request for proposals (RFP) in September, with the announcement of successful bidders by the end of this year.
The first competition is “fuel-neutral,” which means that it is open to all renewable technologies that fall within Natural Resources Canada’s definition of renewable energy and, therefore, can include wind, solar, hydro, geothermal and, in some cases, biomass. A 20-year contract-for-differences model, also known as indexed renewable energy credits, was chosen to be utilized as the payment mechanism for this first competition based on the premise that it would minimize costs by attracting many competitive bidders. The pool price will be subtracted by the bid price to determine the amount of support that will be provided. Although few details beyond 2017 have been provided, it is possible that subsequent competitions may incorporate other key features, such as regional considerations, renewable technology preferences, socioeconomic considerations and First Nations involvement. For this first competition, however, winning bids will be based on price alone.
Deregulated market changes. Alberta’s fully deregulated electricity market has often been cited as one of the major barriers to entry for renewable energy developers. Most operating wind farms in Alberta have leaned heavily on federal financial incentives or subsidies during development, and thus, it was difficult and risky for developers of capital-intensive renewable energy projects to compete in a deregulated electricity market. To further compound these challenges, fluctuating equilibrium prices created an additional lack of revenue certainty.
However, in November 2016, it was announced that Alberta would be transitioning from a fully deregulated electricity market to a capacity market by 2021. Electricity will still be sold within a spot market, but generators will also be given the opportunity to bid on five-year contracts that provide financial compensation for the capacity they could offer the market.
Crown land moratorium. A moratorium that prohibits the development of wind energy projects on Crown land was put in place in August 2005 by the Alberta government. The purpose of this decision was to provide time for the regulatory agencies to develop a comprehensive strategy and implement policies specific to future wind project developments on Crown land. Although consideration toward the lifting of this moratorium is currently under way, details are few and far between, and no timeline has been given. Because approximately 60% of the land in Alberta is designated as Crown, developers are understandably anxious to see movement on this front, as this represents a significant portion of potential buildable land area for wind developments.
Regulatory updates. To ensure proper project siting occurs as more renewable energy projects become operational, the major regulatory bodies such as the Alberta Utility Commission (AUC) and Alberta Environment and Parks (AEP) have been developing legislation and integrating renewable energy-specific policies into the existing regulatory frameworks. The Wildlife Directive for Alberta Wind Energy Projects was released in January of this year by AEP to help project proponents identify and minimize risks to wildlife from various phases of wind energy development. Although these are considered development guidelines, it is likely that AEP will request conformance by any new development projects prior to obtaining AEP sign-off. Additionally, best management practices for minimizing renewable energy project impacts to native grasslands are currently being developed.
There is also talk of the possibility of renewable energy projects being added to the list of designated activities under the Environmental Protection and Enhancement Act. As these discussions are in preliminary stages, it is difficult to ascertain or speculate how this would impact the current environmental approval process in place for wind projects. However, it is likely that the breadth of environmental factors requiring consideration would increase, and non-wildlife factors, such as soil and groundwater impacts, would require study and assessment.
Lastly, the noise guidelines contained within AUC Rule 012 are possibly some of the most complex and stringent in Canada. As a result of this, these noise guidelines require careful consideration during project development, as they can significantly impact project layouts. To add further complexity, the abundance of oil and gas structures can play an important role here because cumulative noise impacts are a key requirement of Rule 012.
The Saskatchewan Party has been in power since 2007, under the leadership of Brad Wall, a former Progressive Conservative party member. In October 2016, the Saskatchewan government released Saskatchewan’s White Paper on Climate Change, which reaffirmed the province’s 2015 commitment to be supported by 50% renewables by 2030. Currently, wind power contributes to 3% of Saskatchewan’s power supply mix, with most renewable power for the province being derived from hydroelectric sources (15%). In contrast to Alberta, Saskatchewan’s electricity market is not deregulated but, instead, is overseen by SaskPower, a government-owned public utility. SaskPower has been tasked with leading the procurement of up to 1,600 MW of renewable power for projects that are to be developed between 2019-2030. The first RFQ for 200 MW of wind power is currently under way, with power contracts to be awarded at the end of 2017. A solar RFQ and RFP process is also taking place concurrently with the wind RFQ, with 10 MW to be awarded in 2017 and a total of 120 MW of solar energy to be procured by 2025. To date, a high level of interest has been shown toward both the wind and the solar procurements, which suggests that there will be significant competition for these power contracts. SaskPower has indicated that although pricing will have the heaviest weighting during the evaluation process, factors such as environmental impacts, community engagement and First Nations consultation will also all play important roles.
Although there have been few major or notable changes with respect to energy policy in Saskatchewan, the two main points of interest for wind developers are discussed below.
Regulatory uncertainty. In September 2016, the Chaplin Energy Project’s Environmental Impact Statement (EIS) was rejected by the Saskatchewan Ministry of Environment (MOE), due largely to migratory bird concerns. To give a brief background of the significance of this decision, the project began public consultation in 2010 and was awarded a power contract from SaskPower in 2012. A technical proposal was submitted to the MOE in April 2013 as part of the Environmental Assessment process. In March 2014, the MOE designated the project as a “development,” thus requiring it to participate in the full Environmental Impact Assessment process. In September 2014, the MOE approved the Terms of Reference proposed for the project, and an EIS was submitted by the project proponent in March 2015.
Given the sequence of these events, the ministerial decision to reject the project nearly four years later undoubtedly has created some uncertainty among developers with respect to environmental approval risks and regulatory approval timelines. Perhaps in an attempt to soften these concerns, the MOE released new siting guidelines for wind projects on the same day that the decision to reject the Chaplin project was made.
Guidelines. The Saskatchewan MOE released the first version of the Wildlife Siting Guidelines for Saskatchewan Wind Energy Projects in September 2016. The intent of these guidelines is to provide a framework for acceptable development practices in the province to lessen impacts to biodiversity.
However, absent from the guidelines is information on two key pieces that could significantly impact site selection and the overall layout determination of wind project development: noise and post-construction monitoring requirements. Although the MOE has indicated that these will be addressed in future versions of the guidelines, the current information gap has added to the uncertainty in acceptable siting practices.
With two aggressive renewable energy procurement strategies in place, Alberta and Saskatchewan are currently the go-to Canadian markets for wind development projects. These two provinces have historically been dominated by other industries and now are playing regulatory catch-up; thus, the ensuing lack of regulatory precedent in both provinces, although exciting in terms of the opportunity to pave the future for new developments, also fosters an environment for risk. As can be seen by the election of the NDP in 2015, significant policy changes can be implemented within a relatively short period. It is not entirely unlikely that the political parties currently in power in these provinces will change in the next five years, and this could very well have an impact on the current policies and plans in place.
However, other factors, such as the increasingly competitive costs of renewable power and the global commitments made to reduce greenhouse gases, will also play contributing roles in future political and industry decisions. Only time will tell what the future holds for wind power in both provinces, but one thing is known for sure – it will certainly not be devoid of excitement!
Ashley Rieseberg is project manager; Gabriel Constantin is team leader for environmental and permitting services; and Ellen Crivella is senior manager for strategy and business development, project development, and engineering at DNV GL. They can be reached at firstname.lastname@example.org, email@example.com, and firstname.lastname@example.org, respectively.