Province taps into winds of opportunity
Private investors set to spend $600M on clean alternative
By Charles Wyatt - Business Edge
Published: 06/09/2005 - Vol. 1, No. 11
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Ontario is late in harvesting the wind. With only 14 megawatts of wind-generated electricity in operation, Ontario lags well behind several Canadian provinces, as well as the United States and Germany.
In 2004, Germany led the wind world with 16,629 megawatts of wind-generated electric power, or 35 per cent of total production.
The U.S. produced 6,700 megawatts, while in Canada, the leading provinces, Alberta and Quebec, produced 275 megawatts and 113 megawatts, respectively, according to the Global Wind Energy Council and the Canadian Wind Energy Association.
Quebec is Canada's largest power producer from all sources, with total production of about 37,600 megawatts, while Alberta's total installed capacity is about 10,800 megawatts, says the Canadian Electricity Association.
Wind farms may dot the Ontario landscape as part of the province's initiative to replace 7,500 megawatts of coal-generated electricity.
Two more Canadian wind farms - a 68-megawatt facility in Alberta and a 31-megawatt operation in Nova Scotia, which together can produce enough electricity for more than 42,000 homes - opened in May.
Ontario is beginning to turn its winds into energy, however. About $600 million in private investment is now targeted on installing wind-power plants that will add more than 350 megawatts of electrical power to the province's 30,000-megawatt generation capacity. More wind-power projects are expected this year, says the Ontario Ministry of Energy (OME).
The OME approved construction last November of wind farms in five Ontario locations. Wind power from these projects is expected to start to flow in early 2006, eventually producing enough electricity to power 75,000 homes.
Wind energy is the fastest-growing source of electricity in the world, increasing more than 30 per cent over the past five years, the Global Wind Energy Council says.
In 2004, there were more than 47,000 megawatts of wind power installed around the world, although Canada accounted for only 444 megawatts of that total.
"Being a late entry isn't necessarily a bad thing," says Tom Adams, executive director of the consumer advocacy group Energy Probe. "Lots of people wasted a lot of capital developing systems."
The Ontario government is pushing wind-power generation to help replace more than 7,500 megawatts of electricity generation that will be lost in 2007 when the province's coal-fired generation plants are shut down.
The governing Liberals have been promising since they were in opposition that they would shut down the plants, which produce about 25 per cent of Ontario's electricity, in order to reduce air pollution and improve the health of Ontarians.
In April, the OME asked for proposals for another 1,000 megawatts of renewable energy. The approved proposals will be announced in the fall.
About 85 per cent of the renewable-energy projects approved in November 2004 were wind-power generation.
Although wind power is environmentally friendly, it has faced opposition from people who live in the area of wind farms for a variety of reasons, including noise and visuals.
Adams also says Germany has not been able to achieve its expected energy output despite its multibillion-dollar investment. "They built in low-wind areas and they are producing only 15 per cent of the rated capacity."
Quebec, Canada's second-largest wind-power province, also failed to reach its expected power-generation levels, and early installations yielded 18 per cent instead of the expected 30 per cent. Adams says the world's most productive wind-power stations reach 45 per cent of their rated capacity.
He believes, however, that Ontario will avoid the problems that occurred with the first rush into wind-power generation, because its windmills will be sited in the province's windiest locations.
Some of the best wind areas are near Lake Huron, Lake Erie, Kingston and the Islands, Sault Ste. Marie and James Bay. The Ontario sites are expected to produce in the area of 30-per-cent rated capacity, Adams says.
The Kingsbridge Wind Power Project, under construction by Edmonton-based Epcor Utilities Inc., is a 39.6-megawatt wind farm near Goderich on Lake Huron. The project, which will produce enough electricity to supply 8,600 homes, is scheduled to begin producing electricity for the power grid by mid 2006. Kingsbridge is Epcor's first wind-power project.
Paul McMillan, Epcor's Ontario senior vice-president, says the wind development process in this province "allows us to earn a competitive but reasonable rate of return."
In April, Epcor agreed to buy Port Albert Wind Farms Ltd., which will give it the right to develop more than 270 megawatts of additional wind power near the Kingsbridge project. Epcor expects to submit proposals for additional wind-power projects in response to the Ontario government's request for an additional 1,000 megawatts of renewable power, McMillan says.
Under the federal government's wind-power production incentive, companies installing wind-power generation can receive a subsidy of one cent per kilowatt of production capacity. In the recent budget, the government increased its wind-power production target to 4,000 megawatts from 1,000 megawatts.
Superior Wind Energy Inc., a subsidiary of Brascan Corp., is developing two wind-power projects.
A 100-megawatt wind farm near Sault Ste. Marie is expected to begin producing power in 2006. A second 50-megawatt wind farm near Collingwood is expected to produce electricity in 2007.
As well, Toronto's Aim PowerGen Corp. is developing the 99-megawatt Erie Shore Wind Farm on the north shore of Lake Erie. The site also is expected to begin commercial operation in early 2006.
Adams says Energy Probe supports Ontario's expansion into wind-power generation because consumers will not be financially responsible if the wind plants do not produce power.
Many of the first wind-power companies went bankrupt, leaving consumers with the debt and no power. Adams says this is less likely to happen in Ontario because the companies developing the wind power are financially strong companies such as Brascan and Epcor.
"The Ontario government is saying we will buy your wind power, pay you eight cents a kilowatt hour, and if you do not deliver that's your problem," Adams says.
"Other jurisdictions have put the consumer on the hook if there is a failure to deliver."
"The operational risk is on investors, which is where it should be," he says.
Under the Ontario government's proposal, suppliers using renewable energy will receive 7.97 cents per kilowatt hour of electricity, according to the Ontario Ministry of Energy.
Even if the new wind plants are financially successful and produce electricity at a reasonable cost, it is unlikely they will be able to replace coal-fired generation. While wind is clean and free, Adams says, it is also "intermittent, it comes and goes, depending on nature."
"Some Alberta wind-power plants are producing cheaper power than gas plants," Adams says, but adds that the province has a "terrible wind-coincidence factor."
"The wind isn't available when the electricity demand is highest," he says. "Wind plants produce power out of phase.
"Coal plants are on the other end of the telephone," Adams says. "You call up and say you want to increase power by 100 megawatts for two o'clock in the afternoon and you get it. The wind is called by nature."
(Charles Wyatt can be reached at wyatt@businessedge.ca)
