Round 1 of Alberta’s Renewable Electricity Program (REP) concluded this week with the award of the following Renewable Electricity Support Agreements (RESAs):
|Capital Power Corporation||Whitla Wind||201.6||Medicine Hat|
|EDP Renewables Canada Ltd.||Sharp Hills Wind Farm||248.4||Oyen|
|Enel Green Power Canada, Inc.||Part 2 of Castle Rock Ridge Wind Power Plant||30.6||Pincher Creek|
|Enel Green Power Canada, Inc.||Riverview Wind Farm||115||Pincher Creek|
Round 1 was being closely watched because it is the first time Alberta has had a procurement offering long-term (20 year) government backed contracts (called RESAs) for new renewable electricity projects. Like many others, AlbertaPowerMarket.com has been reviewing and reflecting upon the Round 1 results for the past few days. Our takeaways include:
- A weighted average price of $37/MWh, the lowest competitive renewable pricing in Canada to date, demonstrates that Alberta has an excellent wind resource. Yes, capital costs for wind projects are coming down, finance costs are low, and running very competitive procurement processes helps to lower prices, but a $37/MWh weighted average price only arises if proponents can harness winds that produce high capacity factors for their projects. The results prove that Alberta has that wind resource in spades.
- The range of winning bid prices was wide, from $30.90/MWh to $43.30/MWh. No detail was provided on which winning project bid which price, but one might surmise that Enel’s expansion project at Castle Rock may be able to leverage existing interconnection infrastructure and therefore is the lowest bid price. Still, an over $12/MWh spread across winning bid prices seems high to us. Also, though the $37/MWh weighted average price is getting the news most developers looking forward to Round 2 are reflecting on the $43.30/MWh successful bid price.
- Wind is still cheaper than solar in Alberta. And, as we have discussed here, that is certainly the case if the procurement does not assign any value to the fact that solar projects capture higher pool prices than wind projects in Alberta. Most solar developers therefore did not even bother to bid in Round 1, though it was nice to see from the announcement that Canadian Solar and Bowmont Capital teamed up and submitted a solar bid.
- Southern Alberta is windier than the rest of this province. No surprise for anyone familiar with Alberta, though AlbertaPowerMarket.com did note that 75% of the new renewable capacity will be situated in South Eastern Alberta (Medicine Hat and Oyen) versus in South Western Alberta (Pincher Creek).
- Though final bids were received for 26 projects (3 projects qualified in the RFQ phase of Round 1 appear not to have bid in the RFP phase) with an aggregate capacity of 3600 MW, there were only 12 different proponents that submitted these bids. In other words, the proponents that chose to bid in Round 1 did so for multiple projects. Also the 12 proponents that bid are all large developers (some bigger than others), and no small local developers qualified and bid their projects in Round 1. That said, some large developers with wind projects on the AESO project list apparently chose to sit out Round 1.
- The winners are diverse and include a long-standing Alberta generator (Capital Power), an international generator that already had a 76.2 MW wind project in Alberta (Enel) and a brand new international entrant to the Alberta market (EDP). The conspiracy theorists who believed the incumbent generators would win all the RESAs in Round 1 were wrong. Alberta is open for new entrants.
- Though the target for Round 1 was 400 MW, RESAs were awarded for 595.6 MW. We assume that the AESO organized the projects by strike prices, started awarding RESAs to the lowest strike price projects, but concluded that to get to 400 MW it had to exceed its target. If that assumption is correct by our calculations the AESO either got to 394 MW or 347.2 MW, and decided that it needed to award another RESA to exceed the 400 MW target. And, yes, we did include this takeaway to add to the bid price speculation that goes on after every renewable procurement.
- Neither Capital Power nor EDP appear to have bid the full capacity of their projects into Round 1. Coincidentally, each of their winning projects were originally designed to have 83 3.6 MW turbines and be capable of generating 298.8 MW. Perhaps they will now build out these projects in phases with the subsequent expansion phase participating in a future Round of REP.
- We will have 4 (3 anyway, since 1 is an expansion) new renewable projects in Alberta. There was some concern that with only 400 MW being awarded there may only be 1 winner with 1 new project. More ribbon cutting in different locations will be good for the renewable electricity industry in Alberta.
- Finally, and importantly, we take away that the AESO can run an efficient fair competitive procurement for renewable electricity in Alberta that is completed on time in a condensed period. Though there were successful and unsuccessful proponents in Round 1, AlbertaPowerMarket.com is not hearing many complaints about the process. That is important for Alberta and the success of future Rounds of REP.
AlbertaPowerMarket.com is interested in your takeways. So please let us know what else stood out to you from the results of Round 1.
Kent Howie is the head of the Electricity Markets Group at the Calgary, Alberta office of the national law firm Borden Ladner Gervais LLP. He is also the editor of and regular contributor to AlbertaPowerMarket.com. The views expressed in this article are the personal views of the author, and not the views of Borden Ladner Gervais LLP.