By Janet Plume
While many sectors of the project cargo industry lie near dormancy due to price collapses of oil and of most commodities, wind energy projects continue to add renewable capacity in Canada and in other parts of the planet, at least for now.
A recent report from the World Wind Energy Association (WWEA) reveals the wind energy industry bounced back strongly in 2014 after several years of decline amidst the global economic recession. Ranked No. 7 in wind capacity worldwide – ahead of France and behind the U.K. – Canada’s wind energy industry has ballooned from a few hundred Megawatts a decade ago to more than 10,000 MW today. The more than 51 Gigawatts of new wind energy added to the planet last year posted a record in terms of growth, bringing total global wind power capacity to 370 GW.
While steady growth in capacity continues this year in Canada, industry observers say the future is clouded by uncertainty over potential changes in government policies towards the sector. While this uncertainty is giving investors pause about the bank-ability of new capital wind projects, the small wind sector is steaming ahead unfazed.
Wind blades are becoming bigger and longer. Onshore wind turbine blades historically averaged 40-45 meters in length. The new generation of onshore wind blades are 55-58 meters in length, while offshore blades can be up to 75 meters long. Generally, blades of lengths greater than 64 meters cannot be transported on standard semi-trailers and require specialized equipment.
Turbine manufacturers are trying to build assembly plants closer to their markets. Manufacturers such as Enercon and Siemens that had previously only exported out of Europe – particularly Germany and Denmark – now have facilities in Canada, Mexico, Brasil and China. The result has been that the wind turbine sector has become a lot less of a carrier market. As the trend has evolved in other parts of the world from China to Brasil, manufacturers are building closer to their Canadian markets, creating transportation opportunities for truck and rail. “There has been a strong increase in the number of wind components being made in Canada,” said Jean-Francois Nolet, Vice President of Policy and Communications at the Canadian Wind Energy Association. “Wind energy manufacturing accounts for 5,000 jobs in Quebec, and 1,000 jobs in Montreal.”
Of the 10 wind energy projects that were completed during the first half of this year, four are located in Ontario, comprising more than 85 percent of the 510 MW of wind capacity added during this period throughout the entire country. Ontario garnered the lion’s share of wind farm construction last year as well, with its 16 new wind farms accounting for some 53 percent of the more than 1,870 MW in wind capacity added nationwide.
“Both Ontario and Quebec have seen aggressive development in wind farms in recent years,” said Mr. Nolet.
Canada’s federal government provides no subsidies for wind farms. Because electricity generation is a provincial jurisdiction, Canada’s wind energy development has grown according to those borders. “With 10 different provinces, it’s like 10 different countries with 10 different energy grids,” Mr. Nolet said. “Most utilities are crown utilities owned by the province, and they are the sole buyers of electricity. If the provincial government is not launching an RFP, nothing will be built.
“Alberta is the exception with its open merchant market in which people bid on electricity,” he said. “You don’t need a utility to launch a wind farm project. Similar to the U.S., wind energy in Canada is now viewed as a mainstream source of energy production, which means its costs are similar to other forms of power generation. As the cost of building wind farms decreases, governments have less incentive to provide subsidies for their construction. “We have reached the point where wind competes with traditional sources of power generation such as the fossil fuels,” Mr. Nolet said.
While electricity demands are increasing in Eastern Canada, growing electricity demands are expected to be completely met in British Columbia by BC Hydro’s Site C dam project, a nearly $9 billion project on the Peace River near Fort St. John. That is why the only wind project currently under development in B.C. is the $400-million, 185-megawatt Meikle Wind project in Tumbler Ridge, expected to be operational in late 2016. Mike Garland, Chief Executive of Pattern Energy Group LP, which is building Meikle, said B.C. remains Canada’s most under-developed wind market.
Another twist to provincial jurisdictions is the issue of multiple policies as opposed to a single national policy regulating wind energy. Renewable energy continues to face many challenges worldwide, and amongst its most notable challenge is the ongoing uncertainty over government support. “After this year, we are going to start seeing uncertainty around policies in different provinces in Canada,” Mr. Nolet said. “While there is a lot of activity right now on construction sites, and a lot of projects are being commissioned, there is uncertainty about the next two to three years.”
In Quebec and Ontario, provincial governments are developing energy strategies, Mr. Nolet said. “Alberta’s open market has worked well there for traditional generators (of energy) – for fossil fuels – but now it’s more difficult where renewables are part of the mix. With a new political party running the government, we will have to see what happens.”
In Quebec, Canada’s No. 2 producer of wind energy behind Ontario, the provincial government turned to wind farms as a form of economic development, particularly in the Gaspe Peninsula, which was in economic decline. The region has a large number of wind farms, a wind research institute, and a number of service providers have set up shop there.
Canada’s smallest province – Prince Edward Island – is the largest in terms of penetration of wind energy, with 30 percent of all electricity in the region coming from wind. In PEI, energy independence prompted the provincial government to establish a healthy wind energy industry.
On a global scale, increasing uncertainty surrounding government support policies has eroded investor confidence in wind power projects, according to WWEA. The UK, Germany and Nova Scotia are all moving away from feed-in tariffs and green certificates (See Sidebar “Nova Scotia Ends Subsidy Program”). Instead, they may be heading towards reverse auctions and subsidy caps, aimed at limiting the cost of the transition to consumers. Investors are also shying away from wind farm proposals in southern Europe, where retroactive policy changes have impacted solar farms in Italy. Even the United States’ longstanding subsidies for wind energy are being questioned. The future of U.S. production tax credits for wind energy appears shaky as low costs have further insulated the sector.
“We see quite a bit of uncertainty for the wind sector in the long term,” Mr. Nolet said. “Canada’s next 10,000 MW of wind energy capacity won’t be driven by increases in electricity demand like the first 10,000 MW was, rather it will be driven by phase-outs of coal plants where we have coal. There are decisions to be made shortly about whether to refurbish those plants in Ontario. Electricity generators will move to all-gas, or coal plants will stay open longer, but either way, those policies will impact the wind market. “
Mining, Small Wind
While concern over government policies are making capital wind project investors jittery worldwide, the small wind market anticipates steady double-digit global growth for the rest of this decade. WWEA defines the small wind market as turbines with rated power up to about 50-100 kilowatts, but notes that different countries have their own definitions of small wind.
The report forecasts that off-grid applications will continue to play important roles in remote areas, bringing electricity to areas that previously had none or were dependent on diesel or a transported fuel. In Canada, the number of First Nations communities turning to small wind projects is on the rise, as are the number of mines switching to wind and solar power.
One of the most notable examples of the mining community switching to renewable energy is the 9.2 MW Diavik Wind Farm, which helps power the Diavik Diamond Mines on an island in a remote subarctic lake about 300 kilometres northeast of Yellowknife in the Northwest Territories. As the world’s most northern large-scale wind-diesel hybrid energy facility, Diavik’s four Enercon wind turbines are integrated into the mine’s existing diesel-powered system and offset diesel use when the wind is blowing, saving the company about $5 million to $6 million a year in fuel costs. Diavik expects the $33 million project to reduce the mine’s reliance on diesel by about 10 percent and lower the mine’s carbon footprint by about 6 percent.
“Canada has more than 300 remote off-grid communities, many of which rely on diesel for their energy,” according to Tim Weis, Director of Renewable Energy and Efficiency Policy at the Pembina Institute. “The opportunity to replicate what Diavik has done is significant. If we were to apply similar projects in remote communities across Canada where we know there is a reasonably good wind speed, we could displace 15 million litres of diesel fuel imported to the North every year. If other industrial sites were included, the number would be much higher.”
Small wind projects are especially appealing to mines because they need to reduce the cost of energy in remote locations, but they still want reliability,” said Mark Bongiovani, Mining and Metals Sales Manager at Schneider Electric. “If they can do both, it’s a very simple decision.”
Lastly, while Canada’s bounty of land has always provided ample space for onshore wind projects, offshore projects, which generally cost about 40 per cent more, have never been part of the wind energy outlook. This past summer, however, Beothuk Energy Inc. announced plans to search for financing for a $400 million 180 MW offshore project in St. George’s Bay, Newfoundland. Beothuk is proposing to construct a 180 MW demonstration wind farm in St. George’s Bay, western Newfoundland and Labrador.