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In a press conference on July 20, 2012, the Government of
Canada's second most populous province, Québec,
announced plans to procure 700 MW of wind energy capacity.
This procurement will tranche be in the form of a 450 MW
block through a new request for proposals (RFP's), and a
250 MW block to be procured from Aboriginal communities
through a dedicated purchase program.
Québec previously issued three wind energy RFPs totalling
3,500 MW of capacity. This includes an RFP in 2009 for
two 250 MW blocks, respectively reserved for community and
Aboriginal projects, with private sector participation. As a
condition of this RFP, projects were limited to 25 MW and the
Aboriginal projects required majority control by the Aboriginal
community or nation. Ultimately, only one of the Aboriginal
projects (approximately 25 MW) was retained as a result of
this RFP.
As in previous RFP's, the Québec government has
articulated its intention to maximize regional and provincial
economic benefits through domestic content requirements. This
will likely be achieved by requiring that 30% of the cost of the
turbines be spent in the regional municipalities of Gaspésie
and Matane, and that 60% of the overall costs be incurred in
Québec.
Specific details of this new 700 MW procurement have not
yet been released, but the announcement indicated the
government's intention to publish draft regulations in the fall
in relation to the 450 MW and 250 MW blocks. This call
for power is expected to be procured from independent power
producers by Hydro-Québec Distribution, which is
wholly-owned by the Province of Québec, through a 20-year
power purchase agreement.
In recent calls for wind power, the Quebec 'local
content' component required that at least 30% of turbine costs
relate to expenses for the manufacture of the wind turbines in the
Gaspésie-Matane region. In these RFP's, costs
associated with the following item were excluded from the
determination of this 30% regional content: (i) wind turbine
warranties; (ii) transportation of the wind turbines to the project
site; (iii) the erection, testing and commissioning of the
turbines; and (iv) maintenance and operating costs. In other words,
the Government of Québec is seeking hard capital investment
in manufacturing plant and jobs.
Québec's most recent RFP's also required that 60%
of overall costs be spent in the province, allowing for
'softer' local content items such as: (i) development
costs, including the cost of resource, site and environmental
studies; (ii) the cost of the wind turbines; and (iii) total
construction costs, including costs associated with transporting
wind turbines to project sites, testing and commissioning. However,
items such as warranty coverage payments, operation and maintenance
costs and payments made to local landowners have previously been
excluded from the broader local content requirement wind power
calls.
This newly announced procurement will effectively help
Québec to fulfil the 4,000 MW of wind power capacity
objective stated in its "Energy Strategy 2006-2015". It
is widely seen to replace the so-called "orphan"
700 MW of projects which had previously been retained by
Hydro-Québec but which did not proceed and the deficiencies
resulting from the 250 MW block of Aboriginal projects of the
2009 RFP.
This announcement has been welcomed by the industry in the
province as an affirmation of Québec's commitment to the
ongoing development of wind energy in the province. It is
anticipated that this initiative will provide immediate regional
and provincial economic spin-offs, including maintaining employment
in the Gaspésie-Matane region and its manufacturing sector,
which includes nacelle assembly, as well as the production of
nacelle components, power modules and converters, turbine blades
and turbine towers.
The announcement of this new RFP for 700 MW is also seen to
provide greater certainty for the future of the wind energy
industry in the province, which is estimated to generate over $10
billion between 2005 and 2015.
It also is expected that an additional 300 MW of wind
energy capacity will be procured as part of Québec's
Plan Nord, as previously announced by the Quebec government,
although the details of such procurement have not yet been
released.
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