Alberta will hold its first auction for renewable electricity generation contracts in early 2017. Speaking Thursday morning at the annual Canadian Wind Energy Association ("CANWEA") conference in Calgary, the Hon. Shannon Phillips unveiled another piece of the Province's Climate Leadership Plan. In the course of her morning keynote address, the Minister reaffirmed the Province's commitment to achieving its "30 by 30" target (30 percent of electricity used in Alberta being generated from renewable sources by 2030) and announced (i) the tabling of Bill 27 – Renewable Electricity Act; and (ii) the endorsement of the Alberta Electric System Operator's ("AESO's") recommendation to the Province for a Renewable Electricity Program ("REP"). The Minister's address was followed by a luncheon presentation by Mike Law, a VP at the AESO, who provided more details on the REP.
New things we learned include that:
- the REP will begin in Q1 of 2017, and will be a 3 stage procurement: a REOI (4-6 weeks), RFQ (4-6 months) and RFP (2-3 months) stage;
- the REP will be for up to 400 MWs of renewable capacity and will be fuel neutral;
- 20 year contracts called Renewable Energy Support Agreements (RESAs), with the AESO as the counterparty, will be awarded to successful bidders late next year for projects of more than 5 MWs that will have to be in-service by 2019;
- the financial incentive in the RESAs will be in the form of an indexed renewable energy certificate (REC) which, in essence, will be a contract for differences linked to the pool price for electricity. The intent being that successful bidders will not bear the Alberta pool price risk over the term of their RESA but, in return, will forego windfall profits in times of high pool prices; and
- the draft material commercial terms of the RESA and REC will be released by the AESO on November 10th for comment as part of a short consultation period that will end on December 9th.
The much anticipated REP announcement was generally well received at CANWEA. As one attendee put it "Renewable energy procurement has finally arrived in Alberta - the race for the prize has begun." Of course, over the next number of months project developers will be rolling up their sleeves to better understand the rules of this race, and the size of the prize, before deciding whether to participate in the first Alberta REP, or perhaps take a pass and wait for the subsequent REPs that will be required for Alberta to reach its "30 by 30" target as coal plants are phased out. Based on our early discussions with developers at CANWEA, however, market participants like the fact that Alberta has removed pool price risk from the project financing equation. That, alone, is likely to encourage many developers to look more closely at the Alberta power market and the REP in the coming months.
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