CanWEA criticizes RFPs and calls for procurement mechanisms that reflect best practices worlwide: feed-in tariffs. The comments are made in CanWEA’s WindVision 2025, a report that lays out CanWEA’s vision of where and how wind energy can be developed in Canada.
CanWEA says . . .
” In most of Canada, provincial governments have directed Crown utilities to procure increasing amounts of wind energy and other renewables through competitive tendering. At face value, it makes good sense to contract for renewable energy supplies at the lowest possible cost. On closer inspection, however, current procurement practices can have unintended consequences which make it harder to capitalize on wind power’s full potential.
With competitive tendering, utilities bring new wind capacity on stream in large chunks rather than in steady increments. While this may satisfy the utility’s needs for more power, it means that equipment manufacturers face a ‘boom and bust’ scenario and an uncertain business climate that offers little incentive to set up facilities in Canada. This cycle of ups and downs also makes it difficult for wind energy developers to make long-term investment plans for Canada. Good wind projects which have passed the initial planning stage must sit on the shelf until new tenders are issued, by which time developers may well have placed their capital and people elsewhere. A procurement system which provided a more stable outlook and a steady flow of opportunities would encourage turbine and component makers to locate and produce in Canada and ensure that good wind energy projects move forward.
Another downside feature of competitive tendering is that it is technically challenging and very expensive for bidders to participate. Responding to a Request For Proposal (RFP) for a major wind project will entail thousands of hours of expert time and costs running into millions of dollars. Not only does this take time and resources away from project development and stakeholder engagement, it gives a distinct advantage to large firms that have the financial capacity to carry these costs and may deter community groups, municipalities, co-operatives and Aboriginal communities from even taking part. One of the strengths of wind energy is that it can be deployed at varying scales by a great variety of potential project developers. Utilities and power authorities must adjust their procurement processes to ensure that it is not only the big players that can compete.
Competitive tendering can also lead to higher costs for wind power projects. When Canadian utilities issue RFPs for new wind energy capacity, they commonly receive proposals equivalent to three to four times the amount of power they are actually seeking. So, competing is a risky business and bidders factor this risk into their price proposals. An effective procurement process should also look beyond price and factor in other variables like community support and local economic benefits.
When it comes to procurement practices, experience in Europe may offer useful guidance to Canada. Wind energy projects in many European countries have an automatic right to connect to the grid and receive a fixed price (feed-in tariff) for their electricity production. If developers are willing to build wind farms at that price, they are free to do so and can start selling electricity as soon as projects are completed. The feed-in tariff system provides much greater certainty and lower risk as developers can easily project whether a project makes good business sense. So it’s no surprise that countries which offer feed-in tariffs are attracting huge wind power investments. This underscores the need for Canada to rethink its procurement processes to improve our ability to compete for global wind energy investment.
CanWEA calls on provincial governments to examine best practices in the world’s leading wind energy countries and adjust their procurement practices to provide a stable and steady stream of opportunities and accommodate a wide range of potential wind energy project developers. New procurement processes should reward disciplined, long-term development proposals and consider factors such as project quality, economic and environmental benefits in addition to price.”
