To question the wisdom of wind power in Canada these days is to risk winding up impaled on a rotor blade. Environmentalists, politicians and investment bankers all seem to agree that wind energy is the next big thing. Unfortunately, few seem to have consulted Mother Nature on this.
The truth is that the wind is about as reliable as that Hyundai Pony that got you – or not – to biology class way back when. If it actually started, you might have (reluctantly) made it to school. But you could never count on the thing. That’s what made it such a great car for a student; it provided a ready excuse for playing hooky.
Meeting the electricity needs of a population of 7.7 million people is a more serious matter. So, to base an energy strategy on something as unreliable as wind velocities in 2015 is, to say the least, hazardous. Yet, the apparent political dividends to be had in backing an as-yet unscathed green energy option has led Premier Jean Charest to order Hydro-QuÃ©bec to buy 4,000 megawatts of wind power – or 10 per cent of the utility’s supply – from independent producers by that date.
Contracts for the first 1,500 MW or so have already been awarded, and the recent call for tenders for an additional 2,000 MW has generated so much enthusiasm that Hydro-QuÃ©bec expects to have offers to supply as much as 8,000 MW by the time the deadline for bids falls in April.
It’s hard to figure out who benefits from this. It’s not Hydro-QuÃ©bec, which will pay more for electricity than it would by generating it itself or by playing the continental energy market. It’s not Quebec consumers, to whom Hydro-QuÃ©bec will pass on the cost of its wind power purchases. And it’s not likely to be all those investors who’ve jumped on the wind energy bandwagon.
Talk to Yvan Dupont, president of the Montreal-based engineering firm AXOR. He built Quebec’s very first wind farms, part of Le Nordais project on the GaspÃ© Peninsula, on what are considered some of the windiest spots in Canada. The 133 wind turbines, installed in 1999, have produced 40 per cent less power than they were supposed to, resulting in the payment of stiff penalties to Hydro-QuÃ©bec. Axor’s $56-million equity investment in the project has been wiped out. “The resource – the wind – was overestimated by all the experts,” Mr. Dupont now laments.
A similar story has emerged for investors in Toronto-based Creststreet Power & Income Fund, which operates two wind farms, including the Mount Copper project in the GaspÃ©. “We experienced overall wind speeds that were well below expectations for this time of year,” Creststreet’s chief executive officer Eric McFadden said in May as the fund cut its monthly distribution by 14 per cent.
Hydro-QuÃ©bec’s contracts with wind providers are based on a 35-per-cent functionality rating, meaning a 100 MW wind farm has a contractual obligation to provide 35 MW of power to the utility. If it produces less than that, it can face financial penalties; if it produces more, it gets a lower rate per kilowatt hour.
This doesn’t mean wind power is a good deal for Hydro-QuÃ©bec. Buying energy when the wind is blowing does allow the utility to close some of its dams and let water levels rise. This process, known as stocking electricity, can come in handy when power prices spike during the summer, allowing Hydro-QuÃ©bec to export it at a premium to energy-starved Ontarians and Americans. But the utility could actually trade energy more profitably if it wasn’t saddled with the wind power contracts.
According to Laval University economist Jean-Thomas Bernard, it makes more sense for Hydro-QuÃ©bec to stock electricity by importing power during market troughs rather than buying it from wind producers. For example, the price of electricity in the Northeastern continental market that comprises Quebec often falls below 2.5 cents per kwh during early hours of the morning. Under most of the recently awarded wind power contracts, Hydro-QuÃ©bec will pay 6.5 cents, not including another 2 cents in transmission and other charges.
To be sure, some of the power Hydro-QuÃ©bec is importing might be coming from environmentally ugly coal- or gas-fired generating stations in the United States. But Mr. Bernard figures it’s only a matter of time before a market in carbon emission credits emerges in North America, so that environmental costs of “dirty” power are offset.
Wind power’s win-win image as an environmentally friendly investment opportunity seems overblown. Besides, it’s not like it doesn’t have an impact on the environment. Toronto-based SkyPower Corp., whose proposed 171 MW project in RiviÃ¨re-du-Loup has struggled out of the gate, has discovered that not many people want a hundred or more 25-storey wind turbines blocking their mountain vistas.
Wind power may be today’s “it” energy. But eventually, the hype – like that unreliable northern gust itself – must die down.
By Konrad Yakabuski
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