Capital Power to buy wind farm
$33-million deal for a wind farm project in Alberta with contracts in California highlights the importance of green energy credits in a carbon-sensitive North American market, said observers.
On Monday, Edmonton’s Capital Power announced it bought out the Halkirk I wind project, a 50-50 joint venture the former city utility entered with privately owned Greengate Power Corp. last December.
The 150-megawatt project’s attraction lies in its long-term renewable energy credit agreement with California’s Pacific Gas and Electric, and ability to sell into Alberta’s open market, Capital Power said.
“The arrangement with PG&E provides a stable, contracted cash flow for 20 years and over the next five years that’s going to make up 40 to 45 per cent of the revenues for the project,” said Bryan DeNeve, senior vice-president of commercial services with Capital Power.
While the project’s green credits are sold to California, its generation will be sold into the Alberta power market when launched in 2013, making the wind farm a hybrid asset of contracted and spot power sales, said DeNeve.
The Alberta government does not offer long-term power contracts to generators, but does trade in green credits as part of its carbon intensity reduction program, at $10 per tonne from renewable energy companies.
California’s aggressive push toward greener generation offers higher premiums which are not made public.
Greengate secured its contract with the U.S. utility for 450 MW of renewable energy credits, covering Halkirk and its 300 MW Blackspring Ridge project in Alberta, expected to be the largest in Canada.
The contracted revenue was critical to secure financing for the projects, said chief executive Dan Balaban. It also addressed Alberta’s currently low power prices which make projects difficult to justify on generation alone, while cashing in on its environmental commercial value.
“It’s certainly challenging for wind energy in Alberta in absence of projects that are able to secure the arrangements that we’ve been able to,” Balaban said.
Electricity prices averaged $50 per megawatt hour last year and $67 per MWh the first five months of the year.
Currently Alberta has 777 megawatts of wind energy connected to the provincial grid, out of a total 13,500 MW. Another 5,225 MW of prospective wind projects are in the connection queue, according to the Alberta Electric System Operator. Most of the wind farms in the province are concentrated in a wind corridor near Pincher Creek in southwestern Alberta, so generate power — or not — at the same time, creating a discount to the average price, said analyst Allen Crowley, with EDC Associates.
“There’s enough of them now so if they all blow at once, they tend to pull the price down,” Crowley said. “And when they are not running, the price might go up but they aren’t there to get it.”
While not all projects will be built, many firms likely will be including wind into their asset portfolio in the future, for diversity’s sake and to offset emissions, he noted.