Transcript 2003 BELL Conference - World Resources Institute
Vision Quest Windelectric Inc.: Developing Markets for Wind Energy in Alberta, Canada
By Juan L. Espinoza, Luis Escobar, & Harrie Vredenburg
TCPL International Institute for Resource Industries & Sustainability (TCPL - IRIS)
2003 BELL Conference, Fort Lauderdale, FL, July, 17-19
OUTLINE
Introduction
Background
– Vision Quest Windelectric – Green energy in Alberta
Green Power Market & Vision Quest (VQ)
– Customers – – Enmax (Greenmax) “Ride the wind” project
How is the future coming for VQ?
Introduction
Objective:
To describe the development of a local “green power” market. It is hoped that the case will provide a framework for national & international application
Methodology:
– Literature review (Secondary data) – – Personal Interviews (2001-2002) Feedback
Outcomes:
– –
Teaching case
(descriptive); Paper (theoretical) “Pilot” study for dissertation topic
Introduction
Rapid
changes
in the electricity sector are moving countries like Canada to consider green/RE alternatives: – – Economic factors (globalization, diversification, deregulation) Technological factors – Environmental/social factors In Alberta, despite its high dependence on plentiful and readily available fossil fuels, the acceptance of wind power appears to be growing This study looks at the different aspects contributing to the
creation
of a green power market, with special focus on the strategic opportunities that it brings to one of the private wind power producers, Vision Quest.
Background: Vision Quest Windelectric
Privately-held Canadian company based in Calgary, Alta.
Active in wind energy exploration, development and production. It is the biggest owner of wind farms in Alta.
“We were the first utility to put a wind turbine in Alberta on a commercial basis in 1994. And we built Canada’s first wind farm in 1987 in the high Arctic” (Vision Quest executive)
VQ has been involved in several governmental and non governmental
task forces
focused on electrical industry restructuring, environmental policy, tax and industry changes designed to create an efficient electricity market.
Green energy in Alberta DRIVING FORCES
The growing renewable energy/wind power industry Deregulation of the electricity sector (from state monopoly-based to open markets) Government support for green energy development (climate change issue) *BARRIERS Alberta’s strong fossil fuel sector (economic, technological, and institutional forces)
Sources of Power Generation in the electricity system of Alberta
Hydro 9% Gas 23% 1998 Wind & Biomas s 1% Coal 67% Gas 35% 2000 Wind & Biomas s 1% Coal 55% Hydro 9% Gas 41% Hydro 6% 2005 Wind & Biomas s 2% Coal 51%
Wind Energy Installed Capacity (MW) around the World
Wind power still represents less than 1% of global power production
BUT
it is the world’s fastest-growing energy source (30% annually) Wind Energy Markets (Countries) Germany United States Spain Denmark India Canada (*) World Total (Approx.) 2000 Additions 1,669 53 713 552 90 10 2000 Year End Total 6,133 2,566 2,502 2,300 1,167 137 17,300 2001 Additions 2,659 1,695 835 117 240 61
2001 Year End Total 8,750 4,261 3,337 2,417 1,407 198 24,000
Source: AWEA, Global Wind Energy Market Report-2001 (*) In order to compare with the ‘big five’ wind energy producers
DEREGULATION: How the Alberta’s electricity market works Generation Marketers Importers and Power Pool
Hourly demand bids Hourly supply offers
Independent Power Producers
Deregulated
Main utilities: Alberta Power Edmonton Power TransAlta Vision Quest Canada Hydro Transmission Distribution Regulated Independent entity appointed by the government ESBI Alberta Ltd
Deregulated
Retailers Municipalities ENMAX Consumers
The Vision Quest opportunity for developing a Wind Power Market?
“In 1996, the Federal Government was looking at recommendations from the national round table on the environment and the economy from the previous year, which suggested that the federal government take the lead in Climate Change and environmental issues by buying something that nobody really had heard very much before, green power” …“we saw it [deregulation] as an opportunity…it was a survey across Canada saying that 70% of the people want wind energy as part of their mix and a large percent (20%-30%) said they’d pay more” ( VQ executive )
VISION QUEST’s PRODUCTS
“We decided to invent the product (‘Green Energy ®’) that was different and break the rules. And we said it’s different and it’s better...”
VER: Verified Emissions (CO2) Reduction Efficiency: Reduction of Voltage Losses
GREEN ENERGY ®
Electricity only: From wind power “...
we were able to quantify the green power energy, and because we were through this auditing process we call that the Verified Emissions Reduction (VER). So, that was also one of the first ever domestic reduction trades in Canada too”
VQ Installed Capacity
Vision Quest's Installed Capacity
50000 40000 30000 20000 10000 0 1200 1200 9660 28380 40440 1997 (2) 1998 (2) 2000 (16) 2001 (47)
Year (& number of units)
Total
Some customers:
Enmax (Greenmax), TransAlta, Suncor Energy
The retailer: ENMAX
Enmax is an electricity transmission, distribution, and energy supply & services company, and is wholly owned by the City of Calgary.
“Being Enmax a retailer, the company is the ‘middle- man’ between electricity producers and clients. Enmax realized that the environmental impacts from the electricity sector could lead to a carbon tax penalty to either the producer or customers, but not to Enmax itself. However, the company saw a role to play about this environmental problem. They created in 1998 an educational and marketing program as the starting point for Greenmax” (Enmax Executive)
Greenmax Program
It was the customers the opportunity to support “green power”
“Greenmax offers customers a choice to support wind-generated electricity production through the payment of premiums ($5, $10, or $ 15 option) to offset the costs associated with sourcing wind power”
first program
in Canada offering residential (Enmax executive) Two ways to encourage clients to pay more: – Educational program & “the green club program”
CLIENTS
– 3,000 residential customers (1% of Enmax’s market) – – – Federal Government (NRCan & Environment Canada) “Ride the Wind” project AUMA and commercial clients
Clients of the Greenmax Program
Greenmax Clients
150 100 50 0
10
10
2.2
2.2
26
26 83.8
67
122
28.8
Sep-01 Jun-02 (*)
Others
include residential, commercial, and municipal clients
“When in 1998 the program was launched, Environment Canada and Natural Resources Canada facilities were the first clients”
(Enmax Executive)
Ride the Wind
x Established in September, 2001. It’s a
100 % pollution free project
to power the LRT system (C-Train)
First public transit system
wind power in North America using
Collaborative
project: VQ-Enmax-Calgary Transit It contributes significantly toward the City of Calgary’s goal to
reduce its CO2 emissions
. (It avoids the generation of 26,000 tonnes of CO2 annually).
“The City of Calgary has a particular interest in environmental issues at both corporate and community level...people saying to us: ‘if you do whatever change to be environmentally responsible, we’ll pay for it’”
(City of Calgary’s executive)
Ride the Wind…
Long-term contract (10 years) with a fixed price
Comparison of electricity prices
a b 1 2 3 4 5 6 7
Time (e.g., days or years)
8 9 10 Power Pool Wind power contract
Alberta power Pool Prices ($/MWh)
Sources:
Power Pool of Alberta Canadian Hydro Developers Inc.
What should VQ’s strategic direction be?
Toward a ‘sustainable’ green power market (Beyond Greenmax?) – Economies of scale (e.g., “socially responsible” investors) – Role of large energy firms such as Shell, BP, Suncor, Transalta Regulation (based on government-subsidies) Deregulation (based on consumer-premium)?
vs.
Geographical focus (Alberta, Canada, US)?
Competition within the wind power industry (e.g., CHD) Competition in the electricity industry: differentiation and cost leadership at once?
product
Vision Quest II: The Sequel
October 2002: Vision Quest became a wholly owned, independently operated subsidiary of the TransAlta Corporation, Canada’s largest non-regulated power generation company. 2003: Constructing Canada’s single largest wind farm (75 MW) at McBride Lake. With this, VQ is becoming Canada’s largest wind power producer Vision Quest presently owns and operates 68 wind turbine power plants with over 46 megawatts of total peak capacity (to meet the demand of 21,000 homes)