Mountains Mountains

The new Renewable Electricity Program in Alberta

Jan.06.2017

How to take advantage of the new Renewable Electricity Program (REP) in Alberta

The much-anticipated REP was released in November, when the Government of Alberta endorsed the Alberta Electric System Operator (AESO) and its recommendations. The plan is meant to spur the development of 5,000 megawatts (MW) of renewable electricity generation between now and 2030, increasing capacity from 11 to 30 per cent in the province.

In order to develop the program, the AESO posted a questionnaire on www.aeso.ca and sought feedback from developers/investors, associations and other interested parties in March 2016.

What does the AESO have in mind?

The REP is a series of competitions to stimulate development of renewable energy through the purchase of renewable attributes, otherwise known as Renewable Energy Credits (RECs). The successful bidders will be allowed to sell both their electricity production and renewable attributes, and will be granted a 20-year Renewable Electricity Support Agreement (RESA).

The first “bid” is intended to procure up to 400 MW of renewable electricity in 2017. However, the AESO has outlined some rules for the first competition. To be eligible to participate, a project must:

  • Be equal to or greater than 5 MW
  • Be developed at the lowest renewable attribute price per megawatt hour (MWh)*
  • Fulfil the Natural Resources Canada definition of renewable energy
  • Be a new or expanded project in Alberta
  • Reach an in-service date of 2019
  • Make use of the existing transmission and/or distribution system

* For the first competition, the AESO has proposed an Indexed REC where bidders will submit an “all-in” price per MWh that they need to construct and operate their proposed project.

The three-stage competitive bid process will unfold in 2017 and run for approximately seven to 11 months. Here’s what you should expect:

  1. Request for Expression of Interest (REOI): This first stage in the process is intended to attract market interest and provide relevant information regarding the bid process, expected to occur in Q1 2017.
  2. Request for Qualifications (RFQ): At this stage, bidders will submit their qualifications, including project proposals and structure of project teams, and the AESO will determine those who are eligible to participate in the REP – Q2-Q3 2017.
  3. Request for Proposals (RFP): Essentially, this is a pricing stage where bidders will provide their final offer to the AESO and the winners will be given the opportunity to enter into an RESA. Qualified bidders from the RFQ stage will confirm their initial proposals and the AESO will determine which bidders will be entitled to receive support payments in exchange for renewable attributes. This final stage is anticipated to last two to three months in Q4 2017.

In a recent Blake, Cassels & Graydon LLP analysis of AESO, the authors noted that there are still components that require clarification and potential challenges to anticipate:

  • Fees: The Renewable Electricity Act specifies that the AESO will charge “reasonable fees” on both participants and generators that enter into RESAs for the purpose of recovering costs and expenses incurred in developing a proposal under the REP. The price of these fees is still unknown.
  • Deadlines: Developers and regulators such as the Alberta Utilities Commission and Alberta Environment and Parks may face challenges in achieving the 2019 in-service deadline if a large number of projects are approved in this first competition.
  • Delays: There is a significant potential for delay, considering that eligible projects need to use the existing transmission or distribution system in the province.
  • New projects may struggle to complete requisite environmental studies, obtain regulatory approval and complete construction prior to 2019.
  • The eligibility criteria favours projects that have already received regulatory approvals and that are located in proximity to pre-existing transmission infrastructure.

Now that you’ve familiarized yourself with the Renewable Electricity Program as it currently stands, what are your thoughts? Share your ideas with us below.

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