In a surprise announcement, the public utility is now planning to issue a "Round 1" RFP, likely this month, to acquire about 50 MW of the 125 MW in nameplate RETs capacity envisioned by 2000. Hydro also announced it will exclude its own business units and municipal utilities from bidding in the first round, although investor owned utilities and other crown corporations, such as the Ontario Energy Corporation, remain eligible. Ontario Hydro's Bunli Yang explained at the workshop that a first round is proposed because Hydro's business units would not, for various reasons, be able to compete fairly in the first bidding process, and that "active steps by government" are required to allow this.
A major uncertainty is the future status of Ontario Hydro Technologies (OHT), which could be changed into a Hydro subsidiary like Ontario Hydro International Inc and allowed to invest in commercial projects. This in turn raises concerns by non utility generation proponents that they could be divulging information to a potential RETs competitor, OHT, with their RFP bids. Even though OHT may help evaluate bids, Yang said non-utility generation concerns for objectivity would be alleviated by strict confidentiality agreements. Yang indicated that utilities might bid under Round 2 along with independents, or perhaps in a separate RFP. Hydro is now finalising the RFP details.
Separate Round 1 competitions are proposed for six green renewable technology categories, each with their own project size ranges (table). At least one contract award is expected -- and two projects could be shortlisted -- in each category. Three of the six competitions involve wind power, although deadlines for medium wind farm proposals (10-25 MW) will be deferred for 42 weeks to enable wind resource mapping by proponents. However, a full year is generally accepted in the industry as the minimum period required..
Jeff Passmore, vice president of the Canadian Wind Energy Association, has welcomed Hydro's "good judgement" in confining Round 1 to non utility generators, but suggests Hydro's business units should also be excluded from Round 2, given their intrinsic generation advantages. Passmore notes that by splitting Phase 1 into two rounds, Hydro has now made it doubly difficult to secure bids from a wide range of renewable technologies and at reasonable cost, since many such projects require a certain minimum size to achieve economies of scale.
The total RETs funds available for power purchase premiums in Round 1, from 1996 to 1999, are $21 million. Hydro's total annual funding for the RETs programme in the period will reach $37 million. Round 1 bids will be judged according to price and economics, and the non-price issues of project management experience, technology and societal impacts. The Round 2 RFP is expected in 1996.
The RETs programme conforms to Ontario Hydro's corporate mission of promoting sustainable energy and the Ontario government's new energy directions policy. RETs offer significant environmental benefits, including contribution to Hydro's strategy to control greenhouse gases. The RETs programme signals a shift from Hydro's previous entrenched preference for construction of large, central generating stations toward distributed, and modular generation from renewables. "RETs are the wave of the future," says Hydro president and CEO Allan Kupcis.
Ontario Hydro emphasises that the main purpose of the first round is not to acquire large amounts of power, but to obtain utility experience and operational performance data on decentralised RETs new to Hydro, as well as to discover their market prices.
RETs will be a two-phase programme. The 1995-1999 period (Rounds 1 and 2) will feature technology development and adaptation. Beyond 2003 is phase two for commercialisation and full integration of grid-connected RETs as a major source of electricity supply. However, no budget has yet been approved for this phase.
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