CANADIAN ELECTRICITY, WIND CARBON MARKET by jpo51691

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									CANADIAN ELECTRICITY, WIND &
       CARBON MARKET
   Wind Power Development Workshop
         Denver, July 16, 2007
        Uwe Roeper - ORTECH
                  ORTECH
• Consultants – Energy/Environment - 35 staff
• Financial Side (ORTECH Power)
  – Sector research in wind & water power, advisory
    work, market analysis, project economics, financial
    modeling, due diligence.
• Technical Side (ORTECH Environmental)
  – Wind resource assessments, project permits,
    technical studies, combustion equipment testing.
                 Content
•   Electricity Market Overview
•   Wind Market Perspective
•   Carbon Market Perspective
•   (summary)
    Canadian Electricity Market
             - Stats-
• 10 Provinces / 10 Grids & ISOs
• 121 GW installed (US=988 GW) (11%)
• 577 TWh/a (US=3,900 TWh/a) (15%)
• US – CA, single market with regional
  submarkets based on RTO areas
• US – CA, members of NERC
• Syncronized interconnects
                   Deregulation Status
•   Alberta
     –   Wholesale and retail open access - Functional separation
•   British Columbia
     –   Wholesale open access - Functional separation
•   Manitoba
     –   Wholesale open access - Functional separation
•   New Brunswick
     –   Wholesale open access – Functional separation
•   Newfoundland
     –   Energy policies under review
•   Nova Scotia
     –   Wholesale open access in planning - Functional separation
•   Ontario
     –   Wholesale and limited retail open access – Functional separation
•   Prince Edward Island
     –   Distribution network only
•   Québec
     –   Wholesale open access - Functional separation - Wholesale competition for domestic
•   Saskatchewan
     –   Wholesale open access - Functional separation
        NERC REGIONS IN CANADA
           (market administration)
http://www.pnrec.org/2001papers/Newcomb.pdf

                 1

  62    61   19 28             175              75
                       156

                                              TWh/yr
          CANADA – US INTERCONNECTS
               (physical market interties)
http://tonto.eia.doe.gov/FTPROOT/electricity/0639.pdf
CANADIAN ACCESS TO US POWER TRADING REGIONS
                 (trading platforms)
    http://www.pnrec.org/2001papers/Newcomb.pdf
Adapted from: Hydro Quebec
CANADA - NET EXPORTER OF ELECTRICITY
 http://www.pnrec.org/2001papers/Newcomb.pdf
    Canadian Electricity Market
           - Summary -
• Jurisdiction: Provinces (not Canada)
• Administration: various ISOs administered in
  NERC region framework
• Intertie: strong physical interties in north-
  south direction, limited east-west interties
• Trading: active north-south trading, net export
  from hydro provinces (BC, MB, QC)
• Deregulation: varies from dominant provincial
  utilities to fully open markets.
   Canadian Electricity Market
          - Summary -
• Relevance:
  – Big power price differences among CA ISOs
  – Each province / ISO is a separate market
  – Some CA ISOs subsidize local market with
    export (QC, MB, BC)
  – Open wholesale markets within most CA
    ISOs, but key ISO not set up for open access
    to export markets.
      Canadian Wind Market
       - Economic Factors -
• Cost ($/kWh)
  – Wind Resource / Capital Cost
• Economics
  – Cost vs what the Market will bear
• 3 Market Types in Canada
  – PPA, Merchant, Export
                     Historical & Projected Wind Energy Costs

               30


               25
                                     Price Reduction
               20                         Due to
cents US/kWh




                                  Technology Innovation
               15

                                                           Not attainable
               10


                5


                0
                    1980   1985   1990     1995     2000    2005       2010

 Adapted from: CanWEA 2004                 Year
               Wind Cost
        (aside from wind speed)
• Capital Cost & Cost of Capital
  –   Currency exchange $US-$CA-EURO
  –   Supply/demand turbines
  –   Raw materials
  –   Booming labor market
  –   Financing cost (debt & equity)
• Wind $/MWh cost
  – up ~15% over past 2 years
                                  Wind Install Cost
                3,000


                2,500


                2,000
$ / kW ($CDN)




                1,500


                1,000


                 500


                   0
                    2004   2005            2006       2007   2008

Source: SEDAR                              Year
           Market Drivers
• PPAs direct result of gov’t policy
  – PPAs premium above spot market
  – Paid by rate payers or export
  – 2 types (bid based / standard offer)
• Merchant
  – Depends on voluntary REC market
• Export
  – Depends on market access and US RECs
         Wind & Hydro & PPAs
            - QC/MB/BC -
                   Generation Mix

70
60
50
40                                                    CA
30                                                    US
20
10
 0
     Hydro   Oil   Gas       Coal   Other   Nuclear
                         %
Adapted from: Hydro Quebec
                     Ontario Wind Power Purchases
            150



            120
                                                     5


                                    10
 $CDN/MWh




             90
                            10


             60
                                                    110

                            80      86
             30



              0
                           RFP 1   RFP 2            SOP
Source: Gov't of Ontario
                  Wind Export

• ON market not affected (not based on export)
• QC, MB, BC export excess power to US
     •   Natural gas prices and US economy have been softening.
     •   Power prices softening in gas margin markets
     •   Rising CDN $ vs US $
     •   subsidy uncertainty
     •   Wind purchases based on expectation of export affected
         negatively.
Wind Power Market Types
        PPA Market (Example)
                                                                        Merchant (Example)


                Tax, 5
  Subsidy, 10                                                         REC, 10
                                                                 Tax, 5


                                                          Subsidy, 10



                                                                                         $/MWh, 60
                          $/MWh, 80

                                       Export (Example)


                                         PTC, 0    Tax, 5




                                                            REC, 35

                         US$/MWh, 55
                   Wind Installed Capacity in Canada

     1800
                                                                         1,588
     1600
                                                                 1,460
     1400

     1200

     1000
MW
     800
                                                          684
     600
                                                   444
     400                             322
                       198    236
     200    137
        0
            2000       2001   2002   2003          2004   2005    2006   July 2007

Adapted from: www.canwea.ca                 Year
      Canadian Wind Market
          - Summary -
• Several independent markets
• Electricity price lower (esp. QC, MB, BC)
  / subsidy level higher than US
• 90% gov’t PPAs / 10 % merchant &
  export
• Hydro & export unique issues in CA
  market
• Adjacent US market price important
        Canadian Carbon Market
•   Kyoto signatory (federal)
•   Unable to meet Kyoto goals (federal)
•   Power – provincial jurisdiction
•   Environment – provincial jurisdiction
•   Hydro & Wind & PPA
•   Oil & Gas lobby
•   Debate: hydro eligible for US RECs
•   Interties & trade (provincial ISOs)
•   NOx/SOx trading provincially
•   CO2 (federal) voluntary trading
•   Jurisdictional problems plague implementation
                GHG & Energy in Canada




Figure 3 1990 to 2000 Domestic Energy Consumption, Net Energy Export and Emission Trends (source gov’t of Canada)
            GHG & Prov. Politics




Figure 4 Electricity Generation and Greenhouse Gas Emissions by Province, 2000 (source gov’t Canada)
                                  GHG & Ontario




Figure 5 Ontario Electricity Trends: Generation by Sources and Greenhouse Gas Emissions, 1990 to 2000
Source: govt of Canada
                                          GHG & Alberta




Figure 6 Alberta Electricity Trends: Generation by Sources and Emissions, 1990 to 2000 (source govt Canada)
      Canadian Carbon Market
           - Summary -
• GHG & Kyoto a very large policy issue in
  Canada
• ON policy is to close all coal plants
• AB policy is to expand coal use
• Federal / Provincial jurisdictional issues
  remain unresolved
• No direct implication for wind at this time, but
  potential for future policy support driven by
  deadlock on jurisdictional fronts.
CANADIAN ELECTRICITY, WIND &
       CARBON MARKET
   Wind Power Development Workshop
         Denver, July 16, 2007
        Uwe Roeper - ORTECH

								
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