Clean Wind PowerClean Wind Power

Political FundamentalsPolitical Fundamentals

• Cost of wind is decreasingCost of wind is decreasing

• KyotoKyoto

• Ozone annex of Clean Air TreatyOzone annex of Clean Air Treaty

• Cost stabilizationCost stabilization

• Rural economic development – lease Rural economic development – lease income not agriculture subsidiesincome not agriculture subsidies

• Cost of wind is decreasingCost of wind is decreasing

Cost DriversCost Drivers

• Swept areasSwept areas

• Tower Heights (faster winds)Tower Heights (faster winds)

• Economies of scaleEconomies of scale

• Improved sitingImproved siting

TechnologyTechnology

35

25

15

30

20

10

40

5Ra

diu

s o

f rot

or

(me

tre

s)

500 kW

1300 kW

750 kW

500 kW

250 kW50 kW

1800 kW

Source : AWEA

Cost Reductions

TechnologyTechnologyCost Reductions

Tower Sizes

Taller towers capture faster winds

40M 50M 65M 80M

Technology: Cost ReductionsTechnology: Cost Reductions

• Cost driver for larger blades, is Cost driver for larger blades, is stronger light weight blade stronger light weight blade materialsmaterials

• Cost driver for taller towers is, Cost driver for taller towers is, improved tower and foundation improved tower and foundation designsdesigns

Worldwide Wind CapacityWorldwide Wind Capacity

0

5000

10000

15000

20000

25000

1990 1992 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Compound 5-Year Growth 32%

Source:BTM Consult and EWEA

MW

Wind Economics Wind Economics

• No fuel costNo fuel cost

• Stable fuel costStable fuel cost

• Strong correlation to load requirementStrong correlation to load requirement

– More production in winterMore production in winter

– More production on windy daysMore production on windy days

– More production during the dayMore production during the day

Correlation between Supply & DemandCorrelation between Supply & Demand Gaspé/Québec Gaspé/Québec

0

2

4

6

8

10

12

14

Jan Feb Mar Apr May Jun July Aug Sept Oct Nov DecMonths

% o

f a

nn

ual

to

tal

DemandSupply

Source: GP CO Inc.

Wind EconomicsWind Economics

What about calm days?What about calm days?

– Wind complimentary to water based Wind complimentary to water based storagestorage

– When wind is blowing, store the water When wind is blowing, store the water behind the dambehind the dam

– When calm, run water through turbineWhen calm, run water through turbine

Canada is > 60% water powerCanada is > 60% water power

GaspéGaspé

Wind Investment Wind Investment FundamentalsFundamentals

• More capital intensive than fossil fuelMore capital intensive than fossil fuel• Stable cost has public policy benefit by Stable cost has public policy benefit by

eliminating fuel cost riskeliminating fuel cost risk• Will never have to buy carbon creditsWill never have to buy carbon credits• Will never have to buy Nox or Sox creditsWill never have to buy Nox or Sox credits• Distributed benefits – can decrease line Distributed benefits – can decrease line

losses if well locatedlosses if well located• Jobs in rural areasJobs in rural areas

Impact of Capital IntensityImpact of Capital Intensity

• Property tax – 20X coal plant in OntarioProperty tax – 20X coal plant in Ontario• The capital crunch in EPG makes this more The capital crunch in EPG makes this more

challengingchallenging• Capital tax distorts investment to low Capital tax distorts investment to low

capital, high operating cost investment – capital, high operating cost investment – fossil fuelfossil fuel

• Capital will tend to be provided for the least Capital will tend to be provided for the least capital intensive projectcapital intensive project

Kyoto ProcessKyoto Process

• Kyoto 2Kyoto 2ndnd round starts 2005 round starts 2005

• Evidence of human caused climate change Evidence of human caused climate change will become strongerwill become stronger

• What if 25% reductions are needed? What if 25% reductions are needed?

• What if 50%?What if 50%?

Result?Result?

• Wind is THE low risk investment (and Wind is THE low risk investment (and water)water)

• Fossil plants will become more costly to Fossil plants will become more costly to operate (carbon credits)operate (carbon credits)

• Your regulator may not accept the argument Your regulator may not accept the argument that this was not forseeablethat this was not forseeable

Federal IncentiveFederal Incentive

1.2 ¢/KWH 20031.2 ¢/KWH 2003

1.0 ¢/KWH 20041.0 ¢/KWH 2004

1.0 ¢/KWH 20051.0 ¢/KWH 2005

1.0 ¢/KWH 20061.0 ¢/KWH 2006

.8 ¢/KWH 2007.8 ¢/KWH 2007

Payable for 10 yearsPayable for 10 years

Taxable Taxable

Limited to 1000 MW Limited to 1000 MW

Provincial OptionsProvincial Options

RPSRPS – renewable portfolio standard– renewable portfolio standard

- require retailers to buy a - require retailers to buy a percentage from renewablespercentage from renewables

Green Power ProcurementGreen Power Procurement

Match Federal incentiveMatch Federal incentive

Systems Benefit ChargeSystems Benefit Charge

Other Provincial IssuesOther Provincial Issues

• Rules on interconnection and Rules on interconnection and transmissiontransmission

• Property taxes, sales tax, capital taxProperty taxes, sales tax, capital tax

• Can the power be sold? Price paid?Can the power be sold? Price paid?

• Emissions – are there caps?Emissions – are there caps?

• Crown land policiesCrown land policies

Other SupportOther Support

• Resource assessment, wind atlasResource assessment, wind atlas

• Net meteringNet metering

• Streamlined approvalsStreamlined approvals

• Electricity labelingElectricity labeling

GaspéGaspé

Wind EnergyWind Energy

Truly Sustainable Energy Truly Sustainable Energy

for the 21st Centuryfor the 21st Century