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Climate Change / Renewables
Nov 15, 2016
Alberta Releases Details of Renewable Electricity Program
On November 3, 2016, the Government of Alberta released the first details of its Renewable Electricity Program (the REP). Under the REP, Alberta intends to procure 5,000 MW of renewable electricity generation capacity through a competitive process administered by the Alberta Electric System Operator (AESO). The goal of the REP is to put Alberta on a path to achieve its target of 30 per cent renewable electricity by 2030, as announced in its 2015 "Climate Leadership Plan."
Concurrent with the release of the details for the REP, Alberta also publicly released the AESO's 2016 report on "Renewable Electricity Program Recommendations" (the AESO Report). The AESO Report is the result of Alberta directing the AESO in January 2016 to design and implement a plan to incent the development of new renewable electricity generation projects in the province by 2030. It is expected that going forward, the REP will continue to closely align with the key recommendations made in the AESO Report.
Alberta has announced that under the REP, the first competitive auction will open in early 2017 with the successful bidder(s) awarded at the end of 2017. This competitive auction will:
- See investors bidding to provide up to 400 megawatts of renewable electricity in total;
- Be open to all renewable technologies, with lowest cost qualified projects receiving support;
- Support an Indexed Renewable Energy Credit (Indexed REC) payment mechanism;
- Require supported projects to be operational by the end of 2019;
- Offer 20-year contract terms consistent with international norms; and
- Require projects to connect to existing transmission or distribution infrastructure to avoid indirect costs to electricity consumers.
As recommended by the AESO Report, payments under the REP will be based on an Indexed REC mechanism. This mechanism will operate as a "contract for differences." Winning bidders will be paid a $/MWh payment for renewable attributes produced. When the winning bid price is higher than the Alberta electricity pool price (the pool price), winning bidders will receive support payments to make up for the difference. If the pool price exceeds the bid price, however, the winning bidders will be required to pay the surplus to the Government of Alberta. The AESO expects that the implementation of an Indexed REC mechanism will be most likely to draw the highest number of competitors and minimize the total cost of the first competitive auction.
As well, to be eligible for support within the REP, projects must:
- Be based in Alberta;
- Be new or expanded;
- Be five megawatts or greater in size; and
- Meet the Natural Resources Canada definition of renewable sources.
Each competitive auction for the REP may include up to three stages and is anticipated to run for approximately 7-11 months. The stages include a Request for Expressions of Interest (REOI), a Request for Qualifications (RFQ) and a Request for Proposals (RFP). All stages of the process will be overseen by a Fairness Advisor, an objective third-party observer engaged to monitor and report on how the process has been conducted from a fairness perspective. Additional details about the timelines for the competitive auction process can be found here.
The AESO is currently inviting feedback from all interested parties with respect to key provisions of the Renewable Electricity Support Agreement (RESA) - the agreement that will be entered into by the AESO and bidders that have been successfully selected in the first competitive auction under the REP. A list of proposed key provisions of the RESA is available here. Interested parties must deliver submissions to the AESO no later than 5 p.m. MST on December 9, 2016.
Lastly, Alberta has also clarified that it expects to introduce the Renewable Electricity Act in the near future. This statute will reinforce Alberta's commitment to the "30 by '30" target and provide the legislative framework for the REP.