First North American Tariffs for Tidal Power Proposed
Proposed Wind Tariffs Higher than Ontario & Vermont
January 7, 2011
By Paul Gipe
Consultants to the Nova Scotia government have circulated their proposed tariffs under the province's Community Feed-in Tariff or ComFIT program.
In another Canadian example of open and transparent public consultation around setting the price of feed-in tariffs, Synapse Energy Economics has circulated not only its proposed tariffs but also its financial models and all their assumptions to stakeholders.
Synapse, the consultant to Nova Scotia's Utility and Review Board, circulated their calculations to stakeholders in the ComFIT public consultation in mid December, 2010.
Nova Scotia's ComFIT program differs from others in North America and in Europe by limiting the feed-in tariffs to only community-owned projects.
The proposed tariffs are striking in two regards: the specific prices suggested, and the technologies included.
Nova Scotia's ComFIT program will be the first in North America to specifically pay for community-owned tidal power plants.
Solar photovoltaics are specifically not included in the Nova Scotia program.
Interestingly, Synapse's initial tariff calculations assume a Return on Equity (ROE) equivalent to that permitted by Nova Scotia utility companies. Feed-in tariff advocates elsewhere in North America have suggested just such a measure of profitability.
Successful feed-in tariff programs base the tariff, or price for the electricity, on the cost of generation plus a "reasonable profit". The question of what is a reasonable profit is often raised. The Nova Scotia program may become the first in North America to make that calculation in the same way that they do for determining what a reasonable profit is for regulated electric utilities.
Proposed Tariffs Higher than in Ontario or Vermont
Synapse suggests paying a tariff for electricity from small wind turbines that is as much as Ontario pays for solar photovoltaics (solar PV), and $0.10 per kWh more than the Canadian Wind Energy Association's proposed small wind tariff.
If implemented, Nova Scotia's proposed $0.66 per kWh for generation from small wind turbines would be the highest such tariff in the world. Currently, Portugal pays $0.58 per kWh and Great Britain pays $0.42 per kWh.
Vermont pays the highest tariff for generation from small wind turbines in North America at $0.20 per kWh.
The proposed tariff for in-stream hydro is also significantly more than the hydro tariffs in Ontario. Synapse suggests a tariff of $0.20 per kWh. Ontario currently offers a tariff of $0.13 per kWh, about the same as is offered in Vermont. However, Ontario's feed-in tariff contract is for a term of 40 years, while that in Nova Scotia's ComFIT is only for 20 years.
In contrast to wind and hydro, the proposed biomass tariff is significantly less than that offered in Ontario. Synapse proposes $0.07 per kWh while Ontario and Vermont pay $0.13 to $0.14 per kWh.
Yet it will be the tidal tariffs that attract the most interest.
Very few tidal power plants have been built anywhere. The two most well known projects are the Barrage La Rance in France and the currently operating small plant in Nova Scotia on the Bay of Fundy. Both plants have been in operation for decades. La Rance was installed in the 1960s and generates more than 600 million kWh per year. Nova Scotia's 20 MW Annapolis plant has been operating since 1984.
Consequently, there's very little current data on the capital costs of tidal power and, thus, it is difficult to estimate what it will cost to build and operate a new plant on the Bay of Fundy.
The proposed tidal tariff of $0.78 per kWh is nearly as high as Ontario's microFIT tariff for rooftop solar photovoltaics of $0.80 per kWh. This will surely raise eyebrows in the Maritimes as well as in Ontario.
Nova Scotia will not be the first jurisdiction to offer a tidal power tariff. Ireland pays €0.22 per kWh ($0.30 per kWh) for a 15-year contract.
Solar PV Excluded
There is a widespread belief in Nova Scotia that the sun doesn't shine on the Maritime Provinces. Though it may seem as though the sun never shines in Nova Scotia to the tourists who flock to Cape Breton for the famed Celtic Music festival, the insolation in Nova Scotia is comparable, if not better, than that in Germany.
Yields in Nova Scotia average 1,200 kWh/kWDC per year. This is good as Ontario (1,100-1,300 kWh/kWDC/yr) and better than Germany (900-1,000 kWh/kWDC/yr).
There was also concern that including solar PV would make the program too costly.
Yet, the proposed tidal tariffs are substantially more than any solar PV tariff in Ontario except the microFIT tariff for rooftop installations. And the proposed tidal tariffs are more than double the 2011 solar PV tariffs in Germany.
What opponents of solar PV will think after they see the proposed tariffs for tidal power, a preferred technology in the Nova Scotia program, is unknown.
The proposed tariff of $0.16 per kWh for large wind turbines in Nova Scotia is also higher than the tariff offered in Ontario. Synapse's proposed ComFIT tariff for large wind is $0.015 per kWh more than Ontario's onshore tariff with the community wind bonus ($0.145 per kWh) included, and nearly $0.01 per kWh more for the onshore tariff plus the Aboriginal bonus.
The consultant's report was hamstrung by its interpretation of the IURB's ComFIT regulations. Though stakeholders suggested differentiating tariffs within each technology by ownership, size, location, and time of day, the consultants narrow interpretation the IURB regulations restricted them to calculating only one tariff for each technology except in the case of wind energy. As a consequence it was hard for the consultant to define tariffs that allow development without overpaying for some projects that gain economies of scale.
The IURB regulations, however, specifically singled out wind energy and required a tariff for small wind projects less than 50 kW and for other wind projects greater than 50 kW.
There is no such natural distinction in the field of wind energy. There are very few small wind turbines in the 50 kW class, most are considerably smaller. There is a similar problem with the large turbine class.
Synapse notes that the capital costs for wind turbines greater than 50 kW and up to 2 MW vary widely with the bigger turbines substantially less expensive. Using the capital costs of a smaller turbine in the calculations, they warned, will overpay when a larger turbine is actually used. Nevertheless, Synapse chose a 1.5 MW turbine for its calculations.
The choice of a 1.5 MW turbine is surprising since most large turbines today are 2 MW and larger. Similarly, most projects today, even those owned by farmers and community groups are multiples of 2 MW turbines. The Pukwis community wind project will be the first aboriginal- and community-owned wind project in Canada and possibly in North America and the first phase alone is 20 MW.
Further, there is only one tariff for large wind. The wind tariff is not differentiated by wind resource intensity as it is in Germany, France, and Switzerland. Though Synapse assumed that the turbines would be particularly productive, there are some extremely windy sites in Nova Scotia and at these locations there is the risk of overpaying for wind generation without differentiating the tariffs.
Currently, there are no jurisdictions in North America that pay tariffs for wind energy that are differentiated by resource intensity. Such tariffs have been proposed in Ontario, Michigan, Indiana and other locales, but none have been adopted.
The consultant will publish their final recommendations at the end of February, 2011, and the IURB will begin formal hearings on the proposed tariffs at the beginning of April, 2011. If implemented as initially proposed, Nova Scotia will soon have the first feed-in tariff for tidal power in North America, the first feed-in tariffs targeted at community-owned renewables, and among the highest tariffs for wind energy and hydroelectricity in the New World.