Vision Quest Windelectric Inc.: Developing Markets for Wind Energy in Alberta, Canada

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Vision Quest Windelectric Inc. Developing
Markets for Wind Energy in Alberta, Canada

• By Juan L. Espinoza, Luis Escobar, Harrie
  Vredenburg

TCPL International Institute for Resource
Industries Sustainability (TCPL - IRIS)
2003 BELL Conference, Fort Lauderdale, FL, July,
17-19
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OUTLINE

• Introduction
• Background
• Vision Quest Windelectric
• Green energy in Alberta
• Green Power Market Vision Quest (VQ)
• Customers
• Enmax (Greenmax)
• Ride the wind project
• How is the future coming for VQ?

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Introduction

• Objective To describe the development of a local
  green power market. It is hoped that the case
  will provide a framework for national
  international application
• Methodology
• Literature review (Secondary data)
• Personal Interviews (2001-2002)
• Feedback
• Outcomes
• Teaching case (descriptive) Paper (theoretical)
• Pilot study for dissertation topic

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Introduction

• Rapid changes in the electricity sector are
  moving countries like Canada to consider green/RE
  alternatives
• Economic factors (globalization, diversification,
  deregulation)
• Technological factors
• Environmental/social factors
• In Alberta, despite its high dependence on
  plentiful and readily available fossil fuels, the
  acceptance of wind power appears to be growing
• This study looks at the different aspects
  contributing to the creation of a green power
  market, with special focus on the strategic
  opportunities that it brings to one of the
  private wind power producers, Vision Quest.

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Background Vision Quest Windelectric

• Privately-held Canadian company based in Calgary,
  Alta.
• Active in wind energy exploration, development
  and production. It is the biggest owner of wind
  farms in Alta.
• We were the first utility to put a wind turbine
  in Alberta on a commercial basis in 1994. And we
  built Canadas first wind farm in 1987 in the
  high Arctic (Vision Quest executive)
• VQ has been involved in several governmental and
  non-governmental task forces focused on
  electrical industry restructuring, environmental
  policy, tax and industry changes designed to
  create an efficient electricity market.

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Green energy in Alberta

• DRIVING FORCES
• The growing renewable energy/wind power industry
• Deregulation of the electricity sector (from
  state monopoly-based to open markets)
• Government support for green energy development
  (climate change issue)
• BARRIERS
• Albertas strong fossil fuel sector (economic,
  technological, and institutional forces)

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Sources of Power Generation in the electricity
system of Alberta


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Wind Energy Installed Capacity (MW) around the
World

Wind power still represents less than 1 of
global power production BUT it is the worlds
fastest-growing energy source (30 annually)
Wind Energy Markets (Countries) 2000 Additions 2000 Year End Total 2001 Additions 2001 Year End Total
Germany 1,669 6,133 2,659 8,750
United States 53 2,566 1,695 4,261
Spain 713 2,502 835 3,337
Denmark 552 2,300 117 2,417
India 90 1,167 240 1,407
Canada () 10 137 61 198
World Total (Approx.) 17,300 24,000
Source AWEA, Global Wind Energy Market
Report-2001 () In order to compare with the big
five wind energy producers
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DEREGULATIONHow the Albertas electricity
market works
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The Vision Quest opportunity for developing a
Wind Power Market?

• In 1996, the Federal Government was looking at
  recommendations from the national round table on
  the environment and the economy from the previous
  year, which suggested that the federal government
  take the lead in Climate Change and environmental
  issues by buying something that nobody really had
  heard very much before, green power
• we saw it deregulation as an opportunityit
  was a survey across Canada saying that 70 of the
  people want wind energy as part of their mix and
  a large percent (20-30) said theyd pay more
  (VQ executive)

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VISION QUESTs PRODUCTS
We decided to invent the product (Green Energy
) that was different and break the rules. And
we said its different and its better...

VER Verified Emissions (CO2) Reduction
Efficiency Reduction of Voltage Losses
GREEN ENERGY
Electricity only From wind power
...we were able to quantify the green power
energy, and because we were through this auditing
process we call that the Verified Emissions
Reduction (VER). So, that was also one of the
first ever domestic reduction trades in Canada
too
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VQ Installed Capacity
Some customers Enmax (Greenmax), TransAlta,
Suncor Energy
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The retailer ENMAX

• Enmax is an electricity transmission,
  distribution, and energy supply services
  company, and is wholly owned by the City of
  Calgary.
• Being Enmax a retailer, the company is the
  middle-man between electricity producers and
  clients. Enmax realized that the environmental
  impacts from the electricity sector could lead to
  a carbon tax penalty to either the producer or
  customers, but not to Enmax itself. However, the
  company saw a role to play about this
  environmental problem. They created in 1998 an
  educational and marketing program as the starting
  point for Greenmax (Enmax Executive)

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Greenmax Program

• It was the first program in Canada offering
  residential customers the opportunity to support
  green power
• Greenmax offers customers a choice to support
  wind-generated electricity production through the
  payment of premiums (5, 10, or 15 option) to
  offset the costs associated with sourcing wind
  power (Enmax executive)
• Two ways to encourage clients to pay more
• Educational program the green club program
• CLIENTS
• 3,000 residential customers (1 of Enmaxs
  market)
• Federal Government (NRCan Environment Canada)
• Ride the Wind project
• AUMA and commercial clients

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Clients of the Greenmax Program
() Others include residential, commercial, and
municipal clients
When in 1998 the program was launched,
Environment Canada and Natural Resources Canada
facilities were the first clients (Enmax
Executive)
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Ride the Wind

• Established in September, 2001. Its a 100
  pollution-free project to power the LRT system
  (C-Train)
• First public transit system in North America
  using wind power
• Collaborative project VQ-Enmax-Calgary Transit
• It contributes significantly toward the City of
  Calgarys goal to reduce its CO2 emissions. (It
  avoids the generation of 26,000 tonnes of CO2
  annually).
• The City of Calgary has a particular interest in
  environmental issues at both corporate and
  community level...people saying to us if you do
  whatever change to be environmentally
  responsible, well pay for it (City of
  Calgarys executive)

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Ride the Wind
Long-term contract (10 years) with a fixed price
a
b
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Alberta power Pool Prices (/MWh)
Sources Power Pool of Alberta Canadian
Hydro Developers Inc.
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What should VQs strategic direction be?

• Toward a sustainable green power market (Beyond
  Greenmax?)
• Economies of scale (e.g., socially responsible
  investors)
• Role of large energy firms such as Shell, BP,
  Suncor, Transalta
• Regulation (based on government-subsidies) vs.
  Deregulation (based on consumer-premium)?
• Geographical focus (Alberta, Canada, US)?
• Competition within the wind power industry (e.g.,
  CHD)
• Competition in the electricity industry product
  differentiation and cost leadership at once?

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Vision Quest II The Sequel

• October 2002 Vision Quest became a wholly owned,
  independently operated subsidiary of the
  TransAlta Corporation, Canadas largest
  non-regulated power generation company.
• 2003 Constructing Canadas single largest wind
  farm (75 MW) at McBride Lake. With this, VQ is
  becoming Canadas largest wind power producer
• Vision Quest presently owns and operates 68 wind
  turbine power plants with over 46 megawatts of
  total peak capacity (to meet the demand of 21,000
  homes)

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• THANK YOU
• MERCI
• GRACIAS