Local content rules stir debate 

Quebec’s stringent “local content” requirements for wind-farm developers do little for most Quebec wind-energy businesses, but will increase rates for all Hydro-Québec customers, several experts in the field say.

Under the terms of the call for tender for 2,000 megawatts of wind-generated electricity, developers must guarantee the expenditure of at least 30 per cent of wind-turbine costs in the economically troubled Gaspé region and at least 60 per cent of total wind farm costs in Quebec.

“This will make wind power more costly,” Université Laval economist Jean-Thomas Bernard said.

While the government’s intent was clearly to establish a competitive supply chain within Quebec for the wind-power industry, experience gleaned following the tenders awarded in 2004 revealed that there was a price to pay for that strategy, said Bernard and Joshua Magee of Emerging Energy Research.

Vendors have had a hard time meeting the requirements while remaining profitable, Magee said.

“This has discouraged many of the global wind turbine producers from submitting a bid” this time, he said.

That translates into fewer producers, less competition and higher prices.

Bernard, who favours unfettered wind-farm development by the private sector, points to Marmen Inc. as an example of what shouldn’t happen.

The family-owned firm was building wind-turbine towers in its Trois-Rivières plant when Hydro-Québec launched its first tender for wind power. When General Electric, its biggest customer, landed contracts to build the turbines, Marmen had to build a new factory in Matane to meet local-content requirements.

Asked by The Gazette in 2005 about his new $25-million factory, company president Patrick Pellerin bristled.

“We could have done (in Trois-Rivières) what we’ll be doing in Matane,” he said then.

The two factories have created a “higher average cost (for Marmen) … and is interfering with its ability to become competitive in the North American market,” Bernard said.

Economist Gabriel Sainte-Marie, a Université du Québec à Montréal researcher, says

Hydro-Québec should have become the wind-power developer, ensuring that maximum profits are returned to the government.

Failing that, the utility could have used its size to secure wind turbines from one or more vendors at a good price and then opened up wind-farm development to small Quebec developers, including co-operatives, Sainte-Marie said.

Recent figures from the Organization for Economic Co-Operation and Development indicate that wind production costs in developed countries are much lower than 8.35 cents per kw/hr – the average price Hydro-Québec will pay for the wind-generated power flowing from the wind farms now under construction following the first public tender.

He expects that those who bid this time will demand an average price of 10 cents per kw/hr for the life of their contract.

Comment could not be obtained from the office of Natural Resources Minister Claude Béchard yesterday.

By Lynn Moore

The Gazette

8 September 2007