Ready, Set, Go: Alberta’s Renewable Electricity Procurement Begins

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Courtesy of Borden Ladner Gervais. View original article here.

As promised, the Alberta Electric System Operator (AESO) kicked off what it is calling “REP Round 1” by issuing a Request for Expressions of Interest (REOI) for Round 1 of its Renewable Electricity Procurement (REP). The REOI is the first stage of a much anticipated 3 stage process for a renewable electricity procurement in Alberta this year – the other 2 stages, being the Request for Qualifications (RFQ) and the Request for Proposals (RFP) stages, will follow later this year.

So, did we learn anything new from the REOI? Unfortunately, not much, but it does help to consolidate the previous material REP announcements within a single document. Those include the following:

  1. REP Round 1 will be for up to 400 MW of renewable projects, though the final quantity will ultimately be approved by the Minister of Energy;
  2. REP Round 1 will select developers who will enter into Renewable Electricity Support Agreements (RESAs) to develop, finance, build, own, operate and maintain renewable electricity projects in Alberta;
  3. Each RESA will be a 20 year contract whereby the AESO will acquire the renewable attributes of the project in exchange for providing the project with a fixed price for its electricity. The RESA is essentially a contract for differences linked to the Alberta Pool Price through which financial support payments are provided by the AESO. It eliminates Alberta Pool Price risk for the project proponent in exchange for the project proponent foregoing windfall profits in times of high Alberta Pool Prices;
  4. To be eligible, a project must:
    • be 5 MW or greater;
    • achieve COD by December 2019;
    • be located in Alberta;
    • be new or be an expansion of an existing renewable project; and
    • generate its electricity from renewable energy resources, as defined in the Renewable Electricity Act (Alberta).

​​​​That stuff we already knew, but we did learn a few new things today from the REOI:

  1. The AESO has been rated AA-/Stable by S&P Global Ratings. A number of us previously raised the fact that the AESO is not an agent of the Crown and that may increase the cost of project financing since it is the AESO, and not the Province of Alberta, who will be the contracting party on the RESA. The REOI goes out of its way to address our issue by noting the AESO credit rating, and also stating that a formal funding agreement will be executed between the AESO and the Province to ensure that the AESO is able to pay all amounts due to projects under the RESAs;
  2. The AESO previous announcement that “the existing transmission system will be leveraged” has been clarified. The REOI expressly requires that all successful projects must be located where the available capacity of the relevant region of the grid, under system normal conditions, can accommodate 100 per cent of the project’s contract capacity under the RESA;
  3. An updated version of the RESA terms has been released by the AESO. Having assisted a number of developers to comment on the last version of the RESA term sheet, we along with our clients will be looking closely at the new term sheet over the next few days to see which of our changes were accepted by the AESO;
  4. The REOI includes an anticipated schedule for REP Round 1. The important dates for the REOI are:
    • REOI questions due by 3:30 pm (MDT) on April 11, 2017;
    • A 2.5 hour REOI information session to be held in Calgary on April 18, 2017, where the AESO will answer the REOI questions that have been submitted. AlbertaPowerMarket.com has already signed up for that session though we may do the webinar and multitask from our offices that day; and
    • REOI response forms due by 3:30 pm (MDT) on April 21, 2017.

​​​For those looking ahead and planning their year, the AESO anticipates that RFQ submissions will be due on June 16, 2017 and that RFP submissions will be due on October 13, 2017, so that final selections can be made by the AESO in December 2017.

  1. A couple of things to note about the REOI stage:
    • REOI responses are not being evaluated by the AESO, i.e. th​ey are not excluding or shortlisting the projects at this stage;
    • Submitting a response in not a prerequisite to participating in further steps in REP Round 1; and
    • The AESO has reserved the right to publish the names and contact information for those parties that submit a response to the REOI.

To AlbertaPowerMarket.com, the big task for us and interested developers in the next few weeks will be to assess the new RESA term sheet. We suspect that it will garner the most questions from stakeholders, with the transmission clarification perhaps also garnering some questions. The REOI stage is the final chance for developers to ensure that the terms of the RESA are fair and reasonable, and that Alberta has a financeable RESA contract upon which the successful renewable projects can be project financed.​

Courtesy of Borden Ladner Gervais. View original article here.