February 24, 2006
The answer to Canada’s energy problems may be blowing in the wind.
Wind power is one of the fastest growing energy sectors in Canada and internationally. According to the Canadian Wind Energy Association, Canada’s total installed wind energy capacity grew by 54 percent in 2005, with projects representing more than C$400 million in investment. There are also new projects being installed in Alberta, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, Nova Scotia and Prince Edward Island.
Krista Hill predicts that the industry will continue to expand. “We expect more work in this area as wind power continues to grow and become an important part of Canada’s supply mix.”
Legal practice in the wind energy area includes representing developers in bidding on and negotiating power purchase contracts; advising developers on the tax and production incentives offered by various federal and provincial governments; and negotiating leases with landowners on whose land wind farms are built.
On the other side of wind energy deals are landowners who require legal advice on their negotiations with developers, and turbine manufacturers and suppliers who require contract negotiation on turbine maintenance and repair.
Revenue arrangements are also significant: wind energy project contracts last as long as 25 or 30 years, during which time landowners receive royalties from 1.5 to 4 percent of gross revenue generated from turbines, adding to several thousand dollars per turbine per year.
Reclamation is among the issues to consider as well. For example, there is the question of what to do with a turbine 25 years after it is erected on a 300 cubic metre plug of cement. Covering the cement with topsoil has been one of the suggestions put forward by developers.
Another issue is that of municipal tax: landowners should ensure that they are not held responsible for additional property taxes.
Krista, who represented Brookfield Power (formerly Brascan Power) when Ontario requested proposals to build 1300 MW of renewable energy in the province, says that Ontario’s goal is to be generating 5 percent of its power with renewable sources by 2007, and 10 percent by 2010. That adds up to roughly 3700 MW of power—five times more power than Canada produces today.
“When Ontario Power Generation started to give out power purchase agreements,” says Krista, "that really kick-started the industry, because the developers could lock up their revenue side through these 20-year contracts.”
If the developer wanted, the entire output of the facility could be set at a locked-in price, so the contract could be used to obtain financing.
While Krista works primarily with developers and lenders, she is getting calls all the time from investors looking to get into land deals: "Right now, the demand to invest in wind power is outstripping the supply."