Independent power producers in Nova Scotia got some wind back in their sails with an October 9th announcement from the NS Department of Energy. After amending Nova Scotia’s 2007 Renewable Energy Standards Regulations, Minister Estabrooks declared that Nova Scotia Power Inc’s (NSPI) short-term Renewable Portfolio Standards (RPS) requirement would be pushed back by one year, to Dec. 31st, 2011.
Nova Scotia’s Department of Energy was faced with a challenging situation. It had passed a law in 2007 that included a RPS requiring NSPI to ensure 5% of its electricity sales were generated by renewable sources from independent power producers (IPPs) by the end of 2010, on top of its already-existing clean energy mix, estimated to be about 10% in 2001. If NSPI failed to comply with the RPS by 2010, it would have to make up double the shortfall in the following year, and if it failed to do that, the utility faced fines of $500,000 per day. Taking the charge seriously, NSPI tendered contracts for renewable energy from IPPs worth nearly double what it would need to fulfill its RPS obligation. IPPs responded and many contracts were signed.
Then the recession struck. Capital markets dried up, and capital-intense wind power projects had difficulty securing financing at the same rates they were promised in 2007. Tight money markets meant that some project proponents couldn’t profitably deliver on their commitment to NSPI. They could therefore either renegotiate their contracts, resulting in higher costs for both NSPI and the average electricity-using Nova Scotian, or pull out altogether.
NSPI didn’t want to face penalties for failing to meets its RPS requirement due to reneging IPPs, nor did it want to renegotiate old contracts or tender new ones with shortened timeframes and higher costs. IPPs didn’t want to shut down good projects because of time-addled financing constraints. And the government didn’t want to miss its targets or burden Nova Scotians with unnecessarily expensive electricity bills.
So to smooth things out, Minister Estabrooks extended the renewable energy deadline. IPPs now have the opportunity to secure financing at rates closer to what they expected in 2007 and make good on their contracts. NSPI can meet its RPS requirements and avoid stiff penalties. And Nova Scotians can get reasonably priced clean energy, and contribute to preserving their beautiful shorelines from the consequences of global warming.
By Jeff Beyer .(JavaScript must be enabled to view this email address)
