Federal government procurement of solar electricity in Alberta

January 26, 2021

In December 2019, the Government of Canada committed to using 100% clean electricity to satisfy the power requirements for all federal buildings in jurisdictions where available by 2022, and by 2025, in other locations where renewable power is less accessible. In furtherance of this mandate, on January 7, 2021, Public Services and Procurement Canada issued four requests for proposals (RFPs) as a first step to meet this target:

• Two RFPs for the purchase of electricity and all associated Renewable Energy Certificates (RECs) generated from solar facilities located in Alberta; and
• Two RFPs for the purchase of RECs generated from solar and/or wind facilities located in any jurisdiction in Canada.

Canada intends to procure up to 255,625 megawatt-hours (MWh) annual supply of solar-generated electricity, which, in Alberta, generally equates to an installed nameplate capacity of between 130 megawatts (MW) and 170 MW, depending on facility characteristics and location. Electricity Supply Agreements will be entered into with successful proponents for contract terms of 10 years in length, with an option for Canada to renew for one additional term of five years.

Canada also intends to procure up to an additional 128,000 RECs per year (on the basis of one REC being equivalent to 1 MWh offset) which will be purchased through Renewable Energy Certificate Supply Agreements entered into with successful proponents for contract terms of 20 years in length.

To promote Indigenous engagement in the renewable energy sector, Canada has set aside a portion of each procurement for Indigenous Businesses under the federal Procurement Strategy for Aboriginal Business (PSAB). The portions that have been set aside are equal to five percent of the total amount sought under each procurement (equivalent to 12,781 MWh of solar generation and 6,400 RECs, respectively, on an annual basis).

Procurement process

The following aspects of the procurement process may be of specific interest to project proponents as they consider the preparation and submission of a potential bid:

• As outlined above, there are two procurement structures:
• • Procurement for projects in which a minimum economic interest of 25% is held by one or more Qualifying Indigenous Communities or Entities (Non-PSAB Projects).
  • Procurement set-aside for projects, which are owned by qualifying Aboriginal Businesses (PSAB Projects)

• Eligible Non-PSAB Projects must have a minimum contract capacity of not less than 5MW. There are no such minimum contract capacity restrictions on eligible PSAB Projects.
• Eligible projects must be either a new build or an expansion of existing facilities but cannot be a redevelopment, which does not otherwise constitute an expansion of a previously existing facility.
• Eligible projects must have obtained or be capable of obtaining the applicable provincial Utilities Commission approvals no later than three months following contract award (currently estimated to be as of May 27, 2021).
• With respect to Non-PSAB Projects, Canada will assess an Indigenous Participation Score on the basis of the actual economic interest held by the applicable participating Qualifying Indigenous Communities or Entities. When ranking prospective bidders for the purpose of selecting successful contractors on the basis of the lowest cost facility strike price, Canada will deduct the applicable bidder's Indigenous Participation Score from the strike price provided in its submission.

Contract terms

While the RFPs do not attach the form of purchase agreement to be entered into by the proponents upon selection, a list of key provisions to be incorporated into these agreements has been included in the package provided to bidders. The following aspects of the form of electricity supply agreement may be of specific interest to project proponents as they consider the preparation and submission of a potential bid:

• The successful proponent is expected to attain Commercial Operation by December 31, 2022 (Target COD). If Commercial Operation is not achieved by the Target COD, then the project proponent will be subject to the payment of liquidated damages, however, in the event that the delay exceeds three months in duration, the proponent will be at risk of being subject to any other remedies which may be sought by Canada and which may include the outright termination of the subject agreement.
• The strike price submitted by successful project proponents in their bids will be the price payable by Canada for the generated electricity it receives throughout the duration of the contract term and will not be adjusted to account for increases or decreases in the consumer price index.
• Successful bidders will be required to comply with various reporting obligations to Canada throughout the contract term, including:
  • Regular progress reports describing, among other things, the status of the design and construction of the applicable facility and the receipt of the required regulatory approvals.
• • In respect of Non-PSAB Projects, all such information as will be required to establish and confirm that a minimum economic interest of 25% is held by one or more Qualifying Indigenous Communities or Entities and will continue to be held for at least the first three years following the Commercial Operation Date.

Conclusion

Through these procurements, Canada is seeking to continue to promote solar electricity development and clean-energy-sector job creation while reducing the carbon emissions associated with its ongoing facility operations. These procurements also highlight the attractiveness of Alberta's deregulated electricity market as a location for investment and development of new technologies for the clean energy transition. With many other organizations, including major corporations, looking to reduce their own carbon emissions, these factors speak to a bright future for the province's renewable energy industry. Dentons will continue to stay atop this and other developments in the renewable energy and energy transition space.