NaiKun headaches hold lessons for offshore wind projects

The fierce, consistent winds blowing through the Hecate Strait on the northwest coast of British Columbia would seem to make the site an easy choice for Canada's first offshore wind project. But reality has turned out to be a lot more complex.

With a sparsely populated region that has lots of room for development, consistent speeds of 36 kilometers an hour, and a ready market of industrial consumers in the forestry and mining industries nearby, getting a wind project up and running might seem like it should be a cakewalk.

But the fate of Vancouver-based NaiKun Wind Energy's bid to erect up to 110 turbines provides a cautionary tale for renewable energy developers.

'We don't just go clam digging or get scallops or crabs or fish to sell. We eat it.' Tammy Gates, Haida Concerned Citizens

Despite federal and provincial commitments to renewable energy, NaiKun's proposal is in the doldrums, dropped for consideration by the provincial utility BC Hydro and opposed by some local residents.

"We are going to do whatever we can to stop this," Tammy Gates, spokeswoman with the Haida Concerned Citizens, told CBC News.

The project would generate up to 396 MW of clean energy. That's enough, the company says, to serve 130,000 homes.

And, it would create 200 jobs over the 10 years of the construction phase, in addition to the employment created as new companies set up shop in the region to take advantage of a large-scale power source.

NaiKun CEO Mike O'Connor told CBC News the project would open up an area that could eventually stretch from Vancouver Island to Hecate Strait that he's convinced will prove to be "an enormous [wind] energy field."

The Haida Concerned Citizens aren't convinced, and believe the development poses a threat to the local subsistence fishery.

"We don't just go clam digging or get scallops or crabs or fish to sell," Gates said. "We eat it. This is our livelihood and it has been for thousands and thousands of years."

Financial risk a worry

NaiKun signed a tentative partnership with the Council of the Haida Nation under which the CHN would invest in the project, but that is another concern for the Conerned Citizens, who believe their leaders are taking on too much financial risk.

"The Council of the Haida Nation wants to borrow between $300 and $800 million for a 20 to 40 per cent share in the NaiKun wind farm," said Gates. "By the time you pay the interest, it's anywhere between and $20 and $50 million a year, and this is unaffordable for us a poor business decision."

The Citizens also fear the project will change wind and tide flows, causing accelerated erosion at Rose Spit. It's an area of land about seven kilometers from the turbines which is sacred to the Haida, as the original birthplace of their people. There were as many as 20 ancient villages on the spit.

"We were born out of a clam shell in Rose Spit," said Gates, "we were lured out by the Raven."

O'Connor counters that the erosion worries are unfounded. "Our turbines are going to have no effect on that [erosion] at all."

The project has caused a rift among locals. Gates said 80 per cent of the Haida people oppose the NaiKun project. O'Connor disagrees about that estimate.

"I think this project has about as much support as you could ever expect from any significant project anywhere in British Columbia," he said. "There are a few people who don't support it, but that's like anything."

The biggest setback for NaiKun, however, was BC Hydro's decision on March 2010 to drop the project from the list it would consider as potential clean power suppliers. The utility did not give specific reasons, but the decision was devastating for NaiKun.

Cost, risk factors

In an e-mailed response to questions from CBC News, BC Hydro said that while it would not comment on the specific reasons why NaiKun was not awarded a purchase agreement, "one could ascertain that the NaiKun proposal was eliminated due to not being cost effective and/or having excessive risk."

"BC Hydro selected projects for [purchase contracts] based on the final contract terms and conditions, including price, First Nations consultation and risk assessment," the e-mail added.

The firm's guess is that based on the projects that have received provincial approval, the utility has decided to focus on smaller projects of less than 100 MW.

NaiKun also assumes BC Hydro balked at the price of buying electricity from the development, even though the company has estimated it would add only about $2 per month to the retail price of power in the province.

B.C. has some of thelowest power rates in North America, and the province has committed itself to holding on to that distinction.

Despite NaiKun's setbacks, proponents of wind power say offshore developments are necessary if countries want to reduce their reliance on polluting, non-renewable sources of energy without disrupting communities.

Chris Turner, the Calgary-based author of The Geography of Hope, said the European experience suggests offshore wind power doesn't cost that much more than land-based projects. In his book, Turner used examples of energy technology and usage around the world to argue there's a practical way to move toward sustainable energy generation.

He said offshore wind must play a role in generation in Canada, citing its significant advantages: the wind flow offshore is more constant than onshore, the projects tend not to be in anyone's backyard, the scale can be much greater than on land, and the overall environmental impact is minimal.

Europe is already investing in offshore wind. Last year it experienced what management consultants KPMG describe as "dynamic" growth, with installed capacity doubling to 2.2 gigawatts from a year earlier.

Distribute the additional cost of developing offshore wind projects and other alternative energy sources across all customers, as is done in Germany, Turner said, and it's "pretty minimal, about $50 a year per household."

'You need an organization that's truly committed to shifting to next-generation renewable energy.' Chris Turner, author of The Geography of Hope

The obstacle facing renewable energy adoption in B.C., said Turner, is that it isn't a truly competitive marketplace and prices are low. Thus there is little incentive to diversify into other sources of generation.

"You need an organization that's truly committed to shifting to next-generation renewable energy, said Turner.

"Nothing I've heard about BC Hydro suggests that they are."

NaiKun in survival mode

For now, NaiKun has moved into survival mode, scaling back operations, but has said it has enough cash to keep going for five to six years. It may need that long. The development with the best hope of becoming North America's first offshore wind energy installation is the 130-turbine Cape Wind project, with a capacity for 468 megawatts. Proposed for Nantucket Sound off Massachusetts, it just received federal approval on January 7 this year, after a regulatory review involving 17 agencies taking 10 years.

Construction of Cape Wind is due to start later in 2011, but it still faces opposition over concerns about its possible effects on the commercial fishery, the environment, property values, and archaeological sites.

In Canada, besides NaiKun, there are three other projects that are in the most advanced stage of the planning and regulatory process, all of them proposed for the Great Lakes.

Trillium Power Wind plans a 414 MW wind farm in Lake Ontario, about 35 kilometres from Kingston. Windstream Energy is planning a 300 MW project at Wolfe Island Shoals, about 20 km south of Kingston. Toronto Hydro is planning a wind farm off the Scarborough Bluffs east of downtown Toronto.

All have come in for their share of controversy, with cottagers, politicians and environmentalists concerned about effects on human health, water quality, and bird and bat populations.

And, much like the NaiKun project, all three are facingbleak prospects.

On February 11,Ontario's Liberal government imposed a moratorium on all off-shore wind farms, saying more research was needed to determine the health and environmental impacts.

"Fresh water wind turbines are something that's relatively new, and the Ministry of the Environment needs a level of comfort on the science before they can approve any further consideration of them," said Energy Minister Brad Duguid.

Still, there's significant opportunity. In December, a Conference Board of Canada study estimated the potential for offshore wind generation sites in Ontario alone at 35,000 MW.

Moving forward

For now, NaiKun remains committed to its project and is focusing on explaining its benefits to the public.

On March 17, the company was granted a federal screening decision confirming the project would have no significant environmental, social or health effects. However,the lack ofa BC Hydro contract remains a significant obstacle to the project.

O'Connor is convinced NaiKun's time will come, believing the world will run short of petroleum sooner than many expect.

And BC Hydro itself has acknowledged the need for new sources of electricity. Ninety per cent of its generation now comes from hydroelectric sources, but the province is running out of potential sites for new dams.

"So if we're going to develop other resources, they've got to be, I think, mostly renewable resources going forward," O'Connor said.

"It's just a matter of when it gets developed, not if," he added. "It's not going to be that long before people realize that this is an amazing resource."