Darius Snieckus, Canada’s National Observer
A leading Canadian wind power developer is warning that projects crucial to the country’s clean energy transition could “fail or be cancelled” after Ottawa imposed a 25 per cent tariff on imported steel used in key components including turbine towers.
Patrick Leitch, chief operating officer of Toronto-headquartered Capstone Infrastructure, which has 3.3GW of projects in development nationwide, including a trio of major wind farms in BC, said the federal government’s levy last week “introduces a great deal of risk” that could lead to projects being shelved.
“The renewables sector in Canada is still ‘elbows up’ — the low-cost, green electrons that wind delivers are a clean energy advantage for industry in Canada and the wider Canadian economy,” he said.
“But the big concern we have is that — because we bid into competitive procurements with very tight margins — when you have a fixed-price contract [with a provincial utility], there is no adjustment when tariffs like this are suddenly applied. Someone will lose money.”
The newly-levelled tariff on imported steel, announced last week, could result in provinces “having to raise their [baseline] bid price or, worse, seeing no bids come in because it is too late for developers to absorb the additional cost stress,” said Leitch. He noted developers were “not consulted” before Ottawa announced the levy.
The Canadian Renewable Energy Association (CANREA), an industry advocacy body, said that “within 24 hours” of the tariff announcement, developers in its membership began receiving notice from their financial backers that they would be “reassessing their current and future investments in Canada.”
“We can get a lot done with wind in our country to advance the energy transition, with ratepayers reaping the benefits,” says Capstone Infrastructure COO Patrick Leitch.
“Developers are considering walking away from contracted projects as these tariffs will make wind projects completely uneconomical — even with the Clean Economy ITCs (investment tax credits),” said Fernando Melo, CANREA’s senior director of policy.
Calculations by CANREA suggest the tariff — which exempted steel used in oil and gas projects — could add over $6 billion to the total cost of developing wind farms through to the end of the decade.
Power for 9 million homes
Some 9 GW of so-called RFP (requests for power) auctions are underway, including in BC, Ontario, Quebec and Nova Scotia, where developers will compete to win government contracts to supply electricity to the grid. These procurements could power almost eight million Canadian homes.
The Canada Energy Regulator forecasted in November that new wind projects will make up 70 per cent of power wired into provincial grids in the next five years, with expectations over 6.2GW of additional generation will flow onto Canadian electricity networks by 2030.
“[We] recognize Ottawa is on a war footing… and needs to protect and bolster critical industries like Canadian steel when they are unfairly harmed by major trading partners,” said Melo, who confirmed plans for the latest steel tariff were kept secret from industry until the public announcement on Dec. 5.
He said the wind power sector aimed to be “a reliable customer for the Canadian steel sector,” but this would call for “prudent measures” not surprise tariffs, which only “drove up the cost of electricity for all ratepayers and made Canadian industry less productive and less competitive.”
“A managed transition that bolsters domestic production capacity while ensuring the billions of dollars in private-sector investment being made in Canada’s clean electricity system don’t fail is the only way forward,” Melo said. “Otherwise, we could see a bunch of wind projects being cancelled.”
Turbine towers can account for 20 to 30 per cent of the total capital cost of a wind farm. Each tower, made up of cylindrical sections weighing tens of tonnes, can cost as much as $1 million for the largest turbine models now being installed.
Solitary Canadian tower maker
One Canadian company for which the tariffs are a potential boon is Marmen, the only turbine tower maker in the country — though there were once eight manufacturers, with multiple facilities in Saskatchewan, Ontario, Nova Scotia and Quebec.
The Trois-Rivières, Que.-based outfit, which ships its towers overseas into international markets as well as domestically, said there were both commercial and environmental benefits to sourcing turbine towers from Canadian manufacturers.
“The return of wind power in provincial government policies and the [tax] measures announced by the federal government are creating favorable [market] conditions for stimulating and increasing the production of wind towers,” said Marmen, in a statement, adding that calculations by Delphi, a consultancy, showed every 1GW of imported towers generates a carbon footprint 100,000 tonnes greater than that manufactured in Canada.
“The government’s [steel tariff] announcement is a positive step toward strengthening Canada’s industrial sovereignty, protecting local jobs, and ensuring a sustainable future for our manufacturing sector,” it said.
This week, Skookum Manufacturing, a company run by entrepreneur Larry Timlick, announced plans to convert a former sawmill site outside Prince George, BC, into a turbine tower factory.
Melo called the news “encouraging” but underlined this was only a “land deal [at this point] and there is a way to go” before the proposed plant could start delivering the 200 towers a year it forecasts. “We need towers now,” he noted.
Leitch said: “We can get a lot done with wind — and solar and batteries — in our country [to advance the energy transition], with ratepayers reaping the benefits.
“But the government has to keep an open ear to this — they can’t want provincial procurements to be negatively impacted, and it would, to our minds, only take some minor tweaks to the policy to ensure we get all this clean power onto the grid as soon as possible.”
Absent the construction of new domestic turbine tower manufacturing capacity, said Melo, the steel tariff could end up working against Ottawa’s economic development strategy. “Canada can be its own best customer, but not by kneecapping the industries trying to build our energy future. This tariff won’t put Canadians back to work, and it won’t create new jobs.”
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