The Project: Expansion of the company's Ferndale wind power facility located on the Bruce Peninsula, Ontario. 

The Principals: Glen Estill, President and sole owner.

Generating Facility: One 1.8 MW turbine under RESOP Contract, which was erected in November 2002 and generates enough power to supply 500 homes.

In November 2006, two additional 1.65 megawatt (MW) wind turbines were installed. The generation from the expansion is currently being sold to Bullfrog Power, a Licensed Electricity Retailer, but has an option agreement with the OPA which can be executed upon completion of that contract.

Project Goal

The principal of the operation, Glen Estill, was determined from the outset that the facility would be operated as a profitable business venture. He also wanted to show that a small wind farm operation could be successful in Ontario.

The first step in the process, Estill states, is to ensure that the project can be connected to the local electricity distribution system. This should be determined before any wind study or construction planning is undertaken.

Estill reports that he first identified the prospective site of the facility through visual observation of the wind in the area, and then spent 16 months assessing the potential for wind power generation. This involved erecting a meteorological tower and measuring winds.

“This must be done for at least a full year because of the seasonal nature of wind – and preferably for two years,” Estill says.  “Wind measurements should be taken as close as possible to the height of the hub for the planned turbine, and should determine both predominant wind direction and the percentage of power from each wind direction.”

“Outside investors will normally require the study to be conducted by a reputable independent company, and will sometimes require the data to be reviewed by a third party.”

Estill adds that the data collected from the wind study at the site should be correlated with an available source of long-term wind data, which can be an Environment Canada weather station.  This correlation should take into account a variety of variable factors, such as the height at which measurements were taken, and whether the wind is blocked from any direction.

Once the estimate of wind is achieved, it can then be applied to the power curve of potential wind turbines for the project. A power curve is the manufacturer's estimate of the electricity production of the turbine at a given wind speed.

The estimated annual production of the facility is the sum of the power outputs at each wind speed.

Estill undertook and completed his assessment of the site before signing a lease with the landowner, a local farmer.

“Leasing land is simpler than purchasing, but both the landowner and the operator should choose carefully,” he says. “Landowners should be assured that the developer/operator has adequate financial resources and a sound business plan with a reasonable likelihood of completing and delivering the finished project. Prospective operators should be clear on municipal zoning, access rights and whether roads might need to be built, widened, etc.”

In all cases, developers need to understand the wind power business and prepare a financial model based on wind resources and estimated costs of construction and maintenance, Estill says.

The model should also include adequate provisions for weather delays in construction, hold-ups in equipment shipping, technical problems and other contingencies.

While most costs can be estimated with reasonable accuracy, delays and roadblocks should be expected, including bureaucratic delays due to environmental assessments, connection to the utility and other approvals, Estill says.

Among the approvals he needed were approvals from the Ontario Ministry of the Environment for sound levels, Transport Canada and Navigation Canada for lighting, and the Province for widening of an access road. 

“Sound can be an issue,” he says.  “Developers should assume a minimum 400 meter setback from any nearby housing. Environmental assessments are time-consuming, but wind power projects are seldom turned down except for visual reasons.”

While municipal approvals can also be challenging, Estill's project was unanimously approved by the local council with broad public support. “In any case, there needs to be early dialogue with the planning department of the municipality regarding reception of the turbine,” he says.

For the first turbine of the project, Estill raised funds through private equity investors using flow-through shares that allow investors to save taxes through the deduction of the cost of a test turbine from income.

For the two new turbines, he raised funds through debt instruments.  “I expect lenders to be more receptive to wind-power projects as the Standard Offer Program minimizes the price risk for developers and helps to create a competitive market,” he says.

Estill strongly recommends having all approvals and permits in place before ordering any wind power equipment or engaging contractors and sub-contractors.

“As an early entrant in the small wind power business in Ontario, I spent a lot of time and effort researching available turbines and technologies, including time spent in Denmark – the 'silicon valley' of wind power,” Estill says.

“What I discovered is that all the technologies work and that choosing a turbine is essentially a matter of determining what is best for the specific site, wind patterns, heights, turbulence and strengths, etc.”

Estill chose Vestas as his supplier in 2002 largely because there were three commercial scale Vestas wind towers operating in Ontario, which meant that parts and especially service were more readily available than from other suppliers.

“It makes no sense for small operators to do their own service,” he says.  “Servicing wind turbines is a very specialized field and factory training and updates are essential, especially since many components, notably software, are proprietary. Parts availability is also essential. Ordering parts from Europe or California takes a lot of time and maintaining an inventory of parts requires a lot of extra capital.”

The Vestas V80 model, the original turbine at the Ferndale facility, had teething problems but Vestas stood behind their product, Estill reports. The two new turbines being installed for November 2006 start-up are Vestas V82 turbine engines.

The blades are one metre longer than the V80 model, which gives a five percent increase in swept area and a four percent increase in production, Estill says. He adds that as more projects are developed in Ontario, the range of choice for new entrants will undoubtedly increase.

“A major challenge for small operators is to get busy manufacturers interested in the project, especially since many more projects are proposed than actually get built,” Estill states. 

“It makes sense for small projects to coordinate with one another, since they can have their products shipped at the same time as larger projects, provided they are willing to wait.” 

He also advises staying in constant touch with the supplier. For example, a 2008 delivery date might be advanced if the manufacturer can increase the production run for a larger project or if a competing project cancels an order.

For the Ferndale project, the turbine was ordered in February/March 2002 and delivered in time for start-up in November of that year.  The two new turbines were ordered in February/March of this year for operation in November 2007. Estill cautions that lead times are typically longer in today's market.

Costs

Estill says that a rule of thumb for installed costs of a small wind power facility is in the range of $2,000 to $2,400 per kilowatt.

He estimates that costs for the Ferndale project were about $2,000 per kilowatt, with a considerable share of those costs going to installing the first turbines, since the substation and interconnection were built to accommodate the three turbines.

Estill strongly advises prospective small wind farm operators to be prepared to put in a lot of time and effort in planning and preparation – as much as two years or more – and to “expect the unexpected” in terms of pitfalls and roadblocks along the way, both technical and otherwise.

Key challenges include interconnection and its protection and control system, approval of the Electrical Safety Authority, and lead times on delivery of key components.

"But the key lesson in building projects in the electricity sector is that your business is entirely dependent on government policy. The Standard Offer has put in place a very important policy plank - it creates a stable market for your product," says Estill.