BIOENERGY PHASE 2 CALLREQUEST FOR PROPOSALS
Report on the RFP Process
February 10, 2012
FOR GENERATIONS
British Columbia Hydro and Power Authority (BC Hydro) prepared this document (the Report) to describe the Bioenergy
Phase 2 Call Request for Proposals (RFP) process and the award of four Electricity Purchase Agreements (EPAs) with a
volume of 754 Gigawatt hours (GWh) per year of firm energy pursuant to the Bioenergy Phase 2 Call RFP.
Information and documents relating to the Bioenergy Phase 2 Call RFP may be found on BC Hydro's website at:
.
BC Hydro believes in the importance of transparency. However, BC Hydro must at the same time treat as confidential
any information which if disclosed could reasonably be expected to result in significant harm or prejudice to a
proponent's competitive position or undue material financial loss or gain to a person. In this Report, BC Hydro has
provided a range and weighted-average levelized Adjusted Firm Energy Prices (AFEPs) for the awarded EPAs. This
information is provided without attribution.
www.bchydro.com/bioenergyphase2call
Note on Price Disclosure
PURPOSE OF REPORT
Bioenergy Phase 2 Call Request for Proposals - Report on the RFP Processi
CONTENTS
Bioenergy Phase 2 Call Request for Proposals - Report on the RFP Processii
Purpose of Report ................................................................................................................................................................... i
Note on Price Disclosure........................................................................................................................................................ i
1. Executive Summary ............................................................................................................................................................ 1
RFP Implementation and Evaluation ..................................................................................................................................... 1
Cost-Effectiveness ................................................................................................................................................................ 1
2. Background ......................................................................................................................................................................... 2
BC Energy Plan .................................................................................................................................................................... 2
Bioenergy Strategy ............................................................................................................................................................... 2
Clean Energy Act .................................................................................................................................................................. 2
3. Call Implementation and Evaluation ................................................................................................................................. 3
a) Overview of the Bioenergy Phase 2 Call Process ............................................................................................................. 3
b) RFP Process ..................................................................................................................................................................... 3
c) RFP Overview and Key Features ...................................................................................................................................... 4
Eligibility ........................................................................................................................................................................... 4
Maximum Adjusted Price ................................................................................................................................................. 4
Interconnection Studies ................................................................................................................................................... 4
Key EPA Terms and Conditions ...................................................................................................................................... 5
d) RFP Schedule ................................................................................................................................................................... 5
e) Proposal Submissions ...................................................................................................................................................... 5
f) Risk Assessment ............................................................................................................................................................... 6
Process ............................................................................................................................................................................ 6
Results ............................................................................................................................................................................. 6
g) Variations Review ............................................................................................................................................................. 6
h) Quantitative Evaluation ..................................................................................................................................................... 7
Step 1: Levelizing the FEPs ............................................................................................................................................. 7
Step 2: Price Adjustments ................................................................................................................................................ 7
i) Selection of Preferred Proponents ..................................................................................................................................... 8
j) Discussions and Alternate Proposals ................................................................................................................................. 8
k) Adequacy of First Nations Consultation ............................................................................................................................ 8
First Nations Identification ................................................................................................................................................ 8
Potential Project Impacts on First Nations Interests ........................................................................................................ 9
l) Final Portfolio Selection ..................................................................................................................................................... 9
m) Summary of RFP Proposals ............................................................................................................................................ 9
n) Fairness Advisor’s Report ............................................................................................................................................... 10
4. Products Being Acquired ................................................................................................................................................. 11
Hourly Firm Energy ............................................................................................................................................................. 11
Non-Firm Energy ................................................................................................................................................................. 11
Environmental Attributes ..................................................................................................................................................... 11
5. Cost-Effectiveness ........................................................................................................................................................... 13
a) Competitive RFP Process .............................................................................................................................................. 13
b) Comparison to Other BC Hydro Calls ............................................................................................................................ 13
Bioenergy Call Phase 1 RFP ......................................................................................................................................... 14
Clean Power Call RFP ................................................................................................................................................... 14
c) Comparison to Other Jurisdictions ................................................................................................................................. 14
Appendix A – Summary Listing of Bioenergy Phase 2 Call RFP EPA Awards ............................................................... 15
Appendix B – Fairness Advisor’s Report on BC Hydro Bioenergy Phase 2 Call RFP .................................................... 16
Bioenergy Phase 2 Call Request for Proposals - Report on the RFP Process1
The Bioenergy Phase 2 Call was issued on May 31,
2010 and was concluded in August 2011 when
BC Hydro announced the selection of four projects for
EPA awards. The Call is consistent with government
energy policy and legislation, namely the 2007 BC
Energy Plan, the 2008 BC Bioenergy Strategy and the
Clean Energy Act.
Pursuant to the Bioenergy Phase 2 Call, BC Hydro is
acquiring three products – hourly firm energy, non-firm
energy and Environmental Attributes. The energy being
acquired constitutes Clean or Renewable Biomass
Energy as defined in the RFP.
RFP Implementation and Evaluation
The Bioenergy Phase 2 Call employed a RFP process.
The RFP process was modified from previous
acquisition processes in order to reduce costs for
unsuccessful proponents.
By the October 28, 2010 deadline, BC Hydro received
Bioenergy Phase 2 RFP proposals for 13 projects from
ten proponents representing over 3,300 GWh/year of
firm energy. Following the receipt of proposals,
BC Hydro undertook a comprehensive review and
evaluation. In January 2011, BC Hydro selected eight
projects (representing approximately 1,600 GWh/year
of new supply) from five preferred proponents to
proceed to negotiations and interconnection feasibility
studies.
Based on the outcome of the review and evaluation
process, four projects representing 754 GWh/year of
firm energy were selected for EPA awards. The
decision to offer EPAs to these four projects was based
on the final EPA terms and conditions, including the
prices offered by the proponents, the adequacy of First
Nations consultation, and BC Hydro's risk assessment
of the proposals received.
In its decision making for cost-effective EPA awards,
BC Hydro used the levelized final Adjusted Firm Energy
Price (AFEP) since it places all projects on a level
footing by adjusting for varying terms and escalation
1. EXECUTIVE SUMMARY
factors and a common delivery point (i.e., Lower
Mainland). The levelized AFEP (in January $2010) for
the projects selected for EPA award ranged from $112
to $121 per MWh with a weighted-average AFEP of
$115/MWh.
In his report, the Fairness Advisor concluded that “the
procurement process for the Bioenergy Phase 2 Call
RFP to the point of recommendation of the preferred
proponents and the awarding of EPAs has, in my
opinion, been conducted in an exemplary manner
without any unresolved fairness issues”.
Cost-Effectiveness
The cost-effectiveness of the awarded EPAs for the
Bioenergy Phase 2 RFP is demonstrated by the
competitive nature of the RFP process. The volume of
energy being acquired (754 GWh/year) under the RFP
represents less than 25 per cent of the total energy
offered in the original proposal submissions.
The cost-effectiveness is also demonstrated by
comparing the RFP results to other BC Hydro calls.
The weighted-average AFEP of $115/MWh for the four
awarded EPAs under the Bioenergy Phase 2 RFP is
comparable to the $116/MWh price for the Bioenergy
Phase 1 RFP projects. Furthermore, the weighted-
average AFEP for the Bioenergy Phase 2 RFP is lower
than that for the Clean Power Call which was
completed in mid-2010.
The Bioenergy Phase 2 RFP awards are also
comparable to recent Hydro-Quebec awards for
biomass and wind projects.
Bioenergy Phase 2 Call Request for Proposals - Report on the RFP Process2
2. BACKGROUND
The Bioenergy Phase 2 RFP is consistent with
government energy policy and legislation, namely the
2007 BC Energy Plan, the 2008 BC Bioenergy Strategy
and the Clean Energy Act.
BC Energy Plan
The BC Energy Plan was released by the Province on
February 27, 2007. The Bioenergy Phase 2 RFP aligns
with Policy Action No. 31 of the 2007 Energy Plan,
which indicates that BC Hydro will issue “a call for
proposals for electricity from sawmill residues, logging
debris and beetle-killed timber to help mitigate the
impacts from the provincial mountain pine beetle
infestation”.
Other 2007 BC Energy Plan policy actions relevant to
the Bioenergy Phase 2 RFP are:
= – ensure self-sufficiency to
meet electricity needs by 2016;
= Policy Action No. 21 – ensure clean or renewable
electricity generation continues to account for at 1least 90 per cent of total generation; and
= Policy Action No. 30 – implement a provincial
Bioenergy Strategy which builds upon British
Columbia's natural bioenergy resource advantages.
Bioenergy Strategy
In January 2008, the Province released the BC
Bioenergy Strategy, as directed in the 2007 BC Energy
Plan. The BC Bioenergy Strategy called for the
proposed bioenergy call to proceed in two phases –
Phase 1 for projects that could proceed with existing
tenure, and Phase 2 for projects that might require new
bioenergy licenses to proceed. Changes to the Forest
Act, allowing projects that received EPAs to apply for
tenure, were made prior to the launch of the Bioenergy
Phase 2 RFP.
In addition to the directives in the BC Bioenergy
Strategy and changes to legislation prior to call
Policy Action No.10
issuance, the provincial government provided direction
to BC Hydro regarding several key design aspects of
the Bioenergy Phase 2 RFP, including the following:
1. Government identified six “Designated Areas” for
focus that had opportunities for new tenure award
for bioenergy plants. However, projects from across
the province were to be eligible.
2. Government asked BC Hydro to impose a
maximum RFP ceiling price of $150/MWh
(including adjustments for transmission costs and
system losses).
3. All clean and renewable biomass would be eligible
as fuel sources. In contrast, only forest-based
biomass was eligible as a fuel source for the
Bioenergy Phase 1 RFP.
4. Proponents were to assume all biomass fuel price
risk, with no transfer of such risk to BC Hydro.
Clean Energy Act
The Clean Energy Act, which was brought into force on
June 3, 2010, contains several provisions which
reinforce the 2007 BC Energy Plan, including British
Columbia's energy objectives of achieving electricity
self-sufficiency and generating at least 93 per cent of
the electricity in B.C. from clean or renewable
resources. The Bioenergy Phase 2 RFP aligns with
both of these energy objectives. In addition, the Clean
Energy Act exempts persons who enter into energy
supply contracts (e.g., EPAs) related to the Bioenergy
Phase 2 RFP for up to 1,000 GWh/year of electricity
from section 71 of the Utilities Commission Act with
respect to the energy supply contracts.
1 Pursuant to the Clean Energy Act, S.B.C. 2010 c.22, section 2, the legislated clean, renewable electricity generation target is now at least 93 per cent.
Bioenergy Phase 2 Call Request for Proposals - Report on the RFP Process3
3. CALL IMPLEMENTATION AND EVALUATION
a) Overview of the Bioenergy Phase 2 Call Process
The Bioenergy Phase 2 Call employed a RFP process.
Following the receipt of proposals, BC Hydro undertook
a comprehensive review and evaluation based on
criteria described in the RFP document. Once this
review and evaluation was complete, BC Hydro
selected a number of preferred proponents to proceed
to the negotiation stage, which ended with the selection
of projects for the award of EPAs.
The process was modified from previous acquisition
processes (e.g., Clean Power Call and Bioenergy
Phase 1 Call) in order to
reduce costs for unsuccessful
proponents. The evaluation
methodology employed was
also largely consistent with the
recommendations of the
Energy Procurement Review
undertaken by Merrimack
Energy Group, Inc. that was
released in September 2011.
b) RFP Process
The Bioenergy Phase 2 RFP
was issued on May 31, 2010.
Each proponent intending to
submit a proposal was required
to register for the RFP. Prior to
the proposal submission
deadline, registered proponents
were given the opportunity to
discuss their projects in-person
with BC Hydro to gain a better
understanding of the RFP
process and requirements in
the context of their individual
projects.
The RFP process allowed
some flexibility for proponents
to work with BC Hydro to come
up with cost-effective EPA
terms and conditions. In addition to the base proposal,
proponents had the option of submitting an alternate
proposal containing variations to the Specimen EPA.
In September 2010, a Fairness Advisor (John Singleton
of Singleton Urquhart LLP) was retained to monitor the
execution of the RFP process for the purpose of
assessing whether the process of dealing with
proposals and proponents, selecting preferred
proponents and awarding EPAs was conducted by
BC Hydro fairly and in accordance with the RFP.
A process for handling and evaluating submissions was
established prior to bid submission (Figure 3-1). The
Figure 3-1: Bioenergy Phase 2 Call RFP Evaluation Process - Overview
ProposalReceipt
Disclosure ReviewConformity Review
Risk Assessment
QuantitativeEvaluation
Variations Review
Selection of Preferred
Proponents
Negotiation Stage
Final Evaluation
Fair
nes
sA
dvis
or
Eligibility Review
Other Evaluation Criteria
Initial Review
Preferred Proponents Only
Selection of Projects for EPA
Award
Bioenergy Phase 2 Call Request for Proposals - Report on the RFP Process4
evaluation criteria for the process were set out in
section 12.4 of the RFP.
The RFP evaluation process began soon after the
October 28, 2010 deadline for submitting proposals.
BC Hydro received 13 proposals by the RFP deadline.
In January 2011, BC Hydro selected five preferred
proponents, representing eight projects, to continue to
the negotiation stage. BC Hydro met with each
preferred proponent in February/March 2011 to discuss
their proposal(s). The RFP process concluded on
August 4, 2011 with BC Hydro's announcement that
four projects had been selected for the award of EPAs.
c) RFP Overview and Key Features
BC Hydro established a number of eligibility
requirements for participation in the RFP. Projects had
to be “greenfield” developments, located in B.C. and
connected (directly or indirectly) to BC Hydro's
integrated system, have a minimum capacity of 5
megawatts (MW), and generate Clean or Renewable
Biomass Energy as defined in the RFP. In addition,
BC Hydro would not consider projects that were:
= the subject of an existing EPA with BC Hydro;
= under consideration, or the subject of an electricity
purchase or other agreement, in BC Hydro's
Community-Based Biomass Power Call Request
for Qualifications or the Integrated Power Offer or
Standing Offer Program; or
= the subject of an application, or approved funding,
under Canada's Pulp and Paper Green
Transformation Program.
The RFP stated that BC Hydro would not award EPAs
for projects with a final AFEP above the $150/MWh
ceiling price.
For the Bioenergy Phase 2 RFP, BC Hydro
endeavoured to address issues that had arisen in
recent prior calls related to the cost and complexity of
the interconnection studies required for the evaluation
Eligibility
Maximum Adjusted Price
Interconnection Studies
process. The interconnection studies undertaken by
BC Hydro (previously British Columbia Transmission
Corporation) cost approximately $30,000 per project, in
addition to the engineering costs incurred by the
proponent to provide the required interconnection
information. Furthermore, BC Hydro's recent calls
demonstrated that bioenergy projects in general have
lower interconnection costs than other renewable
projects as they are often located close to an existing
industrial facility and thus adjacent to the integrated
electricity grid.
In the Bioenergy Phase 2 RFP, the method of
conducting interconnection studies was modified to a
two-part process. First, BC Hydro commissioned a
preliminary screening process for the six designated
areas and posted the results to the RFP website prior
to the proposal submission date.
For all registered projects not located in designated
areas, separate preliminary screening process
assessments were undertaken (at BC Hydro's
expense). The results of the screening process
assessments provided proponents with a high-level
estimate of the transmission losses to the Lower
Mainland and the potential Network Upgrades for a
project of a given size.
Proponents could use the screening process data to
calculate a levelized preliminary AFEP for their project,
using the price spreadsheet provided by BC Hydro with
the RFP documents. However, proponents were
cautioned that the screening process data was
preliminary in nature, and a more detailed feasibility
study that considered the specific scope, location, and
interconnection configuration for each project would be
required to obtain interconnection cost and
transmission loss estimates with a higher degree of
accuracy.
For the second part of the interconnection process, the
five preferred proponents were required to carry out a
more detailed Interconnection Feasibility Study at their
own cost. The results of these more detailed studies
were included in the calculation of the final AFEP for
each project, which BC Hydro used to determine the
final portfolio.
Bioenergy Phase 2 Call Request for Proposals - Report on the RFP Process 5
Key EPA Terms and Conditions
In developing the Specimen EPA for the Bioenergy
Phase 2 RFP, BC Hydro relied on the form of specimen
electricity purchase agreement developed for the
Bioenergy Phase 1 Call and the form developed for the
Clean Power Call. The Specimen EPA was modified to
incorporate prior contractual enhancements and to
address issues specific to the Bioenergy Phase 2 RFP.
A copy of the Specimen EPA can be found on
BC Hydro's web site.
Some of the key EPA terms and conditions of the
Bioenergy Phase 2 RFP are summarized below.
BC Hydro defines “firm energy” as a
volume of energy with a contractually
assured delivery, which a proponent
must commit to delivering over a
specified period. Proponents were
required to include a commitment to
“hourly firm energy” deliveries with
their commercial proposal; “hourly firm
energy” refers to the volume of energy
that a proponent commits to deliver in
each hour. Additional energy could
also be delivered without a contractual
delivery commitment as “non-firm
energy” as set out in the RFP.
Proponents could propose a guaranteed Commercial
Operation Date (COD) between November 1, 2012 and
November 1, 2016.
Proponents could propose an EPA term ranging from
10 to 30 years, commencing from the COD. The term
length range was established by BC Hydro based on
permitting considerations and the typical life of
bioenergy projects.
As provided under the Specimen EPA, after the first
anniversary of COD, Liquidated Damages (LDs) are
payable to BC Hydro for firm energy delivery shortfalls.
Product
Commercial Operation Date
Term
Liquidated Damages
The amount of LDs is the greater of market price less
the firm energy price (adjusted for delivery to the Lower
Mainland) and $5.20 (adjusted annually for Consumer
Price Index (CPI) from January 1, 2010) for each MWh
of delivery shortfall. The total LD amount for energy
delivery shortfalls in any given year is limited to 200 per
cent of the performance security applicable for that
year.
d) RFP Schedule
At the time of issuing the RFP, BC Hydro set out the
following key milestones:
BC Hydro largely met the schedule as originally set out
in the RFP. The RFP completion date was extended to
July 29, 2011 as a result of the B.C. government's
review of BC Hydro (which began in April 2011 and
concluded in June 2011).
e) Proposal Submissions
By the proposal submission deadline, BC Hydro
received Bioenergy Phase 2 RFP proposals for 13
projects from ten proponents representing over 3,300
GWh/year of firm energy. Prior to the short-listing
process wherein BC Hydro selected preferred
proponents, one proponent withdrew its RFP proposal.
Following the receipt of proposals, BC Hydro
conducted conformity, eligibility and disclosure reviews.
No proposals were disqualified based on these
reviews.
Event/Activity Scheduled Date(s)
RFP Issue May 31, 2010
Posting of Additional RFP Documents June 7, 2010 to June 25, 2010
Registration Deadline July 15, 2010
Pre-Submission Meetings September 13, 2010 to October 1, 2010
Proposal Submission Deadline October 28, 2010
Selection of Preferred Proponents Mid-January, 2011
Negotiation Phase February 2011 to April 2011
RFP Completion April 2011
Table 3-1: Summary of Events and Activities
Bioenergy Phase 2 Call Request for Proposals - Report on the RFP Process6
f) Risk Assessment
BC Hydro conducted a risk assessment to assess the
development and delivery risks associated with each
proposal. Through this process, BC Hydro assessed if
a project was likely to be developed as proposed, and
whether the project would be able to deliver the
stipulated firm energy over the contract term.
Each proposal was reviewed by the four separate risk
assessment teams, which was comprised of BC Hydro
staff and external consultants with relevant expertise.
The fuel plan evaluation team included external
consultants and representatives from the BC Ministry of
Forests, Lands and Natural Resource Operations.
Each team focused on reviewing one of four discrete
risk areas being assessed and confined their
assessment to the relevant portions of the proposals.
None of the risk assessment teams had access to the
bid price information contained in the commercial
proposals.
The risk assessment teams were tasked with
evaluating the following aspects of all proposals:
1. Finance: This team evaluated the financial
strength of proponents and their partners in relation
to the capital required to develop the projects. This
team also assessed whether there was a risk of
projects not being developed due to a lack of, or
inability to acquire, debt or equity financing.
2. Technical/Permitting: This team assessed the
proposed project development, including technical
aspects. Areas of assessment included: the
feasibility of the construction schedule and the
operational plans proposed by proponents; a
determination of whether the necessary permits
and approvals had been identified; the
reasonableness of the plan and schedule for
obtaining any outstanding permits/approvals; and
the risk of not receiving these permits and
approvals.
3. First Nations: This team reviewed the
reasonableness and adequacy of First Nations
consultations for each project.
4. Fuel Plan: This team evaluated the availability of
supply and the long-term viability (including tenure
availability) of the proposed fuel and source, the
status and adequacy of plans and commitments to
secure the required supply of biomass, the
potential impact on existing users, and the
reasonableness of the fuel sourcing cost
information.
For their respective areas of focus, each risk
assessment team developed a risk rating for each
project on a scale of low, medium or high. Ratings were
based on criteria defined by each team prior to
receiving proposals. In addition to the risk ratings, the
risk assessment teams provided a brief summary of the
major risks for each project. This review was completed
in December 2010 and team members remained
available for expert advice regarding questions that
subsequently arose during the negotiation stage.
Upon completion of the individual risk assessment for
the four risk categories described above, the results
were summarized and used to support informed
decision-making related to selection of preferred
proponents. The risk assessment was not intended to
be used as a pure pass or fail decision, although
BC Hydro retained the right to remove any proposal
from consideration on the basis of excessive risk. No
proponents were removed from consideration as a
result of the risk assessment.
g) Variations Review
As part of the package of RFP documents, BC Hydro
provided a Specimen EPA containing its preferred
terms and conditions. The Specimen EPA was based
on a project proposed by a single corporation, offering
hourly firm energy with a direct interconnection to the
transmission system. Proposals submitted in
accordance with these terms were referred to as “base”
proposals. While proponents could submit alternate
proposals, proponents were requested to submit a
“base” proposal that contained no proposed variations
to the Specimen EPA which would materially change
the benefit or risk of the Specimen EPA.
Process
Results
Bioenergy Phase 2 Call Request for Proposals - Report on the RFP Process7
To accommodate potential unique situations not
contemplated in the Specimen EPA or where
proponents could offer additional value, BC Hydro
allowed proponents to submit alternate proposals using
a format provided in the RFP proposal submission
guide. For alternate proposals, proponents were
requested to submit a blacklined version of the
Specimen EPA along with a brief description of the
alternate proposal and any associated modification of
the commercial proposal.
BC Hydro assessed all alternate proposals received
from proponents. In some situations, the submitted
alternate proposals were modified and/or additional
value variations were offered by proponents in the
course of post-submission discussions with BC Hydro.
For those alternate proposals that were acceptable to
BC Hydro, the EPAs were modified accordingly.
h) Quantitative Evaluation
The Bioenergy Phase 2 RFP permitted proponents to
select a number of different options (e.g., product and
pricing attributes) when submitting their proposals. To
fairly compare proposals with different attributes,
BC Hydro calculated a preliminary AFEP for each
proposal.
The first step in computing the preliminary AFEP was to
levelize the offered Firm Energy Price (FEP), which
took into account the pricing attributes proposed by
each proponent. The second step was to adjust each
project's levelized FEP for product attributes, estimated
Network Upgrade costs, and project location relative to
the Lower Mainland. The screening process
interconnection assessment data was used in
calculating the preliminary AFEP.
To compute the levelized FEP, BC Hydro divided the
present value (PV) of the firm energy purchases for
each proposal, based on the proponent's selected
options (e.g., COD, contract term, escalation rate), by
the PV of firm energy deliveries over the term of the
EPA. To calculate the PV of firm energy purchases,
BC Hydro used a nominal discount rate of 8.0 per cent
and a real discount rate of 5.8 per cent (assuming an
inflation rate of 2.1 per cent).
Step 1: Levelizing the FEPs
Step 2: Price Adjustments
For base proposals, the levelized FEP was adjusted to
account for differences in product attributes and project
location. Adjustments were made for hourly firm energy,
Network Upgrade (NU) costs, Cost of Incremental Firm
Transmission (CIFT) and energy losses, as follows:
= Hourly Firm: Although all projects were required to
submit a base proposal with hourly firm energy, the
hourly firm energy adjuster was retained to allow
comparison to previous calls and to allow
evaluation of potential alternate proposals that
modified the energy delivery obligations. An
adjuster (expressed in $/MWh) was deducted from
the levelized FEP for proponents that committed to
deliver hourly firm energy. The magnitude of the
adjuster depended on the proponent's profile of on-
peak hourly firm energy. For a project with a “flat”
hourly firm energy profile, the adjuster was
approximately $4.05/MWh.
= NU: The NU adjustment was based on a high-
level screening process estimate of the costs that
would be borne by BC Hydro to interconnect each
project to the grid. The applicable NU amounts
were multiplied by 150 per cent and converted into
a $/MWh adjustment and then added to the
levelized FEP for that project.
= CIFT: The CIFT adjustment was based on a report
entitled “Bulk Transmission System Cost of
Incremental Firm Transmission for BC Hydro's
2008 LTAP Base Plan and Contingency Resource
Plans CRP1 and CRP2” dated January 15, 2009.
The CIFT provides a general indication of the long-
term unit cost of bulk transmission system
reinforcement from region to region. The CIFT for
non-adjacent regions was determined by summing
the region to region costs. To calculate the CIFT
adjustment for each project, CIFT costs (expressed
in $k/MW-year) for the largest incremental energy 2flows in the F2010 Stage were used. The
cumulative CIFT costs for each project were
converted into a $/MWh adjustment and then
added to the levelized FEP for that project.
2 F2010 Stage refers to the facilities that are expected to be in service in F2010 and later.
Bioenergy Phase 2 Call Request for Proposals - Report on the RFP Process8
=
carried out to provide a high-level estimate of
transmission losses associated with delivering the
energy from the general location of each project to
the Lower Mainland on a stand-alone basis. These
losses were converted into a $/MWh adjustment
and added to the levelized FEP for the project.
The result of the above adjustments is a preliminary
levelized AFEP on a stand-alone basis for a common
product (i.e., hourly firm energy delivered to the Lower
Mainland).
i) Selection of Preferred Proponents
Following the completion of the preliminary evaluation,
on January 21, 2011 BC Hydro selected eight projects
(representing 1,639 GWh/year of new supply) from five
preferred proponents to proceed to negotiations and
interconnection feasibility studies.
j) Discussions and Alternate Proposals
During February and March 2011, BC Hydro met with
all preferred proponents to discuss their base and
alternate proposals in order to more fully understand
their projects and proposed variations. In addition,
proponents were asked to submit clarifications
regarding certain aspects of their proposals.
Furthermore, BC Hydro explored ways to enhance the
value of the proposals to ratepayers, through
modification of the commercial terms or development of
modified proposals.
In early April 2011, preferred proponents were given an
opportunity to submit improved commercial proposals,
including alternate proposals. The final AFEP was
calculated for each proposal using a similar process to
the calculation of the preliminary AFEP, including
adjustments for hourly firm energy, NU costs, CIFT and
losses.
The primary differences in the calculation of the final
AFEP compared to the preliminary AFEP were as
follows:
Losses: A screening process assessment was =
terms offered by preferred proponents in April 2011.
In contrast, the preliminary AFEP was based on the
original commercial terms submitted by all
proponents with their bids in October 2010;
= The NU and losses adjustments in the final AFEP
were based on the results of the interconnection
feasibility studies, rather than the interconnection
screening process data used in the preliminary
AFEP; and
= The final AFEP included adjustments for alternate
proposals offered by the preferred proponents
which were acceptable to BC Hydro, whereas the
preliminary AFEP was based only on the “base”
proposal.
BC Hydro used the final AFEP for each of the eight
projects to determine the final portfolio of cost-effective
projects that were selected for EPA awards.
k) Adequacy of First Nations Consultation
Prior to awarding the EPAs, BC Hydro reviewed the
First Nations consultation records provided by the
Bioenergy Phase 2 RFP proponents to determine if
consultation had been reasonable and adequate to the
date of contract award. BC Hydro requested
information and documentation from proponents
regarding the identification of potentially impacted First
Nations, potential project impacts on asserted
aboriginal rights and title as well as consultation logs
and summaries of meetings.
Requested information that identified how proponents
determined which First Nations to consult with in
relation to their projects included:
= A statement of how proponents determined which
First Nations to consult and a list of such First
Nations (including key contact persons); and
= Copies of directions from other Crown agencies
indicating the specific First Nations to be consulted
with as well as supporting documentation such as
letters from First Nations or tribal councils.
The final AFEP was based on the final commercial
First Nations Identification
Bioenergy Phase 2 Call Request for Proposals - Report on the RFP Process9
Potential Project Impacts on First Nations
Interests
To assess the degree of the potential project impacts
on asserted aboriginal rights and title, BC Hydro
considered:
=
current stage of the project, such as the nature of
information shared with First Nations about the
project, the opportunities for First Nations to
identify potential impacts, when consultation
began, how frequently consultation occurred and
plans for future consultations;
= Detailed information on each potential impact to
any First Nation's asserted aboriginal rights and
title that had been identified, either by the First
Nation or through studies related to the project
(such as archaeological studies or Traditional Use
Studies);
= Information on how
the severity of the
potential impact was
assessed and
whether First Nations
were involved in that
assessment;
= Mitigation measures
that had been
identified by the
proponent and
whether those
mitigation measures
addressed First
Nations concerns;
= Identification of any concerns raised by First
Nations in the permitting process in respect of
permits not yet issued by Crown agencies; and
= Identification of all permits, licenses, tenures and
approvals that had been rejected due to lack of
adequate First Nations consultation.
For each of the four projects that were awarded EPAs,
BC Hydro determined that the consultation processes
to the date of the EPA award were reasonable and
adequate.
Information on the level of consultation to the
l) Final Portfolio Selection
Based on the outcome of the review and evaluation
process described above, four projects representing
754 GWh/year of firm energy were selected for EPA
awards. A detailed description of the projects that were
awarded EPAs is contained in Appendix A.
The decision to offer EPAs to these four projects was
based on the final EPA terms and conditions, including
the prices offered by the proponents, the adequacy of
First Nations consultation, and the risk assessments.
m) Summary of RFP Proposals
Table 3-2 summarizes the treatment of the RFP
proposals, starting with the registration of proponents in
July 2010 and ending with the EPA awards in August
2011.
BC Hydro used the levelized final AFEP in its contract
award decisions since it places all projects on a level
footing by adjusting for varying terms and escalation
factors and a common delivery point (i.e., Lower
Mainland).
The levelized final AFEP for the projects selected
ranged from $112 to $121 per MWh with a weighted-
average AFEP of $115/MWh (January $2010).
The levelized final AFEP for the four short-listed
projects that were not selected for the award of an EPA
ranged from $126 to $162 per MWh.
Table 3-2: Summary of RFP Proposals
Event Date Proposals Firm Energy (GWh/year)
RFP Registrations July 2010 19 ~3,500 to 5,000
Proposals Submitted October 2010 13 3,321
· Proposals withdrawn prior to short-listing · Proposals not short-listed
(1) (4)
(1,682)
Selection of Preferred Proponents January 2011 8 1,639
Awarded EPAs August 2011 4 754
Bioenergy Phase 2 Call Request for Proposals - Report on the RFP Process10
The levelized final AFEP for one of the unsuccessful
projects award was above the $150/MWh, RFP ceiling
price, because the results of its final interconnection
study identified higher NU costs and losses than
estimated in the screening process assessment.
n) Fairness Advisor's Report
The Fairness Advisor's report regarding the Bioenergy
Phase 2 RFP process is contained in Appendix B. The
Fairness Advisor concluded that “… the procurement
process for the Bioenergy Phase 2 Call RFP to the
point of recommendation of the preferred proponents
and the awarding of EPAs has, in my opinion, been
conducted in an exemplary manner without any
unresolved fairness issues”.
Bioenergy Phase 2 Call Request for Proposals - Report on the RFP Process11
4. PRODUCTS BEING ACQUIRED
Pursuant to the Bioenergy Phase 2 RFP, BC Hydro is
acquiring three products – hourly firm energy, non-firm
energy and Environmental Attributes.
Hourly Firm Energy
Proponents were required to provide a base proposal
with “hourly firm energy” deliveries. However,
proponents could modify the delivery obligation as an
alternate proposal (such as offering seasonal or
monthly firm energy). All four of the projects that were
awarded EPAs have an “hourly firm energy” delivery
commitment.
BC Hydro pays for the firm energy that is received at
the price in the EPA for that year multiplied by a time-
of-delivery factor to account for the value of energy to
BC Hydro at different time periods in a month and for
different months in the year. The 3 X 12 table (three
time periods per month and 12 months per year)
reflects time-of-delivery factors that are common to all
EPAs.
The super-peak period is from 16:00 to 20:00, and the
peak period is from 6:00 to 16:00 and from 20:00 to
22:00 from Monday to Saturday. The off-peak period is
from 22:00 to 6:00 from Monday to Saturday and
includes all hours on Sundays and B.C. statutory
holidays.
Non-Firm Energy
In addition to the firm energy being acquired under the
Bioenergy Phase 2 RFP, BC Hydro will be purchasing
non-firm energy. For the selected projects, non-firm
energy will generally represent less than five per cent
of the total energy deliveries.
Payment for any non-firm energy delivered is based on
two pricing options provided to proponents. At the time
of proposal submission, proponents elected to be paid
for their non-firm energy deliveries based on either a
fixed price schedule (Option A) reflecting BC Hydro's
forecast of market electricity prices or a variable price
(Option B) based on actual average mid-C spot market
prices for non-firm energy.
Environmental Attributes
The other product being acquired under the Bioenergy
Phase 2 RFP is “Environmental Attributes” which are
broadly defined in
Appendix 1 of the Specimen
EPA to include all rights and
benefits of any kind
associated with, or arising
from, a project's “greenness”,
including any green
marketing attributes, offsets,
credits or other instruments
or rights arising from the
actual or assumed
displacement by the project
of offsite emissions, as well
as any offsets, credits,
allowances or other
tradeable rights arising from
on-site emission reductions.
Table 4-1: Time of Delivery Factors
Month Super-Peak [%]
Peak [%]
Off-Peak [%]
January 141 122 105
February 124 113 101
March 124 112 99
April 104 95 85
May 90 82 70
June 87 81 69
July 105 96 79
August 110 101 86
September 116 107 91
October 127 112 93
November 129 112 99
December 142 120 104
Bioenergy Phase 2 Call Request for Proposals - Report on the RFP Process12
4. PRODUCTS BEING ACQUIRED
There are several reasons for BC Hydro to acquire the
Environmental Attributes from proponents as part of the
Bioenergy Phase 2 RFP:
· BC Hydro is not acquiring clean or renewable
electricity if it purchases power without the
Environmental Attributes. Such electricity 3would be considered as “null” electricity in
most jurisdictions since it no longer has any
associated environmental benefits.
· There is a potential greenhouse gas (GHG)
liability from acquiring null electricity stripped of
the Environmental Attributes because null
electricity may have some GHG intensity,
whereas clean electricity has no or very low
GHG intensity.
· The acquisition of Environmental Attributes as
part of a clean, renewable power acquisition
process is consistent with the procurement
processes of other utilities. With the exception
of United States jurisdictions issuing standard
offer-like acquisition processes under the
Public Utilities Regulatory Policies Act of 1978,
Environmental Attributes are typically 4transferred to the purchasing utility.
· Acquisition of the Environmental Attributes
permits BC Hydro to manage risk in the event
that at some point a Renewable Portfolio
Standard is set for BC Hydro.
· Environmental Attributes acquired through the
Bioenergy Phase 2 RFP may be marketed to
buyers in B.C., the Western Electricity
Coordinating Council (WECC) region and
other markets for the benefit of BC Hydro's
ratepayers.
3 See, for example, the Western Climate Initiative's position set out in “Electricity Subcommittee Discussion Paper on Renewable Portfolio Standards, Renewable Energy Credits and GHG Accounting” (December 2008), page 1.
4 See, for example, Ontario's Feed-In Tariff Program, enacted under the Ontario Green Energy and Green Economy Act, 2009, where IPPs must transfer environmental attributes arising from projects to the purchasing entity, the Ontario Power Authority.
Bioenergy Phase 2 Call Request for Proposals - Report on the RFP Process13
5. COST-EFFECTIVENESS
The cost-effectiveness of the awarded EPAs for the
Bioenergy Phase 2 RFP is demonstrated by the
following three benchmarks:
Competitive nature of the RFP process;
Comparison to other recent BC Hydro power calls;
and
Comparison to energy prices in other North
American jurisdictions.
a) Competitive RFP Process
BC Hydro relies on the competitive nature of the
Bioenergy Phase 2 RFP process as the primary
support for its position that the EPAs are cost-effective.
The BCUC has previously found that an important
determination of cost-effectiveness is whether or not
the particular power acquisition process awards were
the outcome of a competitive process that yielded a 5cost-effective result.
BC Hydro notes that the volume of energy being
acquired (754 GWh/year) under the Bioenergy Phase 2
RFP represents less than 25 per cent of the total
energy offered in the original proposal submissions.
Additionally, the following facts support BC Hydro's
view that the Bioenergy Phase 2 RFP was a
competitive, fair and transparent process:
= – As described in Section 3 of this
Report, initially BC Hydro received 13 proposals
from ten different proponents, representing more
than 3,300 GWh/year of firm energy. Many of the
=
=
=
Participation
proponents were well-established industrial firms in
B.C. or experienced and qualified IPPs.
= – The RFP offered contract term and
COD flexibility (both initial COD and phased COD).
In addition to the options set out in the RFP
documents, proponents were allowed to submit
alternate proposals that BC Hydro could choose to
accept if such proposals provided value to its
ratepayers. BC Hydro utilized the discretion
inherent in a RFP process to negotiate both price
and value-added alternate proposals with
proponents. In addition, BC Hydro could and did
propose variations to the proposals that increased
their value to BC Hydro and its ratepayers.
= Least Cost – The four awarded EPAs represented
the lowest final AFEPs for the proposals submitted
by the preferred proponents, and were all
considered to be cost-effective, both individually
and on a portfolio basis.
b) Comparison to OtherBC Hydro Calls
In addition to its reliance on the competitiveness and
transparency of the acquisition process, BC Hydro
compared the awarded EPAs to its two most recent call
processes – the Bioenergy Phase 1 RFP and the Clean
Power Call RFP. As shown in Table 5-1 below, these
comparisons further confirm that the Bioenergy Phase
2 RFP EPAs are cost-effective.
RFP Process
5 BCUC Reasons for Decision to Order No. E-1-05 (March 9, 2005), Call for Tenders for Capacity on Vancouver Island and Review of EPA, page 13.
Table 5-1: Comparison to Recent BC Hydro Calls
BC Hydro Call Process
Completion of EPA Awards
Lowest Levelized AFEP
($/MWh)
Highest Levelized AFEP
($/MWh)
Weighted Average
Levelized AFEP ($/MWh)
(All prices adjusted to January 2010 dollars)
Bioenergy Phase 1 RFP December 2008 112 119 116
Clean Power Call RFP July 2010 108 137 127
Bioenergy Phase 2 RFP August 2011 112 121 115
Bioenergy Phase 2 Call Request for Proposals - Report on the RFP Process14
Bioenergy Call Phase 1 RFP
Clean Power Call RFP
The weighted-average AFEP of $115/MWh for the four
awarded EPAs under the Bioenergy Phase 2 RFP is
comparable to the $116/MWh price for the Bioenergy
Phase 1 RFP. Given that all four of the awarded EPAs
are for “greenfield” projects, the price comparison is
particularly favourable given that the majority of the
Bioenergy Phase 1 Call projects were existing industrial
facilities. Further, the prices paid in respect of the four
projects are below the prices offered in respect of the
14 unsuccessful Bioenergy Phase 1 RFP projects,
which ranged from $124/MWh to $412/MWh (January
$2010).
As shown above, the weighted-average AFEP of
$115/MWh for the Bioenergy Phase 2 RFP is lower
than that for the Clean Power Call ($127/MWh) which
was completed in mid-2010.
c) Comparison to Other Jurisdictions
As shown in BC Hydro's report on the Clean Power
Call RFP process (released on August 3, 2010), the
awarded Clean Power Call EPAs were at the lower end
of the energy price range for other North American
jurisdictions and thus were considered to be cost-
effective.
Table 5-2 below provides an updated jurisdictional
comparison where the Bioenergy Phase 2 RFP results
are compared to two recent Hydro-Quebec
procurement processes.
As shown, the energy prices (including transmission
costs) for the awarded Bioenergy Phase 2 RFP
contracts compare favourably with the recent Hydro-
Quebec awards for biomass and wind projects.
Table 5-2: Comparison to Other Renewable Power Acquisition Processes
Utility/Acquisition Process Award Date Award Volume Levelized Energy
Price* (2010$/MWh)
Hydro-Quebec Biomass Cogeneration CFT
December 2009
61 MW $114
Hydro-Quebec Wind CFT for Community and Aboriginal Projects
December 2010
292 MW $136
BC Hydro Bioenergy Phase 2 RFP
August 2011
104 MW $115
* The prices for the Hydro-Quebec awards include transmission costs. For the Bioenergy Phase 2 RFP,
the adjusted levelized price includes interconnection/transmission costs and losses associated with transmitting power to the load center.
Bioenergy Phase 2 Call Request for Proposals - Report on the RFP Process15
APPENDICES
Appendix A
Proponent Name Project Name Location Region Capacity
(MW) Firm Energy (GWh/year)
West Fraser Mills Ltd. Chetwynd Forest
Industries Biomass Project
Chetwynd, B.C. Peace River 12 88
Western Bioenergy Inc. Fort St. James Green Energy
Fort St. James, B.C. North Coast 40 289
West Fraser Mills Ltd. Fraser Lake
Sawmill Biomass Project
Fraser Lake, B.C. North Coast 12 88
Western Bioenergy Inc. Merritt Green
Energy Merritt, B.C.
Kelly Lake Nicola
40 289
Total 104 754
Summary Listing of Bioenergy Phase 2 Call RFP EPA Awards
Appendix B
Bioenergy Phase 2 Call Request for Proposals - Report on the RFP Process16
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