Canadian Hydro Developers - a developer, owner and operator of 18 renewable energy generation facilities totalling net 230 MW in operation with an additional 384 MW nearing construction has just announced Q3.

Buried within the detail, I was amazed to find out that they had actually signed last July one 20 year and even three 40 year Electricity Purchase Agreements from BC Hydro for the supply of 44.5 MW of electricity from hydroelectric projects.

With a 40 year power purchase agreement, all manner of investments become economically viable as they can pay for themselves and more within that time period. Typically in Europe the ppa lasts just 15 years and not many power plants can recoup costs that fast - probably only gas and partially subsidised wind. That's why capital intensive industries like nuclear are screaming for 40 year carbon contracts. As I have opined here before, fully amortised hydropower assets produce the cheapest electricity bar none. This I'm now beginning to realise is best achieved with long-term ppa contracts. So why not extend it to some of the other renewables?

This may be a cheaper way of subsidising alternative energy.

Yet Canada has the advantage over European nations of being a growing country and can make a bet on future electricity demand, regardless of who its customers might be in 40 years. In Europe, 15 year ppas are based on an established client base and demand levels that will probably not change much.

It's hard to judge - how can you do this optimally?

I hope to come back to this theme and explore it again shortly.