Canada: Ontario Announces Final Steps To Green Energy: Announcements Include The Feed-In Tariff Program, Domestic Content Requirements And $2.3 Billion Hydro One Transmission Projects

With assistance from Scott Jones and Bruce Karn

This week, the Ministry of Energy and Infrastructure announced the final steps of the Ontario Government's ten-step plan to launch the Green Energy and Green Economy Act, 2009 (the "Act") into action. The latest initiatives cap off a number of announcements throughout the month of September aimed at securing investment and creating new jobs in Ontario's green economy while establishing Ontario as the North American leader in renewable energy.

The Ontario Government made the following important announcements:

  • The Ontario Power Authority ("OPA") has been directed to launch the Feed-in Tariff ("FIT") Program. The OPA will begin accepting applications on October 1, 2009, and the launch period will continue for 60 days. RESOP contract holders that have projects which have not reached commercial operation will have a limited opportunity to cancel their existing RESOP contracts and apply under the FIT. The Government also announced specific domestic content requirements applicable to wind and solar projects.
  • A Renewable Energy Approvals process has been initiated creating a new streamlined environmental approvals process for renewable energy projects and setting a general minimum 550 metre setback requirement for large wind projects.
  • Hydro One will undertake 20 transmission development projects at an estimated cost of $2.3billion over the next 3 years.
  • A new Renewable Energy Facilitation Office has been established as a one-window access point for information on renewable energy project requirements within the Ministry of Energy and Infrastructure.

These announcements build on developments earlier in September, when the Ontario Government proclaimed several parts of the Act into force, announced the closure of 4 coal plants in 2010 (four years ahead of the previously announced closures), the creation of a $250 million Aboriginal Loan Guarantee Program and the creation of an Aboriginal Energy Partnerships Program, Community Energy Partnership Program and Municipal Renewable Energy Program.

FEED-IN TARIFF PROGRAM

The Ontario Power Authority ("OPA") will launch the much-anticipated Feed-in Tariff program (the "FIT") and will begin accepting FIT applications on October 1, 2009. The FIT program will provide for 20 year contracts (40 years for waterpower) offering price guarantees for energy generated from renewable energy sources, including solar, wind, biogas, biomass, landfill gas and hydro. The FIT Program and pricing schedule will be reviewed at least every two years.

The FIT pricing schedule has been released in its final form, and guaranteed FIT payments range from 10.3¢/kWh for landfill gas projects larger than 10 MW to 80.2¢/kWh for residential solar rooftop projects 10 kW or smaller. The pricing schedule has retained other important features, including an incentive "price adder" and lower security deposits for projects in which there is economic participation by Aboriginal communities and for community-based projects including schools and co-ops.

Applications And Launch Period

The OPA will begin accepting FIT applications on October 1, 2009 with the first contracts expected to be signed in early December. The FIT Launch Period will run for 60 days from October 1, and will allow eligible applicants who want to earn an earlier FIT Time Stamp the opportunity to increase the chance that they will gain access to limited connection resources. Following the Launch Period, the FIT Time Stamp will be assigned at the date the application is received by the OPA.

Transition From RESOP

For applications submitted to the FIT on October 1 and continuing for 30 days, the OPA has been directed to offer holders of contracts under OPA's former Renewable Energy Standard Offer Program ("RESOP") that have not achieved commercial operation the following options: (1) rescind the RESOP contract and apply for a FIT contract; or (2) for wind projects which have attained their Certificate of Approval (Noise Emissions) from the Ministry of Environment, applicants can apply for amendments to their RESOP contracts. The amendment will require contract holders to post security, and will make other consequential changes to their existing contract including a change in the RESOP contract price to 12.1¢/kWh. This approach is a departure from the OPA's previous position that facilities that have a prior standard offer contract are generally not eligible to qualify for the FIT program.

Domestic Content

The Ontario Government has also established domestic content requirements for FIT projects. These requirements will increase over time, and will be tailored specifically to the various different energy sources as follows:

  • Wind – starting at 25% domestic content and increasing to 50% on January 1, 2012;
  • Micro solar PV (<10kW) – starting at 40% and increasing to 60% on January 1, 2011; and
  • Large solar PV – starting at 50% and increasing to 60% on January 1, 2011.

The details of what constitutes domestic content (including equipment, "balance of plant" construction costs, consulting and professional services) and qualifying percentages which can be used to meet a project's domestic content requirement are included in a schedule to the FIT contract. These requirements are intended to encourage investment and stimulate green manufacturing, construction and installation jobs in the province.

Restrictions On Solar On Prime Agricultural Land

Ground-mounted solar procurement above 100 kW on class 1 and 2 soils or on Specialty Crop Areas will be prohibited in order to provide continued protection of such lands. Ground-mounted solar projects, up to a total of 500 MW, will be permitted on Class 3 lands, to be allocated regionally.

The OPA has now posted the Minister's directive launching the FIT and the FIT program rules, pricing, contract and appendices for the both the FIT and the microFIT programs online at: http://www.powerauthority.on.ca/FIT/.

RENEWABLE ENERGY APPROVAL

As a major component of Ontario's climate change and coal phase-out plans, the Renewable Energy Approval (the "REA") became law on September 24, 2009. The REA is a new streamlined environmental approvals process for renewable energy projects, integrating municipal planning, environmental assessment, certificates of approval, and a variety of other approvals and licenses. Also designed to avoid unnecessary duplication and providing a six-month service guarantee per project, the government expects that the REA will facilitate a quicker and more efficient approvals regime in Ontario

The REA also addresses noise limits by creating a minimum setback of 550 metres for one to five wind turbines, a distance that will increase in conjunction with the number and sound level rating of the turbines.

The Ontario Government considers this streamlined renewable energy approval system as a key contributor to its goal of facilitating the development of new energy projects, job creation and economic growth.

TRANSMISSION EXPANSION PROJECTS

In a move geared directly towards building the green energy economy, the Ontario Government has committed its wholly owned subsidiary Hydro One to an extensive $2.3 billion program of expanding and renewing Ontario's transmission facilities expected to create 20,000 jobs. The transmission improvement and expansion program will consist of 20 projects across Ontario that are expected to include core lines, which form the backbone of the transmission system, as well as their supporting enabler lines. Core transmission upgrade projects will cover a large area of the province and include the North/South lines from Sudbury to Barrie, Barrie to Toronto and an East/West line from Nipigon to Wawa. In addition, the Ontario Government has earmarked a number of long term transmission projects in areas with significant potential for renewable power generation.

Due to the massive scope of the projects, the Ontario Government envisions the potential for commercial entities and local and Aboriginal communities to partner with Hydro One to help develop these opportunities.

RENEWABLE ENERGY FACILITATION OFFICE

The Ontario Government has established its new Renewable Energy Facilitation Office (the "REFO") as a single access point to facilitate access to information on developing renewable energy projects in Ontario.

The REFO falls under the umbrella of the Renewables and Energy Efficiency department at the Ministry of Energy and Infrastructure and will act as an important resource for all potential participants including developers, communities and municipalities that require help to navigate the regulatory approvals process.

CLOSURE OF FOUR COAL-FUELED POWER UNITS

Four years ahead of its target, the Ontario Government announced that it will close four coal-fueled power units in 2010. By October 2010, Ontario Power Generation will close two units at its Nanticoke station near Simcoe and a further two units at its Lambton plant close to Sarnia. These plants together represent approximately 2,000 MW of generation capacity. With these closures Ontario's in-service coal capacity will have been reduced by 40 per cent since 2003.

ABORIGINAL ENERGY PARTNERSHIPS PROGRAM ("AEPP")

AEPP is a new program aimed at maximizing Aboriginal participation in renewable generation projects. AEPP will focus its efforts on three core activities:

  • Community Energy Plans, which will give Aboriginal communities the opportunity to identify their own local needs as well as opportunities for renewable energy projects and other green initiatives;
  • Funding for "soft costs" such as feasibility studies, business plans, and technical and environmental studies; and
  • The Aboriginal Renewable Energy Network, which will help to facilitate the transfer of knowledge and best practices associated with Aboriginal renewable energy projects, and will include regional seminars, educational material and a link to the Renewable Energy Facilitation Office.

ABORIGINAL LOAN GUARANTEE PROGRAM ("ALGP")

The Ontario Government has also launched ALGP, a $250 million program that will provide loan guarantees to Aboriginal communities to assist their equity participation in renewable generation and transmission projects. The ALGP will guarantee up to 75 per cent of an Aboriginal corporation's equity in an eligible project, which may include renewable projects such as wind, solar and hydroelectric.

The loan guarantees for each project will be capped at $50 million and projects will be selected on the basis of their projected commercial viability. Successful projects will be required to have in place secured commercial financing arrangements, experienced infrastructure partners, established agreements to sell or transmit electricity at a pre-determined price, and an Aboriginal corporation to act as the contracting party.

COMMUNITY ENERGY PARTNERSHIP PROGRAM ("CEPP")

In order to assist communities to take advantage of opportunities to participate in the green economy, the CEPP was created to provide a range of support to farmers, co-ops and non-profit organizations. The program will consist of one-time assistance to help such groups meet the "soft" or developmental costs of renewable energy projects such as business plans, feasibility studies and environmental assessments. Key features of the program include:

  • Eligible groups will be able to apply for a maximum of $200,000 towards development costs; and
  • Community-based projects will be eligible to receive a graduated incentive, based on the percentage of local ownership, of up to 1¢/kWh in addition to the standard FIT rates.

MUNICIPAL RENEWABLE ENERGY PROGRAM

Along with its support for local and Aboriginal communities, commercial entities and households to get involved in green energy projects, the Ontario Government will also provide support to municipalities for costs associated with their participation in such projects. Even though developers will bear the majority of project development costs, the Ontario Government recognizes that municipalities may also incur costs in connection with renewable projects and it is expected that this program will be launched in the first quarter of 2010.

Together, these initiatives represent an important opportunity for business, communities and government to work together to maximize Ontario's green economic future. If you would like further information with respect to the Green Energy and Green Economy Act, 2009, or any of the initiatives discussed above, please contact Linda Bertoldi or Mark Rodger.

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