On March 22, 2012, the government of Ontario released its scheduled two-year review report regarding its renewable energy feed-in tariff (FIT) program. The FIT program, along with other renewable energy programs, has placed Ontario at the forefront of a burgeoning global renewable energy industry. To date, the FIT program has resulted in approximately 2,000 power purchase agreements being entered into by the Ontario Power Authority (OPA) representing over 4,600 MWs of new renewable generation in Ontario.
The two year review, announced in October 2011, had a mandate to consider a broad range of issues, including:
- Amendments to FIT pricing;
- How to ensure the long-term viability of clean energy procurement in Ontario;
- Improving local consultation processes; and
- The possible addition of new renewable energy technologies and fuel types.
Through a consultation process established by the Ontario Ministry of Energy and the OPA, thousands of submissions were made by individuals, businesses and organizations. Bennett Jones was an active participant.
The FIT review report provides recommendations to the OPA under the seven areas summarized below. The recommendations have been formally adopted by the Ontario government. The next step in the implementation of the recommended changes to the FIT program is the release, by the OPA, of draft FIT program rules and draft FIT contracts for comment. No timeline has been provided by the OPA.
Generally, the FIT review addressed the issues raised by a variety of FIT program stakeholders and serves to stay the course. We would have preferred to see more detailed recommendations regarding the ongoing challenges to connecting projects. Our hope is the forthcoming amendments to the FIT program rules will do so.
The recommendations, in summary, are:
1) Amendments to FIT Pricing
- FIT program prices for wind and solar technologies should be reduced by more than 20 percent for solar, depending on size, and approximately 15 percent for wind. Maintain current prices for water, biogas, biomass and landfill gas (see table below).
- Rather than setting a price at the time of project application, FIT pricing should be set when the contract is offered.
Recommended FIT Pricing Changes
2) Maintain Commitment to Clean Energy
- Ontario should procure 10,700 MWs of non-hydro renewable energy generation by 2015. (We note the 2015 timeline is moved up from the 2018 timeline stated in the Long Term Energy Plan released in November, 2010).
- At the end of 2013, the government should review Ontario's electricity supply and demand forecast to explore whether a higher renewables capacity target is warranted.
- Up to 50 MW of the remaining FIT contract capacity should be reserved for hydroelectric projects.
- Beginning in 2012, the government should conduct an annual review of FIT prices to reflect current costs—setting and publishing prices each November that will take effect on January 1st the following year.
3) Streamline Regulatory Processes
- Three approval stream updates are recommended:
- Full Environmental Approvals including REA regulations: Large, complex projects should continue to require the full environmental approval process, including REA regulations, with the following amendments:
- Final comment letters that the Ministry of Tourism, Culture and Sport (MTCS) and the Ministry of Natural Resources (MNR) provided to proponents should be a required part of a complete submission (application), rather than being required before the final public meeting.
- The timelines for MNR's review of Endangered Species Act permit applications should be reduced.
- MTCS should create a streamlined process to review archaeological reports.
- Exemption: microFIT solar projects should remain exempt from Renewable Energy Approval (REA) regulations, but subject to enhanced land-use protection.
- Self-Screening: Ministry of the Environment's (MOE) self-screening registry system, the Environmental Activity and Sector Registry, should be expanded to include eligible small-scale solar (less than 500 kW) and bio-energy projects.
- MNR should review and update its policy approach to renewable energy development on Crown land. The release of Crown land should be aligned with provincial energy plans and programs when deciding where to make Crown land available for renewable energy.
- The commercial operation milestone for rooftop solar PV should be shortened from three years to 18 months in order to encourage timely project completion.
- A new Renewable Energy Committee should be created that includes senior officials from relevant ministries to help drive the progress of projects through the approvals process.
4) Encourage Greater Community and Aboriginal Participation
- FIT applications for projects with minimum equity participation from Aboriginal and local communities, public schools, colleges, universities, hospitals and long-term care facilities should be prioritized.
- Price adders for community and Aboriginal projects should be maintained.
- A minimum of 10 percent of remaining FIT contract capacity should be set aside for local community and Aboriginal projects with greater than 50 percent equity participation.
- Strengthen limitations on assignment and change of control for priority participation projects, except rooftop solar, which should be strengthened.
5) Enhance Municipal Involvement
- Municipal engagement in the FIT Program should include:
- For large FIT projects, require contract launch meetings with municipalities, proponents, project developers, government representatives, utilities and agencies.
- MOE should revise the Municipal Consultation Form in the REA process to better reflect areas of municipal concern.
- Clarify and strengthen project siting rules to ensure responsible project development, including:
- Protection of agricultural lands by prohibiting solar ground-mount projects (over 10 kW) on prime agricultural land that contain class 1, 2 and 3 soils.
- Prohibit solar ground-mount projects (of any size) in residential areas and lands bordering residential areas.
- Support municipalities in the development of new resources and protocols to support the integration of renewable energy projects in communities.
- In light of recommendations and initiatives to enhance municipal input and support municipal participation, the OPA should not launch the Municipal Renewable Energy Program.
6) Expand Ontario's Clean Energy Economy
- Targeted financial support through the Smart Grid Fund should be provided to Ontario-based demonstration and capacity-building projects that test, develop and bring to market the next generation of technology solutions.
- Work with key stakeholders to consider the potential for a clean energy institute to spur domestic innovation and achieve greater global market presence for Ontario-based companies.
- Domestic manufacturers should be supported by showcasing Ontario's smart energy solutions through a strategic export strategy.
- A Clean Energy Task Force should be created to advise the Ministers of Energy and Economic Development and Innovation on potential strategies for Ontario's clean energy sector.
- The government should explore potential partnership opportunities for renewable energy projects in off-grid remote Aboriginal communities.
- A working group should be established to explore opportunities for self-consumption or net-metering programs in Ontario that builds on the FIT design.
7) Technical Recommendations
- The OPA should allow for a window of time during which existing contracts can voluntarily withdraw from the FIT Program and have their security fees returned.
- A transition process should be provided for: (1) all pre-existing FIT applications; and (2) microFIT applications submitted on and after September 1, 2011. Allow these applications to transition to eligibility requirements in the new FIT and microFIT rules. A revised application should retain its original timestamp. The OPA should return the application and security fee, as appropriate, to any pre-existing applications.
- The OPA should introduce a point system (see table below) for small and large FIT applications that awards points on the following basis:
- projects with minimum equity participation from an Aboriginal or local community and projects with participation by public schools, colleges, universities, hospitals or long-term care facilities.
- projects that have demonstrated support from the local municipalities or Aboriginal communities.
- water or bioenergy projects which have ancillary electricity system benefits.
- project readiness for wind, solar ground-mount and bioenergy projects on Aboriginal Reserves or private land where applicants have sufficient space for the project and a firm lease, firm option to lease/purchase, or ownership of the land. Solar rooftop applicants that do not own the host building should be eligible for project readiness points if they provide proof of firm site control in the form of a firm lease or option to lease.
Recommended Points System
- The OPA should work with Hydro One Networks Inc. and other local distribution companies to facilitate the participation of eligible constrained microFIT projects.
- The intent and focus of the microFIT Program should be maintained by:
- Implementing a limit of one microFIT contract per individual/farmer.
- Maintaining the microFIT Eligible Participant Schedule and include farm co-ops.
- Removing the requirement that Aboriginal communities, schools, public colleges, public universities, hospitals, longterm care facilities and social housing providers must own the land on which the project is to be located.
- Consistent with the goal of keeping the microFIT Program focused on homeowners, farmers, schools and other community applicants, the Commercial FIT (CFIT) Program should not be launched.
- Following commercial operation, a portion of the FIT price should escalate with inflation over time (as measured by the Consumer Price Index (CPI)) on the following basis:
- 50 percent for bioenergy.
- 20 percent for wind and water.
- 0 percent for solar.
- Create a domestic content grid for concentrated solar PV to facilitate participation in the FIT Program.
- To promote efficient use of land and connection infrastructure, the OPA should consult with stakeholders to develop a rule regarding the appropriate maximum distance between a project site and its connection point.
- Where the OPA's screening process indicates that upgrades are required to connect a project, the OPA should offer contracts only to projects where the need for minor transmission upgrades is identified.
- Based on planned transmission projects and recommended changes to the FIT Program, do not proceed with the Economic Connection Test (ECT).
- Establish best practices and processes for local distribution companies (LDCs) and transmitters that will improve communication, transparency and coordination between the OPA, LDCs, transmitters and generators regarding the Connection Impact Assessment (CIA) process and the status of applications.
The full text of the Ontario government two-year FIT review report can be found at: http://www.energy.gov.on.ca/docs/en/FIT-Review-Report.pdf
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