Canada: Feed-In Tariff Review: Ontario's New Renewable Energy Procurement Strategy

Last Updated: April 3 2012
Article by Kristyn Annis and Waleed Elgohary

Most Read Contributor in Canada, September 2018

Introduction

Ontario's Feed-in Tariff (FIT) Program was launched in 2009 to create new clean energy industries and jobs, boost economic activity and the development of renewable energy technology, and to improve air quality by phasing out coal-fired generation by 2014. The Ontario government launched its scheduled two-year review of the FIT Program in October 2011. The two-year review report was released on March 22, 2012 and the following provides a brief summary of the Two-Year Review Report (Report) and its recommendations. For access to this Report, click here.

The Report contains recommendations in six strategic areas:

A. Continue commitment to clean energy

Currently, Ontario is committed to bringing online 10,700 MW of non-hydro renewable energy generation by 2018 as well as 9,000 MW of hydro by 2030. The Report outlines how the Ontario government plans to achieve this commitment:

  1. Ontario should procure 10,700 MW of non-hydro renewable energy generation by 2015.
  2. The government should determine whether a higher renewables capacity target is warranted at the end of 2013.
  3. Up to 50 MW of the remaining FIT contract capacity should be reserved for hydroelectric projects.
  4. FIT prices should be reviewed annually each November and take effect on January 1st of the following year.

The bottom line: The Ontario government has made it clear that it continues to see the renewable energy sector as one that will provide continued growth, jobs and overall economic development. However, this commitment will become more strategically focussed, as evidenced by the additional recommendations in the FIT review. Interestingly, the Report indicates a slight shift in focus by emphasizing the contribution development in smart grid technology will make to the Ontario economy going forward.

B. Streamline processes and create jobs

The following Report recommendations are designed to help encourage job creation by making sure approvals align with the size and characteristics of a project, simplifying the process and increasing accountability.

1. The regulatory approval processes should be streamlined and unnecessary delays or duplication eliminated. Three approval streams are recommended:

i. Exemption: microFIT projects should remain exempt from REA regulations, but subject to enhanced land-use protection.

ii. Self-screening: MOE's self-screening registry system should be expanded to include eligible small-scale solar and bio-energy projects.

iii. Full environmental approvals: Large, complex projects should continue to require the full environmental approval process, including REA regulations.

2. The Ministry of Natural Resources should review and update its policy approach to renewable energy development on Crown land as soon as possible.

3. The commercial operation milestone for rooftop solar photovoltaic should be shortened from three years to 18 months.

4. 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.

The bottom line: Despite the best intentions of the various ministries involved in the regulatory approvals process for renewable energy projects, little if any advancement has been made in streamlining approvals. In fact, the Renewable Energy Approval (REA), introduced in 2009 and meant to function as an omnibus environmental approval, has proved detrimental to project development since a hold up in one area of the REA delays the entire process. Additionally, REAs that have made it through the initial application stages are now being appealed. It remains to be seen how the Environmental Review Tribunal and possibly, the Divisional Court, treat such appeals. The regulatory approvals process will likely continue to be a major development hurdle in the near future.

Regarding the shortening of the commercial operation milestone date for rooftop solar, the solar industry is categorically opposed.

C. Encourage greater community and Aboriginal participation

Renewable energy projects with local or Aboriginal community partnerships create economic opportunities and jobs for the community. The Report outlines how the Ontario government plans to achieve greater community and Aboriginal participation, including:

1. Introduce a system to prioritize FIT applications for small, capacity allocation exempt projects and large projects that awards points to projects with minimum equity participation from Aboriginal and local communities, public schools, colleges, universities, hospitals and long-term care facilities.

2. Maintain adders for community and Aboriginal projects with adjusted prices. The adders should align with new participation and equity requirements for the FIT Program.

3. Set aside a minimum of 10% of remaining FIT contract capacity for local community and Aboriginal projects with greater than 50% equity participation.

4. To maintain continued participation, strengthen limitations on assignment and change of control for priority participation projects, except rooftop solar.

5. Extend support funding to Aboriginal communities partnering with Green Energy Investment Agreement projects.

6. Dedicate support funding for projects that are already in the design/development and regulatory approvals phases.

The bottom line: There have been several successful projects in which Aboriginal communities have partnered with non-Aboriginal entities to develop renewable energy projects. The benefits on all sides are evident and the government sees the FIT Program as a way to spur economic development in Ontario's First Nations and Métis communities. As the land tenure system for development on reserves continues to evolve, this should be viewed as a good opportunity for both Aboriginal and non-Aboriginal communities alike to develop strategic partnerships and good projects.

D. Improve municipal engagement

There is room for municipalities to play a greater role in the development of projects. The Ontario government plans to improve municipal engagement by:

1. Introducing a point system for FIT applications that awards points to projects that:

i. have minimum equity participation from an Aboriginal or local community and projects with participation by public schools, colleges, universities, hospitals or long-term care facilities;

ii. have demonstrated support from the local municipalities or Aboriginal communities;

iii. are water or bio-energy project which have ancillary electricity system benefits;

iv. with respect to wind, ground-mount solar and bio-energy projects, have a firm lease, option to lease/purchase, or have 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. Furthermore, the technical guidelines in the Report recommend that the OPA should require a FIT project to earn a minimum of one point to be eligible for a FIT contract. The points allocation system is set out below:

2. Enhancing municipal engagement in the FIT Program:

i. For large FIT projects, require contract launch meetings with interested parties to facilitate early discussion, share information and define expectations.

ii. MOE should revise the municipal consultation form in the REA process to better reflect areas of municipal concern, in consultation with the Association of Municipalities of Ontario.

3. Clarify and strengthen project siting rules to ensure responsible project development:

i. Enhance 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. Expand protection to include organic and mixed soils and remove zoning exemptions.

ii. Prohibit solar ground-mount projects (of any size) in residential areas and lands bordering residential areas. Permit projects in commercial or industrial areas only when producing renewable energy is a secondary use.

The bottom line: The introduction of a points system to determine which projects go ahead should be viewed as the biggest change to the FIT Program and the change most likely to impact current FIT applications. The fact that applicants will need a minimum of one point to even participate is significant. The provincial government is, fairly or unfairly, squarely placing the responsibility of building project support within host communities on developers. The details and criteria as to what constitutes "support" will also be significant.

The government is also putting the brakes on ground mount solar by significantly restricting the areas for project development and lowering the FIT contract price for such projects (see below). This is likely purely a function of cost. The aggregate capacity of ground mount solar projects under the FIT Program, none of which are currently operational, is slated to grow to over 900 MW and will significantly impact electricity prices once these projects are completed. Nimbyism for solar projects, while growing, is not nearly as significant for wind power projects, which further indicates that the reduction in solar procurement is based on price impact.

The implementation of "contract launch meetings" may also cause serious issues for developers unless such meetings also function to crystallize siting of wind and solar power facilities.

E. Reduce prices to reflect lower costs

The Report recommends that the Ontario government reduce current FIT contract prices. Specific recommendations include:

  1. FIT Program prices for wind and solar technologies should be reduced by more than 20% for solar, depending on size, and approximately 15% for wind. Maintain current prices for water, biogas, biomass and landfill gas.
  2. Rather than setting a price at the time of project application for small and large FIT projects, price should be set when the contract is offered.

The bottom line: The Canadian Solar Industry Association (CanSIA) has already issued a press release saying that, while the price reductions are aggressive, it expects that its members will be able to work within the confines of the new pricing regime, with the exception is microFIT solar PV projects, which saw a price reduction of up to 31.5%. Setting aside for the moment domestic content rules (which remain unchanged), developers may be able to benefit from decreasing costs of modules.

The proposed 15% price cut to wind power facilities has come as a surprise to some. It remains to be seen whether the market will support wind power projects at 11.5 cents/kWh being developed in Ontario's somewhat onerous (and thereby expensive) regulatory regime.

F. Transmission and distribution

Going forward, the OPA will develop a rule regarding the appropriate maximum distance between a project site and its connection point. Furthermore, where the OPA's analysis 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.

The bottom line: Large wind projects will likely be most adversely affected by this change, since they require larger upgrades to the transmission system. Depending on the appropriate maximum distance between the project site and connection site determined by the OPA, other types of renewable projects may also be affected.

Next Steps

The revised FIT program will not affect projects that have achieved commercial operation. Those projects with a FIT contract in place but that have not achieved commercial operation will operate under the old FIT regime, however it is possible that some of the new land use restrictions will now apply to those projects as well. McCarthy Tétrault will provide updates as they become available. Proponents with a FIT application in the queue will have their applications and fees returned and are eligible to resubmit under the new rules and prices, while retaining their timestamp priority.

The government has stated in its press releases that it will move quickly to implement all of the recommendations contained in the Report. Industry associations such as CanSIA and the Canadian Wind Energy Association have each committed to continue to dialogue with the government on some of the recommendations that the associations have deemed unacceptable. The new FIT contract and FIT rules are expected shortly, and will be reviewed carefully by McCarthy Tétrault.

The Market Rule amendments being proposed by the Independent Electricity System Operator (IESO) for renewable generators must also be watched closely, since the dispatch procedures being proposed by the IESO will directly impact wind and solar generating facilities, with wind facilities expected to be the most adversely impacted. McCarthy Tétrault will continue to update clients as developments regarding FIT and dispatch procedures progress.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
McCarthy Tétrault LLP
Borden Ladner Gervais LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
McCarthy Tétrault LLP
Borden Ladner Gervais LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions