Canada: Clean Energy Standard Offer Program, The Second Phase Of The Combined Heat And Power Initiative And The Northern Ontario Water Power Initiative

Last Updated: July 24 2007
Article by Michael D. Shadbolt and Tracy D. Robillard

Most Read Contributor in Canada, September 2016

On June 14, 2007, Dwight Duncan, the Minister of Energy, announced the Clean Energy Standard Offer Program (the "CESOP") and the second phase of the Combined Heat and Power initiative. In addition, the Minister of Energy has issued a press release announcing the Northern Ontario Water Power Initiative to expand the Renewable Energy Standard Offer Program (the "RESOP") to include water power projects in Northern Ontario. All of these initiatives will be implemented by the Ontario Power Authority ("OPA").


The CESOP is an innovative Ontario initiative intended to facilitate and promote the development of small electricity generating projects using clean energy sources.


In November 2006, the OPA launched the RESOP which offers a standard pricing regime and simplified eligibility and contracting rules to small renewable energy projects. Eligible projects under the RESOP include only sources of renewable energy such as wind, solar and bio-fuel. The Ontario Government has set a target of 2,700 MW of renewable energy generation by 2010 and the RESOP is intended to assist in achieving this objective.

Natural gas-fired generation is not an eligible project under the RESOP. To complement the RESOP, the OPA has developed the CESOP which is a distinct standard offer program for "clean" fuels intended to promote greater use of clean sources of energy to generate electricity in Ontario.


Eligible projects must be located in Ontario, be no more than 10 MW in capacity, and be either a natural gas fuel-fired combined heat and power project, a by-product fuel-fired generation project or an under-utilized energy generation project (including thermal and mechanical). Project eligibility involves a number of additional policy and technical factors further detailed in the CESOP.

It is expected that typical generators under the CESOP will include commercial or industrial facilities such as greenhouses, hospitals, universities and industrial facilities that require both heat and power or which produce any source of under-utilized energy.

Contract Pricing and Term

The price paid under the CESOP contract is an incremental amount to be paid in addition to the Hourly Ontario Energy Price ("HOEP"), the spot market price paid to Ontario electricity generators. The CESOP will supplement the HOEP payment received by the generator with an additional payment of 8.10¢ per kWh during weekday prime peak periods and 4.32¢ per kWh during weekday mid peak periods and only during specified months and times. As currently proposed, the additional CESOP payment would is not available during the months of April, May, October and November meaning that generators would only be paid the HOEP for their output. Details regarding the contract pricing under the CESOP are further described in the CESOP rate schedule which is on the OPA website (

In contrast, the RESOP pays a base rate of 11¢ per kWh for all renewable sources except photovoltaic solar systems, which are eligible for a base rate of 42¢ per kWh. Under the RESOP contract, 20% of the base rate may be increased each year by changes in the Consumer Price Index.

In addition, the OPA will offer an optional spark spread hedge which covers a percentage of the generator's gas price risk for eligible natural gas fuel-fired combined heat and power projects in an effort to encourage project efficiency while providing operating margin protection.

The contract term for CESOP clean energy projects will be 20 years. Projects are required to achieve commercial operation within three years from the date that the contract is executed.

Other Program Elements

CESOP projects must connect to a distribution system at no more than 50 kV. The CESOP will require generators to work closely with their local electricity distribution company on a number of technical issues including connection requirements and metering configuration.

The OPA will not consider CESOP projects located in areas of constrained transmission. More information regarding constrained transmission areas is available on the OPA's website.

Next Steps and Timing

  • A working group comprised of the OPA and energy industry members will be formed immediately to resolve implementation details.
  • The OPA will host a webinar on June 27 at 10:00 am to provide interested parties with an opportunity to ask questions regarding the CESOP.
  • Draft CESOP Program Rules are excepted to be issued by September 2007 for stakeholder review.
  • The OPA currently anticipates that a draft CESOP Contract will be issued for review by October 2007.
  • Based on this schedule, the OPA expects that the CESOP will be launched in the of fall of 2007 and be implemented by the end of 2007.

Issues to be Clarified

Many issues regarding the CESOP Program Rules and CESOP Contract still have to be clarified. A key issue of interest to a number of industry participants will be whether existing generation facilities that do not currently have an OPA contract will be eligible to apply for a CESOP contract. Also, the OPA's proposal that generators not be paid the supplemental CESOP amount during the months of April, May, October and November and receive only the HOEP is expected to be a topic of discussion during the stakeholder process.


On June 15, 2005, the Minister of Energy directed the OPA to commence a procurement process for up to 1,000 MW of high efficiency Combined Heat and Power ("CHP") generation projects across Ontario, including industrial cogeneration and district energy projects. In October 2006, the OPA successfully awarded seven contracts as a result of this procurement process with a total capacity of 414 MW.

The OPA will launch a Request for Expressions of Interest (the "CHP II RFEI") as the next phase towards combined heat and power procurements for larger co-generation projects in Ontario. The launch of the CHP II RFEI is intended to assist the OPA in determining whether, and how, it will structure a second CHP procurement process in order to achieve some or all of the remaining 1,000 MW target capacity as directed by the Minister of Energy.


In an effort to encourage the development of clean hydro projects, the Minister of Energy has announced that it will be expanding the RESOP to include water power projects in Northern Ontario. This initiative is intended to reduce barriers to small hydro projects of 10 MW or less by creating an opportunity for them to connect to Ontario's transmission system. Eligible hydro projects will be offered 20 year contracts through the RESOP.

About BLG

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

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

In association with
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.