Canada: Ontario’s New Green Energy Act Set To Energize The Province With Renewable Energy

Copyright 2009, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Energy/Environmental Law/CleanTech, February 2009

The much anticipated and heavily promoted Green Energy Act bill, was introduced to the Ontario legislature this week on February 23, 2009. The ambitious proposal, Bill 150 (the Bill), will create a new Green Energy Act and amend more than 15 existing statutes. The Bill proposes to create wide-reaching policies to establish an attractive investment climate for green power developers, provide certainty for the market, and make Ontario a leader in renewable energy and energy conservation in North America.

Unfortunately, the Bill leaves many open questions about how the government will implement its various proposals. The details are left for future regulations not yet drafted and, until such regulations are developed, the when and how of implementation will remain uncertain. Conceptually, though, the Bill suggests a very different future for renewable energy projects and energy conservation in Ontario.

According to the Honourable George Smitherman, Minister of Energy and Infrastructure, the Bill is based on two equally important thrusts:

1. making it easier to develop renewable energy projects; and

2. creating a culture of conservation where each of us uses less energy per capita each year.

The Ontario government believes that not only will the Bill create a welcome climate for investment, it will also be the seed to develop a projected 50,000 jobs in the next three years alone. The Minister of Energy believes that many of these new jobs will come from planned upgrades to the electricity transmission and distribution system which will then allow more renewable projects – primarily wind and solar – to be connected to the grid.

The changes which the Ontario Energy Board recently made to the Distribution System Code to make it easier for small generators to connect to the electricity grid (see our February 2009 Blakes Bulletin on Energy/CleanTech: Ontario Eases Rules for Connecting Small Generators to the Grid) foreshadowed proposals in the Bill to establish a "right to connect" to the electricity grid for renewable projects, and proposals to facilitate the modernization of the electricity distribution system to a "smart grid" system. Proposed amendments to the Electricity Act will allow the province to make regulations governing the implementation of the smart grid including in respect of the time-frame for the development of the smart grid, and assigning roles and responsibilities for its development.

One of the key provisions of the Bill is a proposal to direct the Ontario Power Authority to develop "a feed-in tariff program", a European-inspired model that would establish a government procurement process for energy from renewable sources, providing standard program rules, standard contracts and standard pricing for different classes of generation facilities differentiated by energy source or fuel type, generator capacity and the manner by which the generation facility is used, deployed, installed or located. The feed-in tariff program is expected to entice renewable energy proponents by providing a guaranteed market, and price and long-term revenue commitments under a streamlined process without incurring the costs associated with a formal RFP process. The revenue certainty, flexibility and improved efficiency of the process under the feed-in program is expected to facilitate and expedite the development and financing of many new renewable energy projects.

Evidently Ontario is looking to build on the success of the Renewable Energy Standard Offer Program (RESOP), launched two years ago, which aided smaller renewable energy projects by guaranteeing a price for renewable energy. Applications to the RESOP program exceeded government expectations, and the province has not been processing new applications (except for very small projects) since May 2008. The new feed-in tariff program to be developed may end up replacing the RESOP program.

The Bill also aims to improve certainty and efficiency in the approvals process. Changes to the Environmental Protection Act (EPA) will transfer renewable energy projects from existing environmental approval and permitting requirements, and instead these projects will be required to obtain a new comprehensive "renewable energy approval" from the Ministry of the Environment. It remains to be seen whether this new approval is processed more quickly than the existing array of individual air, waste and water taking approvals. However, the Minister has committed the government to do so.

Concurrently, broad sweeping amendments to the Planning Act will exempt renewable energy generation facilities and renewable energy projects from various by-law and permit requirements. The combined changes to the EPA and the Planning Act appear to upload the planning process with respect to renewable energy projects from municipalities to the Ministry of the Environment. For example, the plan appears to be for the Ministry of the Environment to issue standardized requirements (in regulations that have yet to be issued) for the location of wind turbines that will apply province-wide to replace the current situation where location is governed by individual municipal zoning requirements.

On the energy conservation front, section 2 of the new Green Energy Act will require all home owners and other real property owners to undertake mandatory conservation and energy efficiency practices, by providing certain information relating to energy consumption and efficiency, prior to selling or leasing real property. The information that will have to be provided in these energy audits will be set out in regulations to be released in the future.

The Bill will also elevate the importance of energy efficiency in the Building Code, and enhance energy efficiency standards for household appliances.

In addition, proposed changes to the Ontario Energy Board Act will require that board to have as an objective the promotion of conservation, facilitation of investment to a smart grid, and promotion of use and generation of electricity from renewable sources when utilizing its decision-making power in respect to the province's electricity system and also to be guided by the objective of promoting energy conservation and energy efficiency when carrying out its responsibilities in relation to the province's natural gas system.

Though the McGuinty government has stated its commitment to green energy, the proposal is not without controversy. Some claim the Bill is driven by the desire to eliminate the environmental approvals process for projects that would not otherwise go forward. Conversely, the proposal has support from many environmentalists because of the increase in availability and use of renewable energy, and the promotion of reducing consumption of energy in the province.

As the proposed Green Energy Act makes its way through the machinery of the legislature, it will be interesting to watch for opposition. If the Bill is enacted, of greater interest will be the numerous regulations that will flow from the new legislation. It is the regulations to come and how they are implemented by industry that will ultimately determine if the new Green Energy Act lives up to the government's pre-release hype and ends up being just what Ontario needs to make life green in the realm of energy, environment and economics.

The text of the proposed Bill is available at .

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.

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