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Ontario Pushes Green Energy Implementation Details Still Missing from Sweeping Legislation
April, 2009
By Barbara Carss
Ontario’s new Green Energy Act is multi-faceted legislation to promote conservation, demand management and the economic viability of renewable energy sources, including the establishment of North America’s first feed-in tariff to set prices and simplify market entry for large and small-scale generators alike. Major elements of the legislation cover: conservation programs and targets; facilitation of the so-called smart grid and related demand-response, load-control technologies; improved transmission networks and priority grid connections for renewable energy; and streamlined approvals processes for development of renewable generation.
Many details and resulting implications for consumers will remain unclear until the Act’s Regulations are released. The Act primarily dictates responsibilities for public sector entities with few stipulations aimed directly at private sector building owners/operators. Nevertheless, it does open the door for increased transmission/distribution and commodity costs.
“This legislation is going to lead to substantial increases in power rates,” predicts Tom Adams, an energy policy analyst who was a member of the Provincial committee appointed in the 1990s to provide guidance for the design and development of Ontario’s envisioned competitive electricity market.
On the flipside, real estate industry players are optimistic the new Act could enhance opportunities to generate and sell renewable energy, and address general frustration with the bureaucracy surrounding energy efficiency incentive programs.
“We’re very excited about the Green Energy Act and look forward to supporting it in whatever way we can,” says Chuck Stradling, Executive Vice President of the Building Owners and Managers Association (BOMA) of Greater Toronto. “BOMA understands that commercial properties contribute to global warming and also recognizes the potential that exists to make the sector more ecologically sustainable.”
FEED-IN TARIFF
The proposed feed-in tariff is one of the Act’s most prominent elements. Consultation is now underway on a proposed schedule of prices for various types of renewable energy. These rates are also geared to the scale of production to provide a higher return for smaller community-based projects or, in the case of solar photovoltaic (PV) electricity, for small rooftop installations.
Proposed rates for solar PV range from 44.3 cents per kilowatt-hour (kWh) for ground-mounted installations producing upwards of 10 megawatts (MW) to 80.2 cents/kWh for rooftop arrays producing less than 10 kilowatts. Proposed rates for other types of renewable generation range from a low of 10.3 cents/kWh for landfill gas generation projects exceeding 5 MW to 19 cents/kWh for offshore wind generation.
This would replace Ontario’s previous two-pronged approach for procuring new renewable generation through occasional competitive Request for Proposal (RFP) processes for large-scale projects and the Renewable Energy Standard Offer Program (RESOP) for projects with a generating capacity of no greater than 10 MW. Proposed prices for the feed-in tariff exceed the rates offered through those two programs – and quite significantly in some cases.
Wind-powered generating facilities developed through earlier competitive RFPs currently produce electricity at contracted prices as low as 8 cents/kWh, whereas the proposed feed-in tariff rate is 13.5 cents/kWh for any proponent producing in excess of 10 MW. “This is a decision by government to move away from competitive procurement,” Adams says.
However, prospective generators maintain the proposed prices are largely in sync with what a RFP would yield in current market conditions, particularly given the private sector’s cautious approach to investment during an economic downturn. “I think they did the math pretty well,” says John Keating, Chief Executive Officer of Canadian Hydro Developers Inc., which owns and operates 20 power plants in Canada with a total capacity of 496 MW and has another 383 MW of generating capacity under construction.
To date, Canadian Hydro has undertaken two large-scale wind generating projects through Ontario’s competitive RFP process – the 199-MW Melancthon EcoPower Centre, which has been fully operational since the fall of 2008, and the 198-MW Wolfe Island wind farm, which is slated to begin production later this year – as well as two small-scale wind projects and a solar PV project through the RESOP.
Keating commends the feed-in tariff’s flexibility, which will allow businesses to develop new facilities on their own schedules rather than in response to periodic proposal calls, and other supporting measures in the Green Energy Act. “It’s groundbreaking legislation and it puts Ontario ahead of the pack in the Canada and in the United States,” he says.
Administrative flexibility and price stability could also lure more companies to generate and sell electricity as a sideline or additional source of revenue beyond their core business. Notably, the proposed feed-in tariff rates for rooftop solar PV generation are markedly higher than the 42 cents/kWh previously offered through the RESOP.
The feed-in tariff would pay 71.3 cents/kWh for rooftop installations generating 10 to 100 kW – an array that could typically fit onto the roof of a school, multi-unit residential building or office tower. The proposed rate for 100 to 500 kW of production – an installation that could fit on the roof of big box store, commercial strip mall or recreational/arena complex – is 63.5 cents/kWh.
GRID CONNECTIONS
Such urban real estate is located in close proximity to the demand load, offering logistical advantages that could partly offset the higher commodity prices the Province is promising for smaller producers. In contrast, delivering electricity produced at more remote large-scale facilities is likely to require a hefty investment in new infrastructure.
“You can put 500 to 1,000 megawatts of wind capacity in a region like the area around Goderich, for example, quite quickly, but having the transmission to carry 1,000 MW of capacity is not a trivial exercise,” observes Adams, whose most recent research focuses on the output and efficiency of four large-scale wind generation facilities in Ontario.
“It’s probably more logistically easy with wind because the windy regions in Ontario are largely in and around the Great Lakes regions,” Keating says. “The hydroelectric potential is in northern Ontario and the power grid is pretty thin up there. It will take money and time to the develop that.”
The Green Energy Act ensures that renewable energy generating facilities will go to the front of the queue for connection services. Transmitters and distributors will be obliged to give renewable energy generating facilities priority access to the grid – albeit along with the opportunity to increase rates to recover required costs for this access. Concurrently, the Act instructs the Ontario Energy Board (OEB) to consider the advancement of renewable energy when making decisions about the construction, expansion or reinforcement of electricity transmission and distributions lines and interconnections.
Generators will have to meet all applicable regulatory and technical standards and make a written request to the designated transmitter or local distribution company (LDC) in the jurisdiction before new facilities can be connected into the delivery systems. Some LDCs are now advocating for a model checklist to guide generators through the necessary steps to ensure new generating facilities do not compromise the operating integrity of the electricity grid.
The promise of streamlined administration appeals to prospective proponents with past experience in developing renewable generation projects. For example, the City of Mississauga currently has a 20-year contract through the RESOP for electricity produced at a 25-kilowatt solar installation on the roof of a prominent municipal arena complex.
“It was a big bureaucratic procedure in terms of how it would be tied into the grid,” recalls Rajan Balchandani, the Manager of Energy Management for the City of Mississauga. “If it was made easier, there would be more people interested in putting renewable energy into the grid.”
MINISTERIAL PREROGATIVE
The Act will also streamline the planning and environmental approvals processes for development of renewable generation, and override some of the arguments that opponents have used in the past as grounds to challenge proposed development. It includes amendments to several other Ontario statutes including the Planning Act, the Conservation Authorities Act and the Niagara Escarpment and Planning Act.
New measures in the Green Energy Act will exempt renewable energy generation facilities from various municipal planning and zoning by-laws and orders, and limit Conservation Authorities’ ability to refuse permission for renewable generation facilities except in relation to controlling pollution, flooding, erosion and/or dynamic beaches. “Aesthetics no longer cuts it in terms of a valid argument,” Keating says.
Many of the Green Energy Act’s yet-to-be clarified details and consequences relate to extensive new powers bestowed upon the Minister of Energy of Infrastructure, who is given authority in many places in the legislation to make future directives to carry out the Act’s mandate. This also appears to take precedence over the mandates of other provincial ministries.
“If you look at electricity legislation since 1998, each successive generation of legislation gives more authority to the Minister and that’s something we continue to see in this legislation. The Minister is getting unprecedented power here,” Adams asserts. “It is a steamroller going off in several different directions and there is sweeping power for future expansion by way of regulation.”
For more information about the Green Energy Act, see the Ontario government web site at www.mei.gov.on.ca/english/energy/gea.
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