By Linda Bertoldi, Borden Ladner Gervais, LLP
The Green Energy and Green Economy Act, 2009 (“Bill 150”) proposes a bold new framework implementing a broad series of coordinated actions designed to make it easier to bring renewable energy projects to life and to make Ontario a green energy leader. From the perspective of the developers of large scale projects, Bill 150 is a positive step forward.
In Bill 150, the Province has adopted various policy initiatives to stimulate new generation investment in Ontario, all designed to reduce or alleviate generator revenue uncertainty, project risk, and associated financing concerns with a goal of ensuring that new generation projects get built. The proposed feed-in tariff program (“FIT”) offers developers an attractive promise of a guaranteed price, buyer, and long-term revenue stream without having to incur the costs involved with participating in a competitive RFP process.
Experience in Germany and Spain has shown that market access for new renewable generation can be enhanced by FITs, as project timing is not constrained by periodic scheduled solicitations. In addition, the draft FIT rules provide some promising improvements over RESOP, including the elimination of capacity limits (except for ground mounted solar and hydro) and the introduction of new anti-gaming provisions, the most significant of which is the requirement that generators must post a sizeable security deposit at the time they apply under the FIT. In part because of the extended timeline between application and contract execution, the FIT must be designed to ensure that for large scale projects the program will provide a reasonable rate of return while recognizing the realities of volatile input prices (such as turbine costs), interest rates, foreign exchange and labour costs.
As the details of the FIT emerge, the OPA will need to work through the inevitable obstacles associated with implementing a policy initiative of this scope. Some of the challenges include achieving an appropriate balance to ensure transparency in the FIT pricing and economic assessment while maintaining the confidentiality of proponents new generation applications. In addition, policy makers should ensure that by providing meaningful incentives under the FIT for new biomass generation facilities this avoids the unintended consequence of driving up the prices of the already limited biomass supply in the province. New biomass fired generation should be on a level playing field with existing biomass facilities.
Bill 150 takes an impressive step to reduce costly delays for approvals and to provide greater certainty for developers by streamlining the requirements to obtain multiple permits, licences and approvals relating to provincial environmental issues, by reducing duplication and providing a “one-stop-shop” for renewable energy approvals with a 6-month service guarantee. Coupled with other amendments which limit the effect of zoning and demolition control requirements, renewable generators can look forward to getting their projects online faster, with fewer regulatory hurdles and less of an opportunity for NIMBY opposition.
There may be some technical issues to be resolved as the Bill moves through the legislative process. For example, zoning bylaws may continue to restrict a proponent’s ability to collect the information needed to apply under the FIT or for a renewable energy approval. In addition, wind proponents must often erect temporary masts to collect wind data in evaluating a potential wind farm site. The mast itself will not qualify for a renewable energy approval; and will therefore continue to be subject to zoning restrictions without some minor changes to the Bill.
One of the most significant developments under Bill 150 from a generator’s perspective is the formal recognition that transmission and distribution system constraints are a significant obstacle preventing new renewable generation from coming online. This problem has long been an issue for generators, and Bill 150 presents a policy framework designed to address this issue head on.
One of the primary policy objectives of Bill 150 is to promote new, small-scale community generation projects. Under Bill 150 it will fall primarily on LDCs to facilitate and connect new renewable generation projects under 10 MW. This aspect of the Bill will create opportunities for the private sector to partner with municipalities and LDCs to help them undertake a new business activity. At the same time, private sector developers can focus on supplying the bulk of Ontario’s electricity demand through projects of a more commercially significant scale.
What is clear is that under Bill 150 the Ministry takes on an increasingly important role in managing overall energy matters in the Province of Ontario. The Ministry’s leadership role emphasizes the need for APPrO to act as an advocate to ensure that needs and concerns of power producers are fully understood by the Ministry so that APPrO members can play a continuing constructive role in attaining the objectives of the Green Energy Act.
With thanks to John Vellone.