The Green Energy and Green Economy Act, 2009: Answers to Frequently Asked Questions (FAQ) from the Ministry of Energy and Infrastructure.
Q: There are many provisions in the bill that seem to leave options open for later development. Is this an invitation for stakeholders and members of the public to bring forward suggestions as to how further mechanisms could be designed, and the practical ways the legislation could be used?
A: The GEA was designed to be enabling legislation, creating a framework under which detailed regulations and other measures can be developed later.
There will be a number of opportunities to provide input into the proposed legislation over the next while. The whole Act, as proposed, was posted on the Environmental Bill of Rights (EBR) website for a 30-day public comment period. The detailed provisions of the proposed GEA have been subject to legislative debate and are currently being reviewed by a committee of the legislature.
If the bill is passed, regulations will be developed to implement specific elements of the legislation. There will be opportunities for public input on the development of these regulations, including, in some instances, further postings on the EBR website. MEI, MOE and MNR are subject to the Environmental Bill of Rights and, as such, any proposed regulations that could affect the environment need to be posted to the Environmental Registry.
Q: Given that the OPA was making great progress already in contracting for large amounts of new renewable energy, do you see the Act as replacing the existing procurement processes, or adding to them?
A: The OPA is in the midst of developing a procurement process that would use a feed-in-tariff program (FIT) as the primary vehicle for renewable energy procurement. The OPA would lead the implementation of Ontario’s proposed FIT program.
The OPA will co-ordinate with other energy agencies like the OEB and the IESO. The OPA began consulting with renewable energy stakeholders on the design of the FIT program on March 17, 2009 and will conduct weekly sessions until May 5.
Q: Is the Ministry planning to track the costs and achievements of the Act? Are annual reports in the cards in terms of MW contracted, connected and operating?
A: Targets are about limits, and the GEA is not about limits. A feed-in-tariff model, combined with right to access to the grid and with certainty about regulation, is about creating certainty for developers. It sends a clear message: if you meet the FIT criteria, you get the contract. And, the approvals and reviews are streamlined and therefore should be a lot faster for renewable energy developers
Q: The setting of particular prices for FITs will inevitably be controversial. How do you anticipate ensuring that the FIT prices are fair and reasonable, yet sufficient to encourage development?
A: The proposed FIT prices were developed based on experience here in Ontario and in other jurisdictions. Prices differ based on project size and type of renewable energy technology. They are intended to cover capital, operating and maintenance costs, and allow for a reasonable rate of return on investment over, typically, a 20-year period. The OPA is currently consulting with renewable energy stakeholders on the proposed FIT program.
The diversified energy supply mix, along with a combination of regulated and market prices will help maintain stability in electricity pricing.
Q: The Renewable Energy Facilitator’s office is an exciting idea with the potential to co-ordinate many disparate arms of government that have impacts on the development of renewables. How wide-ranging and how powerful do you anticipate this office will be?
A: If the GEA is passed, a Renewable Energy Facilitation Office will be established, with the Renewable Energy Facilitator (REF) housed within the Ministry of Energy and Infrastructure. The objectives of the Office would be: to facilitate the development of renewable energy projects; to help proponents satisfy the requirements of the approval process and procedures; and to alert proponents to potential requirements imposed by the Government of Canada.
The REF would offer “one window” assistance to renewable energy to better understand the process of securing approvals for their projects. The Office will liaise with the Ministries of Environment and Natural Resources if requested by the developers. The Office will also provide information about consultation requirements. It is anticipated that this Office will be contacted by mostly renewable energy developers recently on the scene, but it will of course be available to all.
Q: How do you see the small scale cogeneration and district energy projects, generally those that were understood as eligible for CESOP, fitting into this new system?
A: The Feed in Tariff program is designed and intended for renewable energy projects. Of course, the development and implementation of other procurement processes such as the proposed Clean Energy Standard Offer Program (CESOP) would have to take into account the supply resulting from the FIT program.
Q: Mandating the connection of renewable generation to distribution and transmission system carries with it a host of questions about how to prioritize amongst alternative options for local system reinforcements, how to ensure distributors and transmitters have the human and financial resources necessary to respond in a timely way, and how to deal with the inevitable problem that some propositions for connection will be too expensive. It’s a big job that will require simultaneous work by a large number of professionals in several areas. How do you anticipate engaging the full range of people that will need to become involved in order for this aspect of the initiative to move forward quickly?
A: Much of the work mentioned in this question will be carried out by Hydro One, which is supportive of the Green Energy Act and aware of its role in planning and expanding their transmission and distribution systems to accommodate the goals of the Act. Further, we are working closely with Ontario’s local distribution companies to ensure the regulatory and approvals framework for long-term system planning is as smooth as possible. They are well aware of provincial goals for this program, and we will continue to work with them to ensure they are equipping themselves with the needed resources to meet these pending demands for services. They will be required to develop expansion plans to accommodate additional renewable resources.
Q: Do you anticipate creating effectively two connection queues, one for renewables and one for everything else?
A: The Green Energy Act is intended to reduce, if not eliminate, queues for renewable energy projects. Further, the OPA is currently consulting on the proposed rules for the FIT program, which includes a discussion of the OPA’s production line.
Q: There are several references to the smart grid in the legislation and it’s a very exciting idea to many people. However, there are so many aspects to potential smart grid development that some choices will have to be made. Is the government planning to give a leg up to all economically attractive forms of smart grid development, or only to those that directly facilitate energy efficiency and the connection of renewables?
A: The proposed Green Energy Act currently before the legislature demonstrates this government’s commitment to realizing a smart grid. We are moving toward a 21st century electricity grid that can better meet the changing nature of Ontario’s power consumption. A smarter grid is essential to maximizing the energy from Ontario’s abundant solar and wind resources and will further support the increasing role of conservation.
Furthermore, the 2009 Ontario budget announced $50 million to be spent over five years to enable the research, capital and demonstration projects necessary to develop a smart grid in Ontario. The funding in the budget will help foster new technologies, support renewable energy, and create a vehicle for “green collar” job creation in the province. Further details about this budget announcement will be released in the coming months.
Additionally, the IESO has coordinated the Smart Grid Forum that issued a report earlier this year and has established a consultation group. Both of these efforts will assist in developing a smart grid and incorporating renewables and distributed generation. Also, efforts are focused on optimizing the use of smart meters and providing for the widespread utilization of electric vehicle charging. The government expects significant benefits for customers in all of these areas.
Q: There are concerns about the potential for a local distributor to become a direct investor in a new project, be it renewable generation or energy efficiency. While such partnering can often yield great benefits, if there is prolonged uncertainty about whether the local distributor is a passive bystander, a potential partner with oneself or with a competitor, or a direct competitor with a new development, then valuable investment opportunities can be compromised. How does the current policy proposition implicit in Bill 150 expect to clarify the status of the distributor for investment purposes?
A: The Green Energy Act would allow Local Distribution Companies to invest directly in renewable energy projects and combined heat and power projects under 10 MW. It is expected that some of these investments by LDCs will be in partnership with community groups or private sector developers. This provision will greatly facilitate local participation in renewable energy investment and expand opportunities for renewable energy and district energy projects.
Q: What do you see as the unique qualities of small and community-based projects that make it important to encourage them in particular?
A: Examples of smaller generation projects would be residents installing rooftop solar panels on their own homes, or investing in community-based green power projects. These projects will help Ontarians to understand, address and lessen their energy needs. They will also be fighting climate change and making a difference in the economic texture of their communities.
These kinds of projects will probably have greater support in the community and will face less opposition compared to bigger projects. Smaller projects can also play a role in distributed generation to increase reliability of the system.
Q: What do you see as an appropriate balance between the volume of small and community based renewable energy projects and the total volume of what are usually much larger private commercial developments? Do you or the Ministry have any targets or objectives in terms of achieving a balance between the two scales and forms of ownership?
A: The feed-in tariff will be open to both large, transmission-connected projects and smaller-scale projects. No specific target or limit has been set for total capacity according to project size. Projects will be assessed according to program rules that the OPA is currently consulting on with various stakeholders.
Q: Are you concerned about the risk that community-owned projects may start out as locally owned and then later become integrated into the portfolios of larger national and international companies?
A: The proposed FIT pricing has incentives for community-based projects. To receive this pricing incentive, proponents would have to meet a certain criteria. Projects that do not meet that criteria would not be eligible for the price incentive. The pricing for community-based projects will be limited to projects 10 MW or less.
Q: Ontario has used a combination of regulatory and market-based approaches to the electricity sector. There is some debate about the appropriate balance between competition and regulation. In your view, are the two approaches, market development and regulation, likely to be mutually supportive or at odds with one another in the near future? Would you place a higher priority on one or the other of these two tracks, and if so why?
A: We expect that Ontario’s supply mix – with a solid endowment of legacy hydroelectric and emission-free nuclear power, as well as a mixture of regulated and market rates – will continue to help ensure fair prices for the province’s energy users.
Q: The amount of money that needs to be invested in the Ontario power sector is huge and most of the investment is likely to come from private sources. What approaches do you expect to rely upon to ensure that the investment climate is perceived as positive and that the opportunities are attractive enough to bring in low-cost capital to meet the requirements?
A: One of the underlying purposes of the GEA is to create a positive climate for investors. Nearly all the proposed measures, including establishing a FIT, reducing the regulatory burden and establishing the right to connect are intended to encourage investment and provide the certainty investors are looking for.
In the first three years, there will be at least $5 billion in public and ratepayer investments and expenditures in renewable energy and conservation. Additional investments are anticipated from private sector sources.
Q: The Supply Mix Directive expressed the government’s view on the appropriate level of renewables, nuclear, coal, transmission development and so on. Do you anticipate revisiting the mix at any point in the next two or three years, and if so, what kind of public input process do you envision using in such a process?
A: The OPA is continuing to develop the IPSP based on the Minister’s directive to the OPA and in light of the proposed GEA before the legislature, regarding increasing the amount of renewables in the system and the sharpening the focus on conservation. There is flexibility for the supply mix to be revisited as circumstances change.
Q: One of the most frequently heard comments in the power sector is the need for long-term stability and the minimization of uncertainty. What do you anticipate being able to do, to reinforce the sense of stability and the degree of certainty in the electricity sector?
A: The proposed Green Energy Act currently before the Legislature demonstrates this government’s commitment to long-term stability.
Furthermore, the 2009 Ontario budget announced $50 million to be spent over five years to enable the research, capital and demonstration projects necessary to develop the sector including fostering new technologies, support renewable energy, and create a vehicle for “green collar” job creation in the province.
Q: Are you concerned about the impact of the Global Adjustment on electricity rates and how that may affect the accuracy of price signals from the market? Can you anticipate taking steps over time that would reduce the Global Adjustment as a proportion of consumer prices?
A: No substantial changes are currently being considered to Ontario’s electricity market. We expect that Ontario’s supply mix – with a solid endowment of legacy hydroelectric, and emission-free nuclear power, as well as a mixture of regulated and market rates – will continue to help to ensure fair prices for the province’s energy users.