By Roma Ihnatowycz
It was with much anticipation that Ontario’s Renewable Energy Approvals Regulation (REA) was introduced in the province in late 2009, as part of a suite of initiatives associated with the province’s Green Energy Act. As if to underline its commitment to the process, a series of amendments were rolled out by the Ministry of the Environment in January of this year.
The primary reason behind the revamped approach to renewable energy approvals was to improve clarity on application requirements. The REA process also aims to streamline an earlier approvals process that many stakeholders had considered cumbersome, prone to unnecessary delays and far too vulnerable to the vagaries of local municipalities.
The changes, outlined in O. Reg. 359/09 under the Environment Protection Act, were both groundbreaking and ambitious. While the new approvals process called for more requirements, studies and consultations at the front-end of the undertaking, it also promised an impressive six-month service guarantee (for turn-around) once completed applications were submitted to the Ministry of the Environment (MOE).
It sounded ideal. But is it?
Now that the dust has settled, and industry players have familiarized themselves with the new playing field, the reality is looking far from idyllic. As with any significant change, there have been a number of growing pains associated with the new system. To date, few REA applications have actually been granted approval, and many have been sent back for further work.
Responding to growing concern about developers being able to meet their commercial operation deadlines, the Ontario Power Authority stepped in with an offer to push back deadlines. In February, the OPA stated it would amend the contracts of all Feed-in Tariff (FIT) counterparties that had not yet reached commercial operation so suppliers could extend their milestone date for commercial operation by up to one year.
“It’s been much more of a learning curve than people had anticipated,” says Sarah Powell, a partner in the environmental and energy practices of law firm Davies Ward Phillips & Vineberg LLP. “[The new process] is based on a huge, complex array of studies. You’ve got complex environmental and archaeological and natural heritage reports that you may not have had [to do] a year prior. Trying to balance the timing with a very prescribed consultation process and the mandatory commercial operation date is pretty tough. So for the last year, it has been a real struggle for developers to meet that process.”
Many of Powell’s clients – which include hydro, wind and solar power producers – have had applications rejected. In one transaction, a developer had three out of six applications deemed incomplete. Yet others are juggling to meet some of the new study requirements – such as archeological studies that may require field plowing — with changing seasons and completion timelines for public meetings. Holdups of days, if not months, are often the result, and similar scenarios are being played out with renewable energy developers all across the province.
The high ratio of rejected applications, combined with a complex mix of new requirements, has resulted in a growing sense of frustration in significant parts of the power development industry. Powell too admits that the process is “not working as well as everybody had expected or hoped for.”
High expectations
However, Powell, together with other experts, is quick to point out that an overly optimistic attitude, combined with an erroneous notion of a ‘simplified’ application process, may have unduly contributed to some of the discontent currently being felt in the industry. REA is less about simplifying and more about streamlining, stresses Powell, and it has indeed resulted in a more prescribed and transparent process with respect to application requirements for all developers. This, notes Powell, is a good thing.
Paul Manning, a certified specialist in environmental law, shares this view, suggesting that the benefits to developers of streamlining the approvals process outweigh the frustrations of the new regime. In particular, he says, REA has removed some of the vexing zoning issues and other stumbling blocks faced by proponents resulting from variations in the level of municipal involvement in the earlier approvals process. The requirements are now much more consistent from municipality to municipality.
“The streamlined renewable energy freed the industry from the need to comply with a multiplicity of often overlapping approvals and processes, not least the challenges at Municipal level,” says Manning, who runs his own Toronto-based legal firm, Manning Environmental Law. “Although some aspects of those approvals have been drawn into the REA process, it is a single process with a single approval authority and a largely consistent set of rules.”
It is also worth noting, adds Manning, that REA addresses a challenge shared by jurisdictions around the world: “In one sense, you should leave planning to the lowest level of government, and in another sense there are some projects that transcend local and individual interests; where the provincial or national good outweighs local interest. Whether or not you share the government’s priorities, that is really at the heart of what this legislation is about. Its broad-brush approach is designed to overcome that problem.”
This broad-brush approach, however, is precisely what some renewable energy suppliers, such as those in the biogas industry, question. According to Jennifer Green, executive coordinator of the Agri-energy Producers’ Association of Ontario (APAO), many producers and suppliers in the biogas sector are looking to build small plants, 500 kW or less, located on Ontario farms processing animal manure. REA’s long list of requirements, meanwhile, appear more suited to large-scale energy developers, she says.
Contrary to what one might expect, most small biogas projects use more than 25 per cent off-farm material in their waste mix. This means they fall within the purview of the REA legislation, whereas plants bringing in less than this proportion of in off-farm material remain governed by the Nutrient Management Act.
Green believes that most of the smaller projects will require more than 25 per cent off-farm material for financial and other reasons. “The NMA is a much more streamlined approval process. Yet, one percentage point more of off-farm material can push the Nutrient Management Act off the table. As a result, two farms building identical biogas systems with the exception of 1% additional off-farm material will be subjected to vastly different permitting regimes or opt not to develop at all.”
Small operations generally mean fewer financial resources and this in turn makes the labyrinth of studies, approvals and consultations required under REA a daunting economic challenge. Projects running in the range of $2.5 to $5 million for a 500 kW system are feeling a major pinch.
“Getting approvals and engaging specialist consultants is becoming more and more significant, as are the time delays in obtaining the approvals,” says Green. “A large percentage of fees for the whole cost of the project is now being eaten up by time, consulting fees, lack of clarity on requirements, delays and the integration of more consultants to get approval from the various ministries. It is a much lengthier process, and one that must be coordinated with other timelines of the renewable process including infrastructure upgrades and contract requirements. The percentage allocated to approvals is more significant now than it was before the introduction of REA if one proposes to exceed the 25% off farm tip point.”
Green would like to see the MOE examine technologies on a more individual basis. This would include a pre-consultation process to identify the merit of completing a particular study when, for example, its area of concern might have already been successfully addressed by the Nutrient Management Act.
Green would also welcome the addition of a biogas energy expert to the Ministry’s team. “There is a necessity to have someone from within the parameters of policymaking and process who understands this technology. A coordinated approach between ministries and industry stakeholders is recommended to bring a level of appreciation and knowledge of anaerobic digestion to the Ministry.”
To date, no applications for biogas facilities have been granted an REA approval, and many stakeholders in the sector have resorted to taking a ‘wait and see’ approach. Others are starting operation with less than 25 per cent off-farm materials – which they can do under the Nutrient Management Act.
All in all, says Green, biogas development in the province is being hindered by the challenges posed by the REA process. “The increase in cost and overlap with the NMA has had – and will continue to have – a significant impact on the sector. It is a substantial limitation of our development,” she says.
Increased costs
It is not only biogas applicants that are facing increased costs – this is something that is being felt across the board. Most costs are tied to the nuts and bolts of preparing an application, retaining outside help and expertise, delays along the way, and then, at the end of it all, sometimes being told your application doesn’t meet all the requirements and needs further work. For many stakeholders who have already experienced this roadblock, the six-month service guarantee has become a contentious promise, at best.
It is this ‘front-end’ workload – complex, onerous and somewhat subject to interpretation – that appears to be the most unwelcome aspect of the new REA process. It has even left some energy producers looking back fondly to a pre-REA system: while unwieldy and fragmented, it was familiar and operated in a manner that allowed applicants to make their way through the steps bit by bit, amending their submission as they went along. With the new system, this is no longer possible.
“The REA process simplifies things by creating one permit, one window, but what has been created is a need for a developer to do a lot of the coordination (themselves) that earlier may have come about naturally from the permitting process,” comments Christine Cinnamon, Environmental Manager with TransCanada. “Some developers have had to adjust to this.”
As well, adds Cinnamon, “You have to go through the REA process before you can be certain of your FIT contractual status. Previously you might have had some discussions with agencies to make sure that you understood the requirements and gain comfort with that prior to entering into a contract.”
To add to the challenge, agencies and ministries are experiencing their own learning curve, often with newly hired staff to handle the additional workloads, according to Cinnamon.
While it may have gotten off to a rough start, there are those who feel that the stumbling blocks experienced thus far are just part and parcel to implementing such a colossal regulatory change. They feel there are better times ahead as everyone goes through the process and develops a stronger understanding of what is required. As environmental lawyer Paul Manning puts it, “The burden is on the industry to get their house in order, ducks in a row, before they apply.”
The positive side
According to Justin Rangooni, Ontario Policy Manager and Legal Counsel at the Canadian Wind Energy Association, the streamlined process has proved a positive development for wind energy developers, notwithstanding the difficult growing pains. “We weren’t too surprised that the implementation had some bumps, but we’re hoping to iron those out with the relevant ministries as more projects are approved,” says Rangooni.
These “bumps” include both timeline requirements and the unforeseen degree of detail that is required for confirmation letters from the Ministry of National Resources. This is especially challenging given the ongoing changes to an operation’s design and layout that typically arise during the planning phase.
“Developers are finding that a bit onerous,” says Rangooni. “They are focused on detailed engineering and that’s hard because they want all this information now, but the developers are finding that they could still be changing turbine locations and layouts. So it’s hard for them to say definitely what it’s going to look like.”
Having the opportunity to provide a more continuous flow of information would certainly be appreciated, notes Rangooni, and would allow applicants to provide all the information to the required ministries once they are ready to solidify their project. This is one of many issues that the wind power industry is still working out with the regulatory ministries as they make their concerns known.
Rangooni has been pleased with the cooperation offered by the MOE to date. He feels that Ministry staff were open-minded and listened to many of CanWEA’s key concerns, particularly in the early stages when staff were first developing their approach to setbacks.
And while there are wind energy producers who have experienced the disappointment of a rejected application, Rangooni expects the system to gain in ease, speed and approvals once everyone develops a better grasp of the requirements. In many cases, applications were sent back because of inadequate consultations at the municipal level, for instance, something that applicants will be able to rectify next time around.
As well, wind power developers are anxiously awaiting the outcome of the appeals filed to the Environmental Review Tribunal by opponents of Suncor’s Kent Breeze Wind Power Project. The Tribunal is moving rapidly with these appeals and a decision is expected by the time this issue goes to print. An overwhelmingly positive and unambiguous outcome will in all likelihood speed up the process for submissions for wind power projects in the future. “The hope is that it will be a clear decision so that if appealed in the future, other producers can use it as a precedent,” says Rangooni.
The appeal of certainty
Capital Power Corporation, which has submitted an application for its Port Dover and Nanticoke projects, welcomes the certainty the REA process offers to renewable energy producers, which was missing earlier. Delays tied to the uncertainty surrounding setback requirements in certain regions of the province, for example, have been successfully eliminated.
“In the past, a project could be stalled if turbine setbacks had not yet been established for an area,” says Sarah Palmer, Senior Environmental Advisor, Capital Power Corporation. “Historically setbacks varied throughout the province and the basis for some was unclear. Today we have a clear understanding of the setbacks and can move forward on those projects that had stalled.”
The devil is in the details, as they say, and while newer, more detailed requirements for compiling an application are proving challenging, they ultimately represent a welcome change for developers such as Capital Power if they help deliver a positive outcome in the end. More work upfront is the price developers appear to be paying for certainty down the road.
“The new REA system has significantly improved the surety we have when developing a project layout and allows for a more thorough submission for an approval,” says Palmer. “A high level of engineering detail is required going into the field investigation phase of the REA process. While this does change the way we develop a project, it creates a more detailed submission for approval and consultation which should help with acceptance of projects.”
Developers, continues Palmer, clearly need to re-evaluate how they design and develop a project, significantly moving up the timeline for detailed engineering. For many, this takes some getting used to. “These types of changes in mindset take some time to implement and required significant changes to our process of developing a project,” notes Palmer.
Moving forward, Palmer’s biggest concern is what seems to be lengthening review periods for some parts of the process – brought on partly by the high volumes of projects seeking review. She is especially concerned about the impact this may have on timelines, including those introduced recently that allow for a six-month crystallization of a noise compliant layout.
As well, she adds, all stakeholders are still adapting to the new REA regulation, a regulation that will likely continue to evolve with the learning experiences of renewable energy producers. Palmer, for one, has been very pleased with the MOE’s receptiveness to her company’s concerns.
The next few years will ultimately determine just how beneficial the REA process will be to developers, the ministries and the people of Ontario. While it may have gotten off to a rocky start, so too have other systems of regulations that proved their worth in the end. Hopefully, REA will join this list.
One-on-one with Doris Dumais
The MOE’s Doris Dumais, who heads the Ministry’s Approvals Program, spoke to IPPSO FACTO about the benefits of the new REA regulation, the progress of applications, and what to expect moving forward.
How many REA applications have been submitted to date and how many have been approved?
As of April 6, 2011, 45 REA applications have been received by the Ministry, involving 32 renewable energy projects:
• 21 applications have passed preliminary screening, and of these 21
• Three have been approved;
• Eleven are being reviewed for completeness; and
• Seven have been deemed “complete” to meet the information requirements set out in O.Reg. 359/09, and have been or are in the process of being posted on the EBR, and are under technical review.
• Twenty-four of the 45 REA applications received have been returned to or withdrawn by proponents. The returned applications were deemed incomplete. Of the 24 returned applications, 13 had not yet resubmitted to the MOE, as of April 6.
Are you learning from your experiences in granting approvals and improving your system internally as you do? If so, how?
Every application received is a learning opportunity for the REA team. We have sharpened our application screening skills, gained insights on the variety of renewable energy projects being proposed and realized that no two applications are the same.
It becomes very critical for proponents to talk to the REA team sooner in their application preparation process rather than later, to ensure that they fully understand all of the requirements. Given that greater than 50 per cent of the applications are being returned as incomplete, I think this is an indicator of the need for proponents to ensure they understand the REA requirements and comply with them.
Since the introduction of the program, the Ministry has developed a number of checklists and bulletins to support applicants and others wishing to understand the REA requirements. I would suggest that these tools be reviewed by applicants as part of their application preparation process. This will ensure complete applications (are) being submitted and application reviews being undertaken sooner.
In terms of internal process improvements, we have recognized the need to expedite the turnaround time in the development of First Nations consultation lists and we have reduced that turnaround time to five weeks for these lists. Other ways in which we’ve improved our processes are to focus our review efforts first on projects with OPA contracts, then work on projects with no OPA contracts in place. This ensures that projects with upcoming commercial operating dates proceed as expeditiously as possible through the review process.
I would remind you that having an OPA contract and submitting a REA application does not guarantee an approval. The Ministry reviews and carefully assesses every application to ensure that all requirements are met. We have taken a cautious science-based approach in setting our standards and we use the same approach in determining whether or not to approve a project.
What have been the biggest challenges in getting the REA process up and running and how are you addressing these challenges?
One of the biggest challenges is ensuring that the public, municipalities, First Nations, NGOs and proponents understand the requirements of the REA regulation. Folks are interpreting the regulation differently and we are focusing our efforts on ensuring a common consistent interpretation of the regulation. The Ministry’s technical bulletins and the website are but two means for the public, proponents and others to learn about the REA program. Ministry staff have also been out speaking about the REA program to municipalities and others to ensure that the REA program requirements are understood.
What have been some notable positive developments in the overall approval process since the introduction of REA?
In issuing REAs, the Ministry has streamlined and updated its approvals process to make it more coordinated and comprehensive while still providing rigorous protection of the natural environment and public health and safety. Historically, proponents would have to apply for numerous approvals, which were assessed independently and sometimes at different phases in the planning of the project. Today the project is assessed in a fulsome manner thereby ensuring that impacts of the project are addressed and mitigated.
This new approach and updated rules reflect changes that we feel offer benefits to project applicants and local communities, including greater certainty regarding setbacks. This translates into a common, consistent approach being used to approve renewable energy projects.
With the established standards, all proponents understand that wind turbines need to be a minimum of 550 metres away from non-participating receptors. Solar projects are not allowed on Class 1 and Class 2 agricultural lands. Bioenergy projects must be built a minimum of 120 metres from surface water bodies. Noise limits at any of these projects cannot exceed 40 dbA. These rules ensure that all facilities being built are held to the same standards.
The Province has also set up a one-stop, one-window office – the Renewable Energy Facilitation Office – to help developers and residents obtain information on renewable energy projects and the approvals process.
There has been some concern about the complexity (and resulting confusion) in the front-end preparation required, causing delays. How have you addressed this concern in particular?
The approvals process that we have put in place is needed to ensure proposed projects are studied and planned in a way that is protective of the environment and communities. We want to make sure this level of protection is in place and that’s why we’ve taken a cautious approach to establishing setback distances and other requirements.
That being said, we’ve also done a lot of work to coordinate our approvals process to make it easier for developers and residents to navigate and understand.
While the work required of developers – environmental studies, modeling work, assessment of possible impacts, consultation and construction and decommissioning plans – needs to be completed upfront before an application is submitted for our review, we encourage all developers to meet with us during the planning stages (in a pre-submission meeting). We can help clarify requirements, provide additional information and outline consultation requirements that may be needed with other ministries and the federal government. These pre-meetings are highly recommended.
Some renewable energy producers have questioned the applicability of some requirements to their particular industry. Moving forward, will there be flexibility in addressing issues such as these?
Our requirements are established using a science-based approach. We understand that some companies may be challenged with our current approach; however, it is critical for the Ministry to ensure that the environment is protected. That is our first priority when assessing projects of this nature. Any company with challenges should contact the Ministry to discuss their specific concerns and how these can be addressed.
What is your level of confidence in being able to turn around, within the promised six-month period, the bulk of the applications that will come your way in next two years?
I have no doubt that the Ministry will meet its six-month service guarantee for renewable energy projects, but understand that the size and complexity of a project also has a role to play in how long it takes to approve a project. Applicants, when doing their planning, should account for the six months and not underestimate the review time in their planning process so as to ensure that they do not run out of time in terms of meeting their commercial operating date commitments. We will work to expedite the reviews but not at the expense of limiting or undermining our review responsibilities.
Anything else our readers should be aware of in terms of future developments tied to REA?
The REA program is a new program and with the delivery of any new program, the program will evolve and change over time. As with any other program change introduced by the Ministry, we will consult with the public, the regulated community and other stakeholders on any proposed changes to the program.
Doris Dumais is the Director, Approvals Program, Environmental Assessment & Approvals Branch, at the Ontario Ministry of the Environment.
Waterpower takes its own route for approvals
Waterpower is one of the few sectors that does not submit project proposals through the Renewable Energy Approvals (REA) process.
“Water power is fundamentally different,” points out Paul Norris, President of the Ontario Waterpower Association.
Unlike other forms of renewable energy, hydroelectricity is not modular and operates on a much longer timeline – normally five years to achieve commercial production, rather than two to three. As well, the federal government has jurisdiction over navigation and fish.
Equally important is that when the REA system was first introduced in 2009, the waterpower industry, together with provincial and federal agencies, had just spent six years developing a Class Environmental Assessment specifically tailored to waterpower.
“While the objectives of the Renewable Energy Approvals process are laudable, from our perspective, these objectives were something that we had been working on for a long period of time,” says Norris.
Nonetheless, waterpower industry representatives studied the REA process to determine if it would work for the waterpower industry. “We sat down at the table and worked very hard through the REA process to see if there were improvements that we could realize beyond what we had done,” says Norris. “We came to the conclusion that our Class Environmental Assessment was as good or likely better (for our industry) than what could be done through REA.”
In commenting on REA, Norris says: “What was intuitively attractive about the system was its intention to integrate multiple requirements. That is of potential benefit to any proponent who has to deal with dozens of permits and approvals without that overarching coordination. The tenets with respect to getting permits within a reasonable time frame after you have satisfied the process is also attractive. Those objectives made a lot of sense to us.”
“However what didn’t make sense to us,” continues Norris, “was to front-end load the detailed engineering and site specific requirements that are unique to hydroelectricity. That didn’t work for us. Because that’s not the way that projects in our sector get built.”