Ontario’s Feed-in Tariff Program: Two-Year Review Report

Ontario’s Feed-in Tariff Program: Two-Year Review Report

In a directive issued April 5, 2012, Chris Bentley, the Minister of Energy, confirmed that the government is committed to the implementation of the recommendations outlined in Ontario’s Feed-in Tariff Program, Two Year Review. The review was completed and issued on March 22, 2012, after a 6 month stoppage of energy procurement. The review began in the fall of 2011 and resulted in significant industry participation.

Fit-to-Date

The program, by all accounts, has been a great success in pushing Ontario towards cleaner energy. Since the FIT-Program was initiated, Ontario has managed to contract for enough clean energy to power 1.2 million homes. This translates into almost 2,000 small and large FIT Contracts generating a combined installed capacity of almost 4,600 MW of electricity. The program has also served to attract $20 billion in foreign investment and has helped create more than 20,000 jobs.

Goals and Targets

The overall goal of the FIT review was to ensure the long-term viability of the renewable energy program while creating jobs, reducing energy prices and giving communities a greater role in the process. The province’s Long-Term Energy Plan has established some of Ontario’s targets:

  • Procuring 10,700 MW of non-hydro renewable energy generation by 2015.
  • Procuring 9,000 MW of hydroelectric power by 2018

As a further sign of the government’s commitment to green energy, the Ontario Power Authority (OPA) has agreed to begin awarding 50 MW of microFIT and 200 MW of small-FIT projects as soon as possible.

Beginning at the end of 2013, the government will begin to review Ontario’s energy needs in order to determine whether higher renewable targets are needed.

Efficient Renewable Energy Approval Processes

The Government has directed that approval processes be streamlined in order to facilitate the transition of projects from the planning to the development stage. Different Ministries (Ministry of the Environment (MOE), the Ministry of Natural Resources (MNR) and the Ministry of Tourism, Culture and Sport (MTCS)) should cooperate to better administer the approval process and eliminate delays and the duplication of efforts. Such action would help to speed along the development of these projects and encourage job creation. Three approval streams are recommended:

  1. Exemption: microFIT projects should remain exempt from the approval process but subject to land-use restrictions.
  2. Self-Screening: The Environmental Activity and Sector Registry, the self-registry system, should be expanded to include small-scale solar (less than 500 kW) and bio-energy project to significantly reduce timeframes from 18-24 months to 2-3 months.
  3. Full Environmental Approvals including Renewable Energy Approval regulations: large projects should still be required to undergo this process. Despite this, lag times should be reduced by 4-5 months with the following changes:
  • Final comment letters provided to proponents by certain ministries (MTCS and MNR) should be a part of the application submission;
  • The time frame from the MNR review of the Endangered Species Act permit applications should be reduced; and
  • MTCS should create a streamlined process to review archaeological reports.

Applications

The new FIT Rules contemplate the evaluation of applications in four stages:

  1. Application Completeness Requirement – a pass/fail stage based on the application requirements in the rules.
  2. Eligibility Requirements – this is a pass/fail stage based on the application requirements in the rules.
  3. Prioritization and Timing – applications will be ranked by total number of priority points (outlined below) and when the application was submitted.
  4. Connection Availability and Procurement Limits – projects will be awarded contracts in accordance to their above ranking, their ability to pass the TAT and DAT with due consideration given to any applicable limits.

Under the new rules, FIT applications that were submitted before April 5, 2012 may be resubmitted if the details of the application remain the same. Specifically, the OPA requires the site on which the proposed project will be located, the applicant and applicant’s name to remain the same.

Pre-existing applications must be resubmitted during specific application periods. The OPA reserves the right to terminate any applications that are not resubmitted. Information or supporting evidence that was provided during the previous application process will be considered in the examination of the resubmitted application. All previous fees and security will be cancelled and returned. Applicants will be expected to pay a new application fee and provide new application security in the re-submittal process. The OPA has proposed new minimum fees, $500.00 for the application and $1,000.00 for security. Applications cannot be corrected and the OPA may terminate any contracts that fail to provide the requisite information.

i. New Restrictions

The OPA has now prohibited the assignment of applications and change of control of the applicant. Should this occur, the OPA may terminate the applicant and retain the application security.

Application to Other Projects

Projects that have a signed FIT Contract and have reached commercial operation will be governed by the terms of their contract and will not have to worry about the recent changes.

Projects that have a signed contract but have no completed construction will be subject to the terms of their contract. They may, however, be subject to some of the new rules concerning land use.

Projects that do not have a signed FIT Contract will have to resubmit in accordance to the aforementioned rules. They will, however, retain their timestamp.

Priority Points System and Ranking

Applications will be examined for 60 days and awarded priority points based on certain criteria. Applications must accrue a minimum number of 1 priority point to qualify for consideration. After that minimum threshold is achieved, the points serve to rank the application. Points are awarded based on Non-Project type and Project type criteria. In addition to the below, for a more detailed breakdown of the points system please see Appendix “A”.

Non-Project Type Priority Points

Points will be allocated to projects that exhibit the following criteria:

  • The receipt of Support Resolutions from Municipal Council and Aboriginal Groups;
  • Demonstration of “Project Readiness”, the actual or imminent ability to procure title or a lease for a project site;
  • Location of projects on a site to which they have been granted access by a university, school, college, hospital or long-term care facility; and
  • Use of waterpower, renewable biomass, landfill gas or biogas, as its renewable fuel or an on-farm biogas facility otherwise known as System Benefit.

Project Type Priority Points

Points will be allocated based on the following:

  • An Aboriginal equity participation of 15% for projects smaller than 100 MW and 10% for projects larger or equal to 100 MW. The OPA will, also, specifically allocate a minimum of 100 MW for projects with greater than or equal to 50 percent community and Aboriginal equity participation and a minimum of 50 MW for hydroelectric projects. The rationale behind this is to encourage Aboriginal participation in the electricity market.
  • Projects which are comprised of a Co-op (50 members for Large FIT and 35 for small FIR) which have a direct economic interest in the project. The members must be property owners, a defined term, which means any natural person, as of the date two years prior to the application, that are or were registered owner of real property in the municipality in which the project will reside.
  • Projects that in which Education of Health Institutions bear a direct economic interest (15%).

The report also suggests that price adders for community and aboriginal projects must be maintained and reflect the new participation and equity requirements (see Appendix “B” for further detail).

Any change that would result in the lowering of an economic interest, which contributed to the applicant’s acquisition of priority points, to a percentage lower than mandated by the OPA for the specific applicant type in the prioritization process is both prohibited and grounds for termination.

The change restrictions apply to rooftop solar projects differently. With respect to these types of projects, any change that would result in the economic interest of a project that acquired such priority points dropping below the level that facilitated the acquisition of those points prior to the fifth anniversary of its commercial operation date will be prohibited.

Reduction of Prices

When the FIT-program was launched, the tariff rates were pegged in consideration of many different factors. Recently, Ontario has been experiencing a reduction in costs. This has resulted in the completion of projects at a cheaper price. Controversially, the Minister of Energy decided to lower the tariff rates to reflect this phenomenon. These rates will now be set when the contract is offered instead of at the application stage. Generally, tariff reductions of 20 percent will apply for solar and approximately 15 percent for wind, with other generation methods maintaining their current price. See Appendix “C” for a more detailed breakdown of the rate changes. Price reviews will now occur annually.

Land Considerations

i. Agricultural Lands

The OPA has highlighted, as one of their goals, the protection of agricultural lands. As such, the OPA will not engage any contracts for ground-mounted solar with a generation of capacity of greater that 10 MW on specific soils used for Agriculture (Specifically, Class 1,2 or 3 soil, or any mixture of the three, organic/specialty crop soil.)

ii. Land Use Rules

The OPA has issued further land use restrictions. The OPA will not be allowed to enter into FIT or microFIT contracts for ground-mounted solar or wind generation facilities on land that is zoning for commercial or industrial use, even if it is not being used for the purpose. There are also restrictions imposed by the OPA with respect to the development of certain renewable energy facilities on land zoned for residential use or land adjacent to such land.

Transition and Distribution

Under the new FIT rules, the OPA and Ministry of Energy will create a limit regarding the distance that a project can be located from the connection point on the grid. Furthermore, FIT contracts will only be awarded to projects that require no transition upgrades.

Click here for the Transmission Availability Table.

 

Appendix "A":

Applicant Type Local Participation Level Points
Local Community with minimum 15% equity Project includes 50 or more property owners who live in the municipality where the project is located 3
Aboriginal with minimum 15% equity N/A 3
Public Schools, Colleges, Universities, Hospitals & Long-Term Care facilities with minimum 15% equity  or project host N/A 2
Other participants N/A 0
Additional points
Municipal Council Support Resolution 2
Aboriginal Community Support Resolution  2
Project Readiness 2
System Benefit (water and bioenergy) 1

 

 Appendix "B":

  Aboriginal Projects   Community Projects 
Participation Level (Equity)  > 50% > 15% ≤ 50% > 50% > 15% ≤ 50%
Price Adder (c/kWh) 1.5 0.75 1.0 0.5

 

Appendix "C":

Fuel Project Size Tranche Original FIT Price (c/kwh) New FIT Price (c/kwh) % Change from Original FIT Price
Solar Rooftop      

 

 

10 kW 80.2 54.9 -31.5%
>10 ≤ 100 kW 71.3 54.8 -23.1%
< 250 kW
>100 ≤ 500kW 63.5 53.9 -15.1%
> 250 ≤ 500 kW
>500 kW 53.9 48.7 -9.6%
Solar Groundmount ≤10 kW 64.2 44.5 -30.7%
>10 kW ≤ 500 kW 44.3 38.8 -12.4%
>500 kW≤5 MW 44.3 35.0 -21.0%
>5 MW 34.7 -21.7%
Wind All sizes 13.5 11.5 -14.8%
Water ≤ 10 MW 13.1 13.1 0.0%
>10 MV ≤ 50 MW 12.2 12.2 0.0%
Biomass ≤ 10 MW 13.8 13.8 0.0%
> 10 MW 13 13 0.0%
Biogas On Farm ≤ 100 kW 19.5 19.5 0.0%
100 kW ≤ 250 kW 18.5 18.5 0.0%
Biogas ≤ 500 kW 16 16 0.0%
> 500 ≤ 10 MW 14.7 14.7 0.0%
> 10 MW 10.4 10.4 0.0%
Landfill Gas ≤ 10 MW 11.1 11.1 0.0%
> 10 MW 10.3 10.3 0.0%