Ontario's Green Energy Feed-in Tariff Program Re-Launched and Revised 

publication 

March 2012

Energy Law Bulletin

After a six month freeze in renewable energy procurement, the Ontario Government's mandated biennial review of the terms and structure of its flagship Feed-in Tariff Program ("FIT") is finally complete.

On March 22, 2012, Ontario Energy Minister Chris Bentley announced that the FIT Program would be relaunched, with changes to reflect input received from experts, stakeholders and the public over the course of the review.

timing

New FIT Contracts under the revised program terms are expected to be issued starting in 60 days for Capacity Allocation Exempt projects, or 120 days for Capacity Allocation Required projects.

changes

Among the most significant announcements with respect to the program:

  • Points System: FIT Applications will be ranked and given priority not only by time of submission, but also by a points system. Points will be awarded for local and aboriginal community equity participation (3 pts), public education and health institution participation - including as host (2 pts), resolutions of support from local municipal councils or local aboriginal councils (2 pts), project readiness (2 pts), and for being a waterpower or bioenergy project which has ancillary system benefits (1 pt). Each Application must earn at least one point to be eligible for a FIT Contract at all. "Project Readiness" means that that project can demonstrate firm site control of sufficient land or roof space, either by land ownership, a firm lease or option to lease, or a firm option to purchase.
     
  • Price: The prices being offered for wind and solar projects under new 20-year power purchase agreements from the Ontario Power Authority ("OPA") will be between 10% and 30% lower than under power purchase agreements issued prior to the review. There will be no change to prices offered for hydro, biomass, biogas, or landfill gas projects. The changes in price are as follows:  

Project Type

Size (AC)

Old Price (¢/kWh)

New Price (¢/kWh)

Price reduction

Wind onshore

Any size

13.5

11.5

14.8 %

Solar PV Rooftop

≤ 10 kW

80.2

54.9

31.5 %

Solar PV Rooftop

> 10 kW ≤ 100 kW

71.3

54.8

23.1 %

Solar PV Rooftop

> 100 KW ≤ 250 kW

71.3

53.9

24.5 %

Solar PV Rooftop

> 250 kW ≤500 kW

63.5

53.9

15.1 %

Solar PV Rooftop

> 500 kW

53.9

48.7

9.6%

Solar PV Ground Mounted

≤ 10 kW

64.2

44.5

30.7 %

Solar PV Ground Mounted

> 10 kW ≤ 500 kW

44.3

38.8

12.4 %

Solar PV Ground Mounted

> 500 kW ≤ 5 MW

44.3

35.0

21.0 %

Solar PV Ground Mounted

> 5 MW

44.3

34.7

21.7 %

Biomass

≤ 10 MW

13.8

13.8

0 %

Biomass

> 10 MW

13.0

13.0

0 %

Biogas On-Farm

≤ 100 kW

19.5

19.5

0 %

Biogas On-Farm

> 100 kW ≤ 250 kW

18.5

18.5

0 %

Biogas

≤ 500 kW

16.0

16.0

0 %

Biogas

> 500 kW ≤ 10 MW

14.7

14.7

0 %

Biogas

> 10 MW

10.4

10.4

0 %

Waterpower

≤ 10 MW

13.1

13.1

0 %

Waterpower

> 10 MW ≤ 50 MW

12.2

12.2

0 %

Landfill gas

≤ 10 MW

11.1

11.1

0 %

Landfill gas

> 10 MW

10.3

10.3

0 %

  • Price Escalation: A portion of the FIT price under each FIT Contract will automatically increase in conjunction with the Consumer Price Index, starting after commercial operation, as follows:

    • for bionenegy projects, 50% of the price adjusted for CPI
    • for wind and waterpower projects, 20% of the price adjusted for CPI
    • for solar projects, no part of the price adjusted for CPI
    • Annual Reviews: Going forward, price reviews will be conducted annually instead of every two years. The next review will occur this fall and will result in revised prices being published in November 2012 and coming into effect January 1, 2013. The review which will occur after that, in November 2013, will take into account supply and demand forecasts and consider whether continued renewables procurement is warranted.

    • Land Use: Planning Act amendments introduced in 2009 which effectively eliminated a municipal government's right to determine if and where renewable energy projects could be located will remain in place, but priority for FIT Contract awards will be given to projects that can demonstrate local municipal council support. The Renewable Energy Approvals process will be revised to facilitate input of municipal concerns, and a launch meeting will now be required which will include the developer, municipality, LDC and government. All prime agricultural land (Class 1, 2 and 3) will now be excluded from the FIT Program without exception, as will lands with organic and mixed soils. Ground-mount solar projects of any size will be prohibited in and adjacent to residential areas. Projects will only be permitted in commercial and industrial areas if power production is a secondary use.

    • Application Process: Under the new Points System, FIT Applications will be reviewed by the OPA for completeness, eligibility and points/time priority for a period of 60 days. Once ranked, connection capacity and availability will be assessed (through the old TAT and DAT process, but not ECT) for a further 60 day period. FIT Contracts will be offered to successful applicants, who will then have 20 days to accept.

    • Commercial Operation Deadline: Rooftop solar projects will now have only 18 months to achieve commercial operation, down from three years.

    • Regulatory Streamlining: Biomass and biogas projects, as well as some smaller ground-mount solar projects (<500 kW) will be eligible to use the Environmental Activity and Sector Registry's self-screening process instead of being subject to the full Renewable Energy Approval process. For larger projects, the Renewable Energy Approval process will be revised so that reviews are conducted more quickly and the timing of some government responses does not hold up other parts of the process.

    • Quotas for Community and Aboriginal Participation: Going forward, at least 10% of FIT Contract awards will be reserved for projects which have at least 50% Community or Aboriginal Participation. Priority for FIT Contract awards will also be given under the new Points System to projects that have at least 15% aboriginal participation, 15% local community participation (which must be spread among 50 or more local property owners), are hosted by or 15% owned by a public education or health care institution, or have a resolution of support from the local aboriginal community or municipal council. The minimum participation rate to be eligible for price adders (excluding rooftop solar projects) will now be 15%: 0.75¢/kWh for Aboriginal Participation, and 0.5 ¢/kWh for Community Participation – and double those amounts for participation rates over 50%.

    • Priority for Waterpower and Bioenergy Projects: Up to 50 MW of capacity to issue new FIT Contract awards will be reserved for hydroelectric projects. Under the new Points System, all waterpower and bionenergy projects with ancillary system benefits are automatically awarded one point.

    • Transmission: The OPA will develop and implement a new rule setting a maximum allowable distance between a project site and its connection point. FIT Contracts will only be offered to projects that require no transmission upgrades or minor transmission upgrades. The OPA will no longer run the Economic Connection Test to determine if major transmission upgrades are warranted in order to connect a project or group of projects. If transmission is not currently available with only minor upgrades, the project will not be eligible for a FIT Contract.

    • Voluntary Withdrawal: Within a certain window of time, current FIT Contract holders will be allowed to cancel their contracts without forfeiting their security deposits.

    • No CFIT or MREP: The proposed Commercial Feed-In Tariff Program, which would have permitted energy companies to aggregate and participate in the microFIT Program, will not proceed. MicroFIT will continue to be reserved for homeowners, farmers, schools and other community-based applicants. The proposed Municipal Renewable Energy Program has also been shelved.

    • Domestic Content: Local content requirements embedded in the FIT Contract which require wind and solar projects to be developed using 50% (for wind) or 60% (for solar) Ontario-sourced components and labour have not changed, despite international legal challenges to the regime under trade agreements.

    • Termination Rights: A requirement to seek "Notice to Proceed" from the OPA prior to commencing construction – at which time the OPA has the option to terminate the FIT Contract upon reimbursement of certain limited expenses – has also remained in place, despite the Government's earlier offer, available on a temporary basis just prior to the October 6, 2011 provincial election, to waive the OPA's termination rights. That offer has not been extended and new projects will once again be subject to termination by the OPA prior to "Notice to Proceed" being granted.

    • Transition: Although the FIT Rules currently suggest that Applicants who submitted their applications before the new prices were announced should be eligible for the old higher prices, existing Applications will be returned to Applicants together with their application and security fees and urged to resubmit under the new FIT Program rules and pricing. It appears that there will be an initial application period during which resubmitted applications will retain their original timestamp, however, so priority in the Application queue will not be lost other than for lack of points under the new Points System.

    application to projects at various stages

    Projects which have reached commercial operation pursuant to an executed FIT Contract will not be affected by these changes, and will continue to operate under the terms of the existing FIT Contract.

    Projects which are subject to previously executed FIT Contracts but have not yet completed construction will continue to operate under the existing FIT Contract terms, but completion of construction may be subject to the changes to the Land Use powers described above, which could present an obstacle for development-stage or construction-stage wind and ground-mount solar projects in particular.

    Projects for which a FIT Application has been submitted but no FIT Contract has been offered or executed will have their Applications and fees returned and be eligible to resubmit under the new rules and prices, while retaining their timestamp priority.

    New FIT Applications will obviously be subject to all of the new rules, contracts, provisions and prices.

    review background

    The FIT Program was first introduced by the OPA in October 2009, pursuant to a directive issued by the Minister of Energy under the Green Energy and Green Economy Act, 2009. That Directive ordered the OPA to review the FIT Program, including pricing and support programs, at least once every two years and to report to the Minister with results and suggestions for improvement. On October 31, 2011, the OPA announced the beginning of its first such review of the FIT Program. The OPA and the Ministry received input and comments through nearly 2,900 online survey responses, 1700 Webinar participants, 200 written submissions and more than 80 meetings throughout November and December 2011, and spent the first three months of 2012 analyzing those comments and crafting appropriate revisions to the program.

    about McMillan LLP

    McMillan LLP is one of Canada's largest business law firms. Our Electricity Law practice is particularly focused on renewable energy projects, and are industry leaders in the solar PV sector, having developed leases, easements, EPC Contracts, O&M Contracts, Acquisition Agreements, Development Agreement, Investment Agreements or Broker Services Agreements for over 200 MW of solar projects. We also have extensive experience with wind projects (involved in over 1,000 MW of operating and development stage projects) as well as biomass, biogas and hydro-electric projects.

    by Mike Richmond

    a cautionary note

    The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

    © McMillan LLP 2012