On May 14, 2009, Bill 150 (the Green Energy and Green Economy Act, 2009) received Third Reading in the Ontario legislature and received royal assent. The Act constitutes the second significant attempt by the McGuinty government to make Ontario a national and international leader in the development of renewable energy through the introduction of a new power procurement program. Moreover, the Act will have a huge impact on all aspects of electricity production and consumption in Ontario, and in the process, Ontario will become a guinea pig for jurisdictions seeking to adapt European-style procurement programs for use in North America. Although Energy Minister Smitherman and the government have expended significant energy in bringing the Act and its associated programs to fruition, for various reasons the results of this initiative may be disappointing.
Feed-in tariff program
The Act introduces a new feed-in tariff concept to Ontario’s electricity system through the requirement that the Ontario Power Authority (OPA) develop such a program. Based on feed-in tariff programs in Europe, the program will allow for sale of renewable energy at pre-set rates without the necessity of proponents seeking inclusion within a government RFP. Rates will vary based on energy source or fuel type, with further rate differentiations serving as incentives for the development of smaller capacity and community projects.
Based on the information available to date, it’s likely that properly designed, constructed and financed new projects will be able to take advantage of the feed-in tariff without having to dedicate the time and monetary resources necessary to compete with other projects within the framework of an RFP. This program will provide an opportunity for many entrepreneurs to bring forward projects that would not otherwise have been feasible, which will create opportunities in turn for equipment suppliers, financing and other services.
Unfortunately, the structure of the program appears very likely to provide less than optimal results for the investment committed. As the tariff rates for some of the classes of renewable energy, in particular small solar, are significantly higher than for others, the new regime runs the risk of overbuilding the highest cost options. This issue is clearly a product of the competing goals of the government to encourage the development of a green economy and to replace and expand the electricity generation infrastructure in the province. As well, incentives built into the Act and the feed-in tariff program to spur community groups, First Nations, co-operatives and other smaller economic actors to develop projects will result in less efficient results from the new program. Proposed domestic content requirements may raise the cost of developing projects and lead to reduced project development.
Uploading municipal responsibilities
The Act amends many existing statutes with the goal of reducing for renewable energy projects the restrictions that currently exist when undertaking any industrial project, such as the building of a power plant. The intention is to create a permitting system in which a single renewable energy approval will address all otherwise applicable permit requirements. Unfortunately, there is no indication that the burden of documentation and other information to be submitted will be reduced, and certain additional approvals will still be required in particular circumstances (for example, for projects located on Crown land). The new provisions act to “upload” decision-making from municipalities to the province, effectively expropriating municipal power to determine location of these projects. With the stated objective of facilitating the construction of new renewable energy facilities and creating consistent treatment of such projects across the province, these changes will in effect centralize the process of obtaining approvals for new facilities.
Unfortunately, this streamlining exercise is accompanied by unhelpful procedures for appeals of the required provincial approval. Because the new “renewable energy approval” may be appealed to Ontario’s Environmental Review Tribunal (ERT), the focus of NIMBY forces in Ontario will move from the Ontario Municipal Board — the appeal entity for changes to zoning by-laws and other municipal decisions — to the ERT. Disregarding the cost and time associated with preparations necessary for a hearing at the ERT, the Act eliminates any formal leave to appeal process and allows any person resident in Ontario to require a hearing at the ERT with respect to a renewable energy approval.
While the onus of proof rests with the party alleging that there is “serious harm to human health” or “serious and irreversible harm to plant life, animal life or the natural environment”, project proponents will need to prepare for a full hearing on the facts, notwithstanding that there may be little or no substance to the claim.
Ontario Energy Board’s role
Prior to passage of the Act, the objective of the Ontario Energy Board (OEB) was essentially to operate an efficient system. The Act adds to the OEB mandate by requiring it it to promote the conservation of electricity, to facilitate the implementation of a smart grid and to promote the use and generation of electricity from renewable energy sources.
The additional mandate items will dramatically change the OEB’s role in terms of economic regulation. It’s far from clear how the new mandate items can be integrated with the old and there will likely be a period of adjustment and confusion.
Other notable elements of the Act include:
The new Renewable Energy Facilitation Office will have broad powers to assist or encourage the development of qualifying renewable energy projects. The usefulness of this office will depend on the staffing and other resources provided to it.
The Act mandates the development of a “smart grid” in the province. The concept behind the smart grid system is to adjust or rebuild the system in order to minimize transmission inefficiencies. While the Act sets forth this objective, implementation is to be spelled out in the regulations.
The Act introduces for the first time a number of mechanics directed at improving conservation throughout Ontario. As one example, energy audits will be required on the sale of residential premises. The concept of “conservation and demand management” (CDM) targets is introduced for distributors of electricity and CDM targets can be specified as conditions of licences held by the distributors.
Overall, the changes initiated by the passage of the Act comprise an interesting experiment in facilitating and incentivizing renewable energy development, energy conservation and the growth of a green economy in Ontario. Despite its faults, the Act is likely to improve the speed at which renewable energy projects are developed in Ontario, and other North American jurisdictions will keep a close watch.
Aaron Atcheson is Partner and Chair of the National CleanTech Practice Group with Miller Thomson LLP in London, Ontario. Contact Aaron at firstname.lastname@example.org(Written with the assistance of David Rounthwaite and Andrew Roman.)
“For various reasons the results of this initiative may be disappointing.”