Ontario Green Energy Shifts Into High Gear

Written By Michael R. Barrett, Leonard J. Griffiths, Adrienne Moore, Keith G. Sutherland

On September 24, 2009, the Ontario government announced the implementation of key steps to facilitate the development of renewable energy projects in Ontario.

While additional details remain to be released, the steps discussed below provide important pieces to the Ontario renewable power regulatory framework.

FIT Program Launch

North America's first comprehensive feed-in-tariff (FIT) program will launch October 1, 2009. There will be two phases to the application process. Applications received during the launch period, beginning October 1, 2009, and ending November 29, 2009, will be prioritized by the Ontario Power Authority (OPA) in the manner summarized below. Applications received after the launch period will be prioritized on a first-come, first-served basis.

Applications received during the launch period will be assigned a time stamp in relative priority to other applications received during the launch period. Priority will be determined in the following manner:

1. The FIT program draft contract includes the period within which the applicant's facility will have to achieve commercial operation (i.e., three years for solar and on-shore wind). Each application received during the launch period will indicate the number of days by which the applicant is willing to reduce that period, labelled COD Acceleration Days. Applicants with the highest number of COD Acceleration Days will receive the highest priority.
2. If one or more applications have the same number of COD Acceleration Days, priority will be given to the applicant that scores highest on a four-point criteria scale. The criteria are:
   1. is the generating facility renewable energy approval (REA) exempt (see below for REA discussion);
   2. does the project have fixed or guaranteed equipment pricing;
   3. evidence of prior management for similar facilities; and
   4. financial sufficiency of the generating facility's ownership.
    
3. If following (a) and (b), one or more applications have the same outcomes, priority will be given to the applicant with the earliest date that the project secured access rights to the project's location. Access rights may be achieved through real estate leasing or purchase of title.

Renewable Energy Approvals

A REA is now available and regulated by the Renewable Energy Approvals Regulation (Reg 359). A REA, which is an approval that is required for certain renewable energy generation facilities (REGF), provides an almost “one-window” approach that combines former requirements for municipal planning approvals, environmental assessments, certificates of approval, permits to take water and other provincial approvals. The Ministry of Natural Resources will continue to issue approvals for renewable energy projects under legislation that it enforces, but will do so in a manner that is coordinated with the REA.

Although Reg 359 is too complex and detailed to cover in its entirety here, the following are some of the highlights of the REA process:

1. A designated REGF (including a project such as a solar project that was not previously required to obtain an environmental approval) must obtain a REA.
2. A REGF that has obtained required approvals prior to September 24, 2009, will not be required to obtain a REA unless or until an amendment to the approval is required.
3. If no approval was required before September 24, 2009, and construction of the facility began prior to that date, a REA will not be required.
4. If a notice of completion (under an EA) for a REGF was issued before September 24, 2009, and the proponent has a power purchase agreement with the OPA, a REA will not be required (i.e., the project would continue on the approvals path it was on).
5. A REGF that obtained a power purchase agreement with the OPA, was not prohibited under municipal zoning and was not subject to Ontario's Environmental Assessment Act prior to September 24, 2009, is exempt from the requirement to obtain a REA.
6. Reg 359 exempts certain projects, such as wind facilities that would generate less than 3kW, rooftop and wall-mounted solar facilities, ground-mounted solar facilities generating less or equal to 10kW, and water power projects from the requirement to obtain a REA.
7. Requirements, including a REA, for binergy facilities that use biomass, biofuel or biogas material are described, and depend on location, feedstock and size.
8. The REA process requires assessments related to archaeological, heritage and natural resources, including water resources and areas of natural or provincial significance.
9. Reg 359 describes important and detailed consultation requirements, including with respect to First Nations. This includes how notice of and information related to an application for a REA, which is designated as a Class II proposal under the Environmental Bill of Rights (except for the appeal rights under Part II of the EBR, which do not apply to a REA), must be provided, including posting on Ontario's Environmental Registry for a 30-day public comment period.
10. Ontario has committed to completing its review of a REA application within six months of the date on which the notice of application is posted on the Registry.
11. Under the amendments made to the EPA, there are certain rights to appeal the refusal or issuance of a REA.
12. Reg 359 describes important setback requirements, including for specified wetlands, provincial parks, conservation reserves, natural features, and water bodies, which can potentially be addressed by environmental impact studies.
13. Wind facilities must, in short, meet a minimum setback of 550 meters from “noise receptors” (a defined term), with certain limited exceptions.
14. Bio-energy facilities have a minimum setback of 250 meters from “odour receptors”, which can be reduced to 125 meters.

Domestic Content

The FIT program has “Minimum Required Domestic Content Level” rules that require certain wind and solar energy project developers to ensure that a specified percentage of their facility's project costs come from Ontario goods and labour by the time the facility reaches commercial operation.

If a facility does not meet the Minimum Required Domestic Content Level, the project developer will be in default under its FIT contract.

The Minimum Required Domestic Content Levels are as follows:

• For wind projects with a capacity greater than 10kW: 25 percent for facilities with a contracted commercial operation date before January 1, 2012, increasing to 50 percent thereafter.
• For solar (PV) projects with a capacity greater than 10kW: 50 percent for facilities with a contracted commercial operation date before January 1, 2011, increasing to 60 percent thereafter.
• For solar (PV) projects with a capacity less than or equal to 10kW: 40 percent for facilities with a contracted commercial operation date before January 1, 2011, increasing to 60 percent thereafter.

Domestic Content Level is calculated in accordance with the draft FIT contract. For each type of REGF (i.e., either wind or solar) and capacity, the FIT contract identifies “Designated Activities” (for example, using wind turbine blades that have been cast in a mould in Ontario and have instrumentation that has been assembled in Ontario) and a corresponding “Qualifying Percentage” that a project developer can count towards its Domestic Content Level if it performs that Designated Activity in respect of its facility. The sum of all Qualifying Percentages allocated to a facility is its Domestic Content Level.

If a facility is made up of more than one of the components specified in a Designated Activity then the Designated Activity must have been performed in respect of all such components in the facility. For example, all turbine blades for a wind project would have to meet the requirements of the Designated Activity in order to rely on the Qualifying Percentage.

Next Steps

It is anticipated additional details regarding the FIT program and other regulatory initiatives under the Green Energy and Green Economy Act, 2009 will be forthcoming in the near term. The Bennett Jones Energy Group will be distributing timely updates as necessary.