[authors: Jacob A. Sadikman, David Hanick, Elliot A. Smith and Micah Vernon]
On April 5, 2012, the Ontario Ministry of Energy issued a ministerial directive to the Ontario Power Authority (OPA) to continue the renewable energy Feed-in Tariff (FIT) and microFIT programs, subject to a number of amendments that reflect the results of the FIT Program Two-Year Review. On the same day, the OPA posted draft FIT Program Rules, form of contract, and standard definitions for stakeholder review and comment. The review and comment process ran until April 27, 2012 and the final versions of the documents were released on August 10, 2012. This Osler Update highlights the thematic changes to the FIT program that are reflected in the final versions of the revised FIT 2.0 program documents1.
New Prioritization for Future Contract Awards
A new priority “points” system for FIT Applications will be implemented with points awarded for, among other items:
projects with 15% or more of their equity held by Aboriginal communities, community co-ops, educational institutions or healthcare facilities;
projects with a prescribed form of support resolution from the applicable municipalities or applicable Aboriginal groups;
projects located on sites controlled by educational or healthcare facilities;
dispatchable projects (i.e. those other than wind and solar); and
projects whose applications were submitted on or before July 4th, 2011 (partial points are provided for projects whose application was submitted on or after July 5th, 2011, but prior to the start of the two year review).
Also of note, projects with at least 50% of their equity held by Aboriginal or community co-ops will be prioritized over all other projects in the upcoming round of contract offers.
If multiple projects other than those with at least 50% of their equity held by Aboriginal groups or community co-ops have the same number of prioritization points, their “time stamp” (which will be retained from the original application submission if the project is eligible for resubmission under the new rules) will be used as a tie-breaker.
Specified Application Periods
Rather than receiving applications and issuing contracts on an ongoing basis, the revised FIT Program will have specified, targeted “Application Periods” when applications for only certain types of projects will be solicited at the discretion of the OPA. According to the ministerial directive, the first group of contracts to be awarded under the revised FIT 2.0 will be limited to microFIT and small FIT projects (primarily rooftop solar projects). Upon the release of the final version of the revised FIT Rules, the OPA announced that it will allocate up to 200 MW of capacity for small FIT projects during the next round of FIT contract offers. The OPA expects to open the application window for small FIT projects on October 1, 2012 and allow it to run until November 30, 2012. Following this, the OPA intends to re-open the application window for Large FIT Projects. However, there are still industry consultations ongoing regarding how another round of Large FIT Projects will be administered and many details are still unavailable at this point.
Ground-mounted solar PV project proponents will have less flexibility in their choice of development sites as solar projects greater than 10 kW are not permitted to be located on Canada Land Inventory (CLI) Class 1, 2 or 3 Lands, Organic Lands, or Speciality Crop Areas, unless those lands qualify as exempt under the new FIT Rules. Examples of exemptions to the CLI Class 1, 2, and 3 soil restrictions include airport or aerodrome lands, closed landfills, federal military installation property, contaminated property, and CLI Class 3 land owned by a Municipality. Additionally, ground-mounted solar PV projects will not be permitted on lands zoned to permit residential use or on properties abutting such lands, with limited exception. Ground-mounted solar PV projects will also not be permitted on land zoned to permit commercial or industrial use if the project would constitute the principal use of that land. Furthermore, projects other than waterpower projects must be located less than 50 km from their proposed connection point.
Prices for wind, solar ground-mount and solar rooftop-generated power have been reduced significantly. The OPA will undertake an annual consultation process to determine FIT prices that will be applied to subsequent application windows. Applicants who are not awarded a FIT contract offer during a particular application window will be required to re-apply during a subsequent window and will likely be subject to new pricing. Another notable point regarding price reductions, which is particularly relevant for rooftop solar PV projects, is that the OPA will not aggregate the capacities of projects that were issued contracts in previous rounds in determining the applicable contract price for subsequent contract offers.
Several other notable developments have been addressed with the release of the final FIT Rules. This includes changes to the Ministry of the Environments Renewable Energy Approval process aimed at streamlining the program for applicants, including the availability of self-assessment in some cases. The OPA has also defined minimum land requirements for the various eligible technologies under the FIT program. Finally, the permitted construction period for rooftop solar has been reduced to 18 months; however, the new FIT rules permit the holder of a “portfolio of projects” – namely, a single applicant who has during the same application window received over 15MW of contract capacity – a construction period of 36 months.
These final rules and contract changes, together with the limited number of megawatts for renewable energy projects remaining in the Government of Ontario’s target for renewable energy in its Long-Term Energy Plan and the limited available connection capacity, appear to signal the twilight of new large scale renewable energy development opportunities in Ontario. With well over 2,400 FIT contracts issued under the original FIT program (excluding the microFIT Program), market participants are focusing on transactional opportunities for these previously contracted FIT projects, many of which are quickly approaching the completion of their permitting and the commencement of construction.
Osler’s in-depth experience in drafting the first version of the FIT program documents for the OPA prior to the launch of the FIT program in 2009, coupled with our extensive experience acting for FIT project developers and other stakeholders in all aspects of renewable energy project development, finance and acquisition and disposition, uniquely positions us to provide clarity and counsel to stakeholders on the challenges and opportunities in Ontario’s ever-evolving renewable energy landscape.
1 This report is focused solely on the FIT program and does not provide review on the microFIT program.