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. This review and comment process will run until April 27, 2012 and the final versions of the documents are expected to be made available by May 27, 2012. This Osler Update highlights the thematic changes to the FIT program that are reflected in the drafts 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 municipality or applicable Aboriginal groups;
projects located on sites controlled by educational or healthcare facilities; and
dispatchable projects (i.e. those other than wind and solar).
If projects 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). Remaining connection capacity is to be allocated to larger FIT projects, with a minimum of 100 MW of connection capacity allocated to projects with at least 50% of their equity held by Aboriginal or community co-ops, and 50 MW of connection capacity set aside for hydroelectric projects.
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 Class 1, 2 or 3 Lands, Organic Lands, or Speciality Crop Areas, nor can they be located on any property that contains such lands (even if the project’s equipment is not located on the affected areas). 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. Furthermore, all projects will be subject to a requirement that the project site cannot be more than a prescribed distance (yet to be determined in the draft FIT Rules) from the 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, and prices will be valid as of the date of offer of the FIT contract, rather than as of the time of the project’s FIT application. This suggests that prices could change with little or no notice to a proponent before they receive an offer of a FIT contract.
Many key details of the province’s renewable energy program are still outstanding, including:
changes to the Ministry of the Environment’s Renewable Energy Approval process;
the transition of applicant projects towards re-submitting applications;
the application of the new point system; and
the finalization of key provisions in the new draft form of FIT contract, such as the provisions relating to the curtailment of output by wind and solar facilities.
These draft 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.
If you have any questions about these changes or other aspects of the FIT or microFIT programs, please contact Jake Sadikman, David Hanick, Elliot Smith or Micah Vernon.
1 This report is focused solely on the FIT program and does not provide review on the microFIT program.