Ontario government releases feed-in tariff program review

March 23, 2012

The Province released its Two-Year Review Report summarizing the results of its FIT Program review.  The Report proposed the following material revisions to the FIT Program.

Commitment to 10,700 MW Original Target - The Long-Term Energy Plan target of procuring 10,700 MW of non-hydro renewable energy generation by 2015 will be maintained. At the end of 2013, the government will explore whether a higher target is required.

Prioritizing Projects - The time stamps of applications in the FIT Production Line will no longer solely establish the priority of contract award.   The Report proposes the introduction of a point system into the application review process to give priority to certain applicants

Points will be awarded to applications as follows:

  • 3 points for a minimum of 15% equity coming from either Aboriginal groups or the local community (being at least 50 or more property owners in the municipality where the project is located).
  • 2 points for a minimum of 15% equity coming from public schools, colleges, universities, hospitals or long-term care facilities or if such facilities host the project.
  • 2 points if a project has a resolution evidencing municipal council and/or aboriginal community support.
  • 2 points to wind, solar ground-mount or bioenergy projects with a firm lease, firm option to lease or purchase or ownership of the subject land sufficient for the project or in the case of solar rooftop applicants that do not own the host building, with a firm lease or option to lease.
  • 1 point will be granted to FIT projects with an ancillary system benefit (i.e. water or bioenergy).

Also, at least ten percent of the remaining capacity in the 10,700 MW target for 2015 will be reserved for local and Aboriginal projects with greater than fifty percent equity participation and up to 50 MW will be reserved for hydroelectric projects.

Ground-mount Solar - Solar ground-mount projects over 10 kW will be prohibited on prime agricultural land that contain class 1, 2, and 3 soils. All zoning exemptions that permitted projects to be located on lands zoned to permit non-agricultural uses as of October 1, 2009 will be removed. Ground-mount solar projects will be permitted in commercial or industrial uses where energy generation is a secondary use; however, regardless of size, will not be permitted in or bordering residential areas.

Rooftop Solar PV - The milestone date for commercial operation for rooftop solar PV will be shortened from three years following the Contract Date to eighteen months following the Contract Date, which does not affect the eligibility of these projects under the Program; however, it may affect project feasibility for existing applicants.

Interconnection – The OPA is to consult with stakeholders to develop a rule regarding the maximum distance between a project site and its connection point. Further, the Report dictates that where the OPA’s screening process indicates that upgrades are required to connect a project, the OPA will only offer contracts where the need for minor transmission upgrades are identified.

Transition Process – Because some existing applications will be rendered ineligible by the changes, there will be a transition process for all pre-existing FIT applications (which will also be available generally for microFIT applications submitted on or after September 1, 2011) that will allow applications to transition to eligibility requirements under the new rules. A revised application will retain its original timestamp.

Changes to the Price Schedule – Prices for renewable energy projects have been reduced by more than 20 per cent in the case of solar and fifteen percent for wind. The revised price schedule follows:

FIT Program chart

The Province will review the Price Schedule each year. It is expected the revised Price Schedule will be published each November, commencing on November 2012, with pricing to take effect on January 1st of the following year. The contract price will be the price in effect at the time a contract award is made, not the time that the application was submitted.

As with the existing FIT Program, a portion of the FIT contract price will escalate for inflation following commercial operation. The portion of the FIT contract price that escalates will remain 20% for wind and waterpower and 0% for solar; however, the Report has increased the escalation percentage from 20% to 50% for bioenergy.

In addition to prioritizing Aboriginal and community projects through the application process (as described above), these projects will still be eligible for price adders. Unlike the existing FIT Program, however, the price adders will be available for all project sizes and technologies (other than rooftop solar) and will based on the level of equity participation (namely, between 15% and 50% or above 50%).

Renewable Energy Approval (REA) - The Report recommends streamlining the REA process by expanding self-screening for small-scale solar (less than 500 kW) and bio-energy projects and shortening the timelines for agency review. MicroFIT solar projects will remain exempt. For the remaining projects, two streams of REA approvals are recommended.

Reestablishing Municipal Engagement - Proponents and project developers of large FIT projects will be required to meet with the municipality in a contract launch meeting. Further, the municipal consultation form for the REA will be revised in consultation with the Association of Municipalities of Ontario and the Ministry of Energy to better reflect municipal concerns.

The Report made several other notable recommendations:

  • The OPA will allow existing contracts to voluntarily withdraw from the FIT Program for a period of time and have their security fees returned.
  • A domestic content grid will be created for concentrated solar PV to facilitate participation in the FIT Program.
  • FIT project due diligence will be strengthened in areas such as awareness of regulatory approvals, structural safety and application security for small FIT.
  • Multiple projects on the same property will continue to be permitted on the basis of the aggregate MW price, as under the existing FIT Program. Future projects will also be permitted to be built on existing project sites so as long as the original project has reached commercial operation.
  • The Ministry of Natural Resources is to review its approach to renewable energy development on Crown land to release Crown land for renewable energy.
  • The OPA will not proceed with the Economic Connection Test.
  • The OPA will not launch the Municipal Renewable Energy Program or the Commercial FIT (CFIT) program, which was originally proposed to address commercial aggregators.
  • There will be certain changes to the microFIT Program, including limiting one microFIT contract per individual, removing the requirement that Aboriginal communities, schools, public colleges, and universities, hospitals, long-term care facilities and social housing own the land on which the project is located, and provided for an application approval notice, which will be valid for six months, instead of a conditional offer.

The Ontario Power Authority (OPA) will complete draft Rules and a draft Contract based on the Report’s recommendations and will post such materials to the microFIT and FIT website for review and comment.

DISCLAIMER: This publication is intended to convey general information about legal issues and developments as of the indicated date. It does not constitute legal advice and must not be treated or relied on as such. Please read our full disclaimer at www.stikeman.com/legal-notice.

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