By late February the renewable energy industry should have direction from the Ontario government on some of the major changes ahead for the province’s landmark feed-in tariff program. “I am hoping we will have an announcement then with the megawatt (MW) targets and pricing, then new rules and contracts in March, and application processing in May,” said Jim MacDougall, Principal of Compass Renewable Energy and former FIT Manager for the Ontario Power Authority.
Jason Chee-Aloy, Managing Director of Power Advisory, agrees with this timing for an initial policy announcement from Ontario’s Ministry of Energy. “There is no consensus in the sector right now in terms of where the FIT program should go and the Minister [of Energy] is receiving a lot of recommendations in terms of how it should evolve,” he says. “The government will unlikely be in any position to provide policy decisions in terms of revisions to the FIT program until late February or early March.”
Currently the government is very busy digesting the 2,900 submissions it received in response to requests for comment on the FIT’s two-year review which looks at critical aspects of the program including pricing, grid capacity and contract rules. Renewable energy developers and suppliers are eagerly awaiting the review outcomes to inform their business plans. The industry in Ontario has been stalled over the last year by uncertainty over the FIT program’s future in the run-up to last fall’s provincial election and the two-year review process that was announced on October 31.
This spring is expected to be a very busy build-out for the solar community in particular but a lot hinges on the review’s outcomes which will impact the entire supply chain and outline the future of Ontario’s renewable energy landscape. “What we have to remember is that the FIT program is a big standard offer procurement plan that has many moving parts so it’s not just revising rules, contracts and pricing,” adds Chee-Aloy, who headed the design and implementation of FIT as former Director of Generation Procurement at the Ontario Power Authority. “The review involves giving consideration into how these changes fit with other rules and reviewing the entire procurement process – everything up to contract execution.”
Key policy decisions will likely be around the MW targets for the FIT program and their allocation between renewable energy technologies including wind, solar, bioenergy and hydro. Currently the FIT program has no such targets and the uptake of the program since its launch in 2009 has far exceeded expectations. To date, contracts have been awarded to approximately 2,500 medium and large FIT projects and over 11,000 microFIT projects and there are many more in the application queue. Specific MW targets by technology would provide the investment community with a more detailed roadmap of how the Ontario government plans to meet its long-term energy goals.
The rates for wind and solar projects are expected to drop under the review. MacDougall predicts that prices for PV projects in most size categories will come down by at least 25%. The solar industry has been anticipating a price change given the drop in technology prices but the community is very eager to have the price question settled as soon as possible so business can move ahead.
The other big questions for those invested in the Ontario market is how the government will handle the limited grid connection capacity available for renewables and the awarding of future FIT contracts. Current contract prioritization is based on application timestamp and connection capacity but that is likely to change. Chee-Aloy expects the government may introduce new prioritization criteria that consider the location of projects in relation to available grid capacity and the “shovel readiness” of those projects. “There is a small amount of generation capacity compared to the number of projects in the queue and the OPA and the government may look at ways to funnel the most shovel ready projects to the front of the application queue,” he says.
The FIT program was designed on a first-come, first-served basis with a number of program rules and timelines built in for counterparties to meet along the way. It was very much a “production line” mentality with a number of checks and balances for projects, Chee-Aloy notes. There has been far more delays than anticipated, however, and the result is that some projects that would normally have been eliminated due to their failure to meet certain milestone dates are still alive. “It would make sense for the OPA and the government to consider some changes based on this experience,” he adds.
Despite these challenges, this program remains North America’s most ambitious and comprehensive feed-in tariff to date. “Ontario's FIT has been tremendously successful at creating an industry of manufacturers, developers and even residential participation,” notes MacDougall. While renewable energy developers and suppliers are anticipating a scaling down of the FIT, they are also expecting more certainty and direction from the review process. As MacDougall summarizes, “The industry is anxiously awaiting these policy decisions to be able plan for their businesses going forward.”
On April 3-4, Chee-Aloy and MacDougall will be speaking a the third annual Ontario Feed-in Tariff Forum which will offer the very latest updates on the FIT review and the next steps for renewable energy in Ontario with dedicated streams on wind, solar, hydro and bioenergy. Visit the Ontario Feed-in Tariff Forum for more information or contact firstname.lastname@example.org.
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