Experts Predict End of Month for Ontario FIT Review Update

Adrienne Baker, Canadian Clean Energy Conferences
February 02, 2012 | 7 Comments

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 adrienne.baker@canadianclean.com.

The information and views expressed in this blog post are solely those of the author and not necessarily those of RenewableEnergyWorld.com or the companies that advertise on this Web site and other publications. This blog was posted directly by the author and was not reviewed for accuracy, spelling or grammar.

7 Comments

Eric Jelinski
February 4, 2012

As a professional engineer, your NIMBY comments shows that your brain is in a rut. Science, physics, engineering and economics needs to prevail. Face it; wind turbines need 5 to 10 times the concrete and steel vs other power plants, and the wind is not reliable. Without huge amounts of cheap storage, wind has limited value, and we must not put the power system at such risk when we have to cycle all of the rest of the system when the wind blows for a few hours. Solar is more reliable and should continue. Here are some numbers for everybody to understand;
http://ontariowindresistance.files.wordpress.com/2012/02/auditor-gen-final1.pdf
Environmental issues are neatly summed up here;
http://countylive.ca/blog/?p=22184
Have a nice day.

ANONYMOUS
February 3, 2012

No use crying over rich NIMBY driven push back on gas fired power plants. The rich NIMBY's did the same for offshore wind in Lake Ontario. Too bad, wind turbines are so 'ugly'. One might also chalk up most of the transmission losses of getting nuclear power from the Bruce Penninsula to major markets to NIMBYism.

Gerry Wootton
February 3, 2012

Is some digression of rates in order? Possibly considering volume driven cost reductions of equipment.

For comparison, ~950 MW of microFiT solar under the current FiT would result in a net loss equivalent to the nuclear stranded debt. The estimate is that this could amount to ~300 MW; consequently, Ontario's investment in micro solar has some way to go before it equals the existing investments in nuclear power. These are presumably worthwhile investments.

Gerry Wootton
February 3, 2012

Hey, energynumbersguy, nice rant but where's your numbers?

Your concept of how to ramp new technology in market makes no sense. Better to start with a premium market then adjust price down once there is sufficient volume that the volume price can be established. Your math doesn't work with economy of scale and supply demand relationships.

'Sole-sourcing 33% of non-hydro renewables to one company, while also giving that company preferential wires access.'? How about Sole-sourcing 33% of nonrenewables to one company, while also giving preferential wires access. Perhaps you should have a better look at the Ontario market for energy production equipment and utility scale production; there are many examples of equipment suppliers holding up to 100% of the market and producers with preferential access. Consider the orange triangle on the OPA map - no solar thanks, all of the wires are taken. But, this statement applies not at all to microFiT generators. Even the maximum 10 kW installation is less than 20% of the nominal capacity of a user connection (48 kW). The maximum disturbance possible is equivalent to cranking up a large air conditioner or a couple of electric water heaters. As for shifting costs from rate payers to tax payers, coal for power generation in Canada is a $3.4B business with $1.1B in subsidies.Of course, politicians like to play with electricity prices almost as much as gasoline prices. The fact is that everything goes up in dollar amount - that's why we even bother with a cost of living index. On top of that, you can add supply and demand: as demand outpaces supply, prices go up. If you look at the prices paid by OPA in the hourly market, you will know that they sometimes purchase blocks of power at more than $0.20 per kWh in crunch time; once you add transmission and distribution costs it's much higher. Sometimes they sell off nuclear power at negative prices when supply exceeds demand. Hudak that.

Energy Guy
February 3, 2012

Here's part 3 of 3 ...

Here are some other thoughts on what's gone wrong with recent Ontario electricity policy:

24. The tacit approval of the widespread misuse of a highly questionable study of the supposed health costs associated with coal generation.
25. The continuing and seemingly disingenuous portrayal of the replacement of "dirty" coal by renewables.
26. Obfuscation of electricity price increases.
27. Sole-sourcing 33% of non-hydro renewables to one company, while also giving that company preferential wires access.
28. The Ontario Clean Energy Benefit -- a bribe, that ignores one of the key tenets of sound electricity policy by transferring costs from ratepayers to taxpayers. It also goes against a "culture of conservation".
29. The Global Adjustment Class A/B cost shift -- a mostly-secret and partially-undeserved discount for large industrial customers. The legislation was developed with very little consultation and it should be noted that when a regulator was involved, the OEB rebuffed an attempt to get the same treatment for transmission.
30. "Seat-saver" decisions to cancel locationally-critical natural gas projects.

The FIT program is the GEA's primary manifestation and in my view and as constituted (following the opposite of points 16 – 21), should never have seen the light of day. It's therefore no surprise that I don't have any ideas for tweaking or fine-tuning the process. I can't think of a better explanation for my position than to provide a story. An industry acquaintance and friend was a participant in the original FIT consultations. During a break from the one-sided machinations going on at the time, another person very much inside the process referred to it as "polishing the turd".

Is it "déjà vu all over again" ? Only time will tell.

Energy Guy
February 3, 2012

Here's part 2 ...

If one is going to pick winners and direct the procurement of renewables, then:

11. Have competitive processes.
12. Have quantity limits.
13. Set maximum prices.
14. Have no quantity minimums.
15. Be pro-active and transparent about cost increases.

If one is going to procure renewables with a FIT program, then:

16. Set modest and realistic quantity limits, taking into consideration factors such as integration achievability and cost and customer price impacts.
17. Procure through larger projects only.
18. Start with low rates.
19. Increase rates as required, until desired volumes are achieved, subject to economic practicalities.
20. Be pro-active and transparent about cost increases.
21. Consider true job additions and resulting job losses.

Moving on to criticisms ?

The Green Energy and Green Economy Act (GEA) is seriously flawed, arising from:

22. Letting a group of self-interested individuals, organizations and business enterprises develop the legislation.
23. Selling it on the basis that it will:
a. cause bills to rise by no more than 1% per year. The problem with the argument is that conservation was identified as the means of mitigating the GEA increases; with all facets of the electricity infrastructure being so capital-intense, if everyone implements conservation then rising rates caused by low throughput volumes make this mitigation impossible.
b. Deliver 50,000 new jobs, with no mention of jobs lost due to huge price increases.

Look for part 3 ...

Energy Guy
February 3, 2012

My Ontario FIT reveiw submission, admittedly a little hastily thrown together.

Here's part 1 ...

To Whom It May Concern,

The politicization of even the FIT review is a yet another alarming development, which brings into further question how electricity policy is developed in Ontario.

You'll have to read on or skip to the end to see if I was able to bring myself to offer up any constructive suggestions for the current FIT program. In the meantime I offer these general and alternative procurement comments:

While making electricity policy:

1. Give parties with demonstrated objectivity and balance distinct "A" status; seek them out.
2. Give self-interested parties distinct "B" status, if any at all; if one must, listen to them but don't enter into a dialogue with them.
3. Ensure customers and especially residential consumers, are capably represented at all times by objective, third-party advocates who will, among other things, speak truth to power.

There are times that it makes sense to pursue environmental aims in electricity, particularly those that relate to climate change. As the context for the following related comments, let's assume we are "post-coal" and that coal was replaced with an adequate quantity of natural gas. This takes the "health cost of coal" out of the discussion.

4. Be transparent and politically brave.
5. Address all health concerns in a respectful manner.
6. Put a price on carbon, even if just for the electricity sector.
7. Put a realistic cost on nuclear spent fuel management.
8. For certain technologies, including those that are intermittent, determine (perhaps ex-post) costs to integrate them, including wires, back-up and other ancillary services.
9. Determine all other costs that would otherwise go unaddressed by measures 6, 7 and 8.
10. Get out of the way and let the generators compete.

Look for part 2 ...

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Adrienne Baker, Canadian Clean Energy Conferences

Adrienne is a director at Canadian Clean Energy Conferences. With degrees from McGill and Concordia, Adrienne Baker spent seven years in financial journalism reporting for and editing several publications including Investor Relations Magazine,...