The re-start of Ontario’s feed-in tariff

After more than a year of waiting, Ontario’s feed-in tariff (FIT) programme is once again open for business. The government announced a review of the FIT programme in October 2011, stopping the application of new entrants, before publishing a review of the system in March 2012, which included new FIT rates. However, it wasn’t until December 2012 that the government announced that next round FIT applications would start.

 

On December 14, the Ontario Power Authority, the regulator, started to accept applications for a total of 200 MW in small FIT projects (between 10 and 500 kW). The application period will close on January 18, 2013. The application round for 50 MW of micro FIT projects (under 10 kW) was launched in July 2012, and the application round for projects larger than 500 kW is expected to open sometime in 2013, although no clear date has been given.

 

Of the 200 MW in small FIT contracts available in this round, 50 MW has been reserved for projects with more than 50% aboriginal or community-based cooperative ownership, with each getting half of the quota. Even for the remaining capacity, community and aboriginal projects will be preferred under a preferential point system, with the projects that receiving the most points the ones that would be likely to be approved of by the regulator. The government also introduced regulations against ground-mounted solar systems on land zoned as residential or on high-level agricultural land.

 

Claimed as a success

 

Ontario’s FIT initiative has been for the most part a success. The government estimated that 20,000 jobs have created as a result of the incentives, set to increase to 50,000, and that $27 billion (Canadian) has been invested. More than 2,000 FIT contracts had been signed by early 2012, for a total of 4,600 MW in renewable capacity. For a brief period of time in 2011, until larger plants elsewhere in the world were complete, Ontario was even the home the world largest solar PV plan, the 97-MW Sarnia plant.

 

Problems to come

 

But the Ontario FIT regime may be facing problems in the future. The domestic content quota, which specify that 60% of a solar and 50% of a wind power system must be produced in the province, was ruled as an illegal trade subsidy by the WTO in November 2012. While the province is expected to appeal the ruling, the policy uncertainty over the rules could limit further investment as people may wait to see if the domestic content quota will be dropped or changed.

 

And there are other problems. The transmission and distribution systems are heavily congested in parts of the province, which could also limit development is some areas. There have been reports that some projects cannot be developed as the grid operators are unable to handle more power on their lines. However, Ontario Power Authority, the provincial regulator, has said that it is working on ensuring that there is sufficient grid capacity, but it will have to be seen if grid improvements can be completed in time to meet the demand for development. Under the FIT rules, connection costs can be termed “mid-shallow” as the developer has to pay to connect to the grid and all associated equipment at the point of access; however, grid reinforcements are paid by the grid operators. Grid operators are also only required to connect renewable if there is sufficient grid capacity available, unlike in other countries where it is a requirement that grid operators connect every renewable power system regardless.

 

Another problem is one common to almost all countries when renewable development starts: the not-in-my-backyard (NIMBY) syndrome. There are a number of local groups that are fighting renewable development in their community, leading to delays in planning. In the public relations war, those supporting NIMBY had a victory of sorts with the federal government when in July 2012 it announced a long-term study of the health effects of wind turbines. While the government’s study is not limiting current development, it not only shows that NIMBY concerns are seen as politically useful by the government, it could scare some investors away from investment, further limiting development.

 

In short, the Ontario FIT has some good elements, especially with its emphasis on community-based projects, something that has been shown to limit local opposition. People are more likely to support projects if some of the short-term benefits will accrue to them instead of faceless investor. However, the policy uncertainty as a result of the WTO decision, the potential for capacity constraints on the grid, and increasing NIMBY sentiments could limit development. It is in these three areas that improvements need to be made if Ontario wants to become the clean energy centre of North America.

Author

  • Richard Carlson is a Canadian freelance energy researcher and an associate with Cambridge Policy Associates, a UK-based firm that provides business development services to renewable and clean energy companies. Previously based in the UK, he has experience in providing renewable energy policy analysis and recommendations to governments from around the world, as well as an indepth study and comparison of incentives for renewable energy deployment. He has also written academic papers on natural gas supply issues in Central Asia and the Caspian basin.

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Richard Carlson is a Canadian freelance energy researcher and an associate with Cambridge Policy Associates, a UK-based firm that provides business development services to renewable and clean energy companies. Previously based in the UK, he has experience in providing renewable energy policy analysis and recommendations to governments from around the world, as well as an indepth study and comparison of incentives for renewable energy deployment. He has also written academic papers on natural gas supply issues in Central Asia and the Caspian basin.

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