Lawyers in Canada: Davis LLP - Legal Advisors Since 1892

Canadian government announces nineteen successful projects in response to a call for proposals under the Renewable and Clean Energy portion of the Clean Energy Fund

The Honourable Lisa Raitt, Canada's Minister of Natural Resources, today announced support for nineteen (19) projects selected in response to a call for proposals under the Renewable and Clean Energy portion of the Clean Energy Fund. Up to $146 million will be invested over five (5) years to support the demonstration of renewable and clean energy across the country, including integrated community energy solutions, smart grid technology, and renewable applications with solar, wind, tidal and geothermal energy.

Under the Clean Energy Fund, part of the Government of Canada's Economic Action Plan (Budget 2009), the government is to invest almost $1 billion over five (5) years in research, development and demonstration projects to advance Canadian leadership in clean energy technologies. This includes large-scale carbon capture and storage demonstration projects, three (3) of which have already been announced totaling $466 million from the fund, as well as smaller-scale demonstration projects of renewable and alternative energy technologies such as those announced today. Total investments under the Clean Energy Fund for large and small demonstration projects are to benefit Canada's economy by leveraging nearly $3.5 billion in further investments by industry and other levels of government.

The Government is now inviting the project proponents to begin negotiations toward formal contribution agreements to set the conditions under which funding will be delivered. The funding amounts are expected to range from $2.5 million to $20 million for each project. However, until a written contribution agreement is signed by both parties, no commitment or obligation exists on the part of the Government of Canada to make a financial contribution to these projects.

Successful Project Descriptions

A) Projects expected to receive $2.5-$5 million

1. Biomass-based Urban Central Heating Demonstration
Lead proponent: SSQ, Société immobilière Inc.
Strategic Area: Buildings/Community Energy Systems
Location: Québec, Québec
Purpose: La Cité Verte is an innovative real estate project, which combines various initiatives related to sustainable development such as renewable energy utilization, energy efficient design, the management of water consumption, energy and waste management. The funding will support the installation of a biomass and wood-based district heating system. This project combines a variety of technologies and partners.

2. Utility-scale Electricity Storage Demonstration using New and Re-purposed Lithium Ion Automotive Batteries
Lead proponent: CEATI International Inc.
Strategic Area: Electricity Storage
Location: Toronto and Cornwall, Ontario, and Manitoba
Purpose: This project will address electricity storage for renewable and high-density urban applications. The project will demonstrate utility-scale electricity storage systems using new and re-purposed automotive batteries. This concept will reduce cost for electric vehicle batteries providing a future market to meet urban electricity demand using automotive batteries.

3. Energy Management Business Intelligence Platform Development and Demonstration
Lead proponent: Power Measurement Ltd.
Strategic Area: Smart Grid
Location: Commercial buildings in Calgary, Alberta, Ontario and BCIT in Burnaby, British Columbia
Purpose: This project will develop and demonstrate smart grid technology, voluntary load curtailment and peak shaving in a commercial building setting. Most projects of this type to date have focused on residences. This technology will also enable tenants to voluntarily reduce their demand based on real-time price signals.

4. Wind and Storage Demonstration in a First Nations Community
Lead proponent: Cowessess First Nation
Strategic Area: Wind/Storage
Location: Cowessess, Saskatchewan
Purpose: This project aims to demonstrate a combined wind and storage energy system in a First Nation community. The successful demonstration would prove this system as a model for other First Nation's communities across Canada.

5. Bioenergy Optimization Program Demonstration
Lead proponent: Manitoba Hydro
Strategic Area: Bioenergy
Location: Five locations in Manitoba
Purpose: This project is comprised of five different bioenergy systems at five different project sites. The project demonstrates collaboration between utility companies and customers. It is anticipated that the project will help to remove the perceived barrier of technical and operational risk and will promote the wide-scale adoption of bioenergy systems in Canada.

6. Offshore Wave Energy Demonstration
Lead proponent: SyncWave Systems Inc.
Strategic Area: Marine/Hydro
Location: Offshore Central Vancouver Island near Tofino, British Columbia
Purpose: This project will demonstrate the performance, operations and life cycle of a pre-commercial 100-kW wave energy device in ocean conditions typical of British Columbia's open coast. Canada has potentially significant wave energy resources, and it is important for Canada to participate in demonstrations to further the technology, understanding of ocean conditions and the regulatory environment.

7. Demonstration of Waste-heat Recovery at Compressor Stations
Lead proponent: Great Northern Power Corp.
Strategic Area: Hybrid Systems/Northern
Location: Compressor Stations in Alberta and British Columbia
Purpose: This project plans to demonstrate waste-heat recovery systems on a variety of stationary, reciprocating engines greater than 1,000 hp. A successful demonstration has the opportunity to lead to commercialization and wide-scale adoption of this technology at compressor stations and other industrial applications across Canada.

8. Residential Implementation of Solar-thermal Heating Systems
Lead proponent: Enbridge Gas Distribution Inc.
Strategic Area: Buildings/Solar
Location: Greater Toronto Area, Ontario
Purpose: The project will use different types of solar collectors and storage technologies to verify and compare their costs, performance and technical qualities. The project has the ability to validate the technology and provide integrated systems at a lower cost to consumers, thereby allowing greater market penetration.

9. Food and Yard Waste Anaerobic Digestion to Electricity Demonstration
Lead proponent: Harvest Power Canada Ltd.
Strategic Area: Bioenergy
Location: Fraser Richmond Soil and Fibre, British Columbia
Purpose: This project would be Canada's first high-efficiency system for producing up to 1 MW of renewable energy from food and yard waste. If successful, this technology has the potential to be rapidly deployed across Canada as a mechanism to divert food wastes from landfills and produce renewable energy.

B) Projects expected to receive $5-$10 million

10. Demonstration of Heat and Power from Biomass Gasification
Lead proponent: Nexterra Systems Corp.
Strategic Area: Bioenergy
Location: UBC Point Grey Campus, Vancouver, British Columbia
Purpose: This project will showcase biomass gasification integrated with an internal combustion engine generator in a novel, small-scale combined heat and power demonstration suited for on-site applications at public institutions, industrial facilities, and northern and remote Canadian communities. The project has the potential to overcome the difficulty of gas clean up and opens up the possibility of significant replication in Canada and overseas.

11. Energy Storage and Demand Response for Near-capacity Substation
Lead proponent: BC Hydro
Strategic Area: Smart Grid/Electricity Storage
Location: Golden and Field, British Columbia
Purpose: This project demonstrates the integration of energy storage as a mechanism for reducing electricity demand at near-peak capacity substations. This type of solution has the ability to be used in other remote communities where the grid reliability is low and the cost of the transmission line upgrade is uneconomical.

12. Interactive Smart Zone Demonstration in Québec
Lead proponent: Hydro-Québec - Institut de recherche
Strategic Area: Smart Grid
Location: Boucherville, Québec
Purpose: This project will ensure the installation of an interactive network area in a neighbourhood of Boucherville. This will demonstrate different technologies and concepts related to modernization of electrical networks, in particular the deployment of infrastructure for charging electric and hybrid rechargeable vehicles.

13. Biomass and Coal Co-firing Demonstration in Coal Plants
Lead proponent: Nova Scotia Power
Strategic Area: Bioenergy
Location: Coal Plants in Nova Scotia
Purpose: This demonstration project aims to determine optimum fuel blends for the potential co-firing of wood-based biomass with coal as a mechanism to partially replace fossil fuels with sustainable energy sources in coal plants. If successful, there is potential for wide-scale implementation across Canada and the United States.

C) Projects expected to receive $10-$20 million

14. Tidal Energy Project in the Bay of Fundy
Lead proponent: Fundy Ocean Research Centre for Energy (FORCE)
Strategic Area: Marine/Hydro
Location: Minas Passage, Bay of Fundy, Nova Scotia
Purpose: The project plans to validate the performance and resilience of tidal current turbines in the Minas Passage of the Bay of Fundy. This will be the first Canadian deployment of commercial-scale tidal turbines. The project has the potential to advance tidal energy in Canada, provide economic impacts in the Atlantic region and place Canada as a world leader in marine renewable energy.

15. Northern Application of a Geothermal District Heating System
Lead proponent: City of Yellowknife
Strategic Area: Northern/Community Energy System
Location: Yellowknife, Northwest Territories
Purpose: The City of Yellowknife is in advanced stages of project engineering and plans to install a district heating system by extracting heat from the abandoned Con Mine. This project has the potential to provide a cost effective and a more environmentally friendly alternative to fossil fuel based heat. The information that will come out of this project on the effect of extracting ground-source heat from an existing aquifer and its associated long-term heat capacity will help determine if this technology could be replicated in other northern communities.

16. Electricity Load Control Demonstration
Lead proponent: New Brunswick Power Corporation
Strategic Area: Smart Grid
Location: Four maritime communities in New Brunswick, Nova Scotia and Prince Edward Island
Purpose: Traditionally, to accommodate the intermittent nature of wind power, other generation sources are required to follow the net effect of variation in load and wind power production. This project focuses on the integration between smart grid technologies, customer loads and intermittent renewables in a region with potentially significant renewable electricity capacity. It will allow utilities to better understand how customers will react to smart grid and which loads can be controlled by real-time demand balancing in up to 750 buildings, thereby assisting these utilities to capitalize on renewable resources in the region.

17. A 9-MW Wind Technology Research and Development Park
Lead proponent: Wind Energy Institute of Canada
Strategic Area: Wind/Storage
Location: Prince Edward Island
Purpose: The 9-MW wind park proposed will be the first wind/storage combination in Prince Edward Island. The project's research base has a strong focus on information dissemination and would be a good base for supporting additional wind research.

18. Demonstration of Fish-friendly and VLH Turbines in Existing Low-head Water-control Dams
Lead proponent: Eco Joule Inc.
Strategic Area: Marine/Hydro
Location: Mississippi River System, Ontario
Purpose: This project will demonstrate three in-stream hydro technologies including fish-friendly, low-head hydro turbines along an existing water-controlled river system in Ontario. It has the opportunity to prove the technology concept, demonstrate cooperation with a conservation organization, and reduce the barriers to commercialization.

19. Community-based Geothermal Demonstration in a Remote First Nations Community
Lead proponent: Borealis GeoPower Inc./Acho Dene Koe First Nation
Strategic Area: Hybrid Systems/Northern
Location: Fort Liard, Northwest Territories
Purpose: This project will demonstrate how a northern community can use a geothermal resource to generate electricity and heat, thereby reducing the entire community's fossil fuel demand and energy costs. A successful demonstration will provide a model for other northern and First Nations communities with available geothermal resources.

OPA to offer 700 microFIT contracts

The Onatio Power Authority ("OPA") announced today that it will offer 700 microFIT contracts to homeowners, schools, farmers and small businesses. This is the first round of offers to be made under the new Feed-in Tariff program. Many more offers are expected in the New Year.

The contracts are all for renewable generating facilities smaller than 10 kW. Their combined capacity is about 8.6 megawatts (MW), enough to power about 1,000 average homes.

The OPA received about 1,200 applicants for the microFIT program, including the 700 successful proponents. It is unclear whether the remaining 500 are still being evaluated or have been rejected.

Still pending are the approximately 1,000 applications under the FIT program for projects over 10 kW. The OPA indicated that it intends to award about 2,500 MW of large scale projects. However, the OPA did not say when it would announce the next round of FIT winners.

"Annoyance is not a disease", concludes new study of health effects of wind farms

A study prepared for the American Wind Energy Association and Canadian Wind Energy Association concludes that wind turbines do not pose a health risk to those who live near them. The study dispels the notion of a "wind turbine syndrome" caused by the noise and vibrations of wind turbines. Following on the heals of a U.S. DOE report that concluded that wind farms do not depress property values, the study should help remove another potential barrier to renewable energy development.

While funded by wind industry proponents, the study was the product of independent analysis by a multidisciplinary panel comprised of medical doctors, audiologists, and acoustical professionals from the United States, Canada, Denmark, and the United Kingdom. The team is confident in its results, and is reportedly submitting the study for publication in a number of peer reviewed journals.

The following are the main conclusions of the report:

• There is no evidence that the audible or sub-audible sounds emitted by wind turbines

have any direct adverse physiological effects.

• The ground-borne vibrations from wind turbines are too weak to be detected by, or to affect, humans.
• The sounds emitted by wind turbines are not unique. There is no reason to believe, based on the levels and frequencies of the sounds and the panel's experience with sound exposures in occupational settings, that the sounds from wind turbines could plausibly have direct adverse health consequences.

While the team acknowledged that some people may be annoyed and stressed out by the fact that a wind farm has been erected in their vicinity, they noted that "annoyance is not a disease."

No doubt, annoyance is exactly what many wind farm opponents will feel upon reading the report. It will be interesting to see if such opponents challenge any Renewable Energy Approvals ("REA") issued under Ontario's newly streamlined approval process for wind farms. Under Section 142.1(3) of the Environmental Protection Act (Ontario), the only grounds for appealing an REA are that engaging in the renewable energy project will cause "(a) serious harm to human health; or (b) serious and irreversible harm to plant life, animal life or the natural environment." If the conclusions of the study were to be accepted by the Environmental Review Tribunal, it would be very difficult to establish either of these grounds.

Ontario increases solar thermal incentive by a factor of 5

Ontario's Ministry of Energy and Infrastructure announced this week that it has quintupled the incentive available to organizations that install solar thermal hot water systems. The maximum provincial grant is now $400,000 (up from $80,000), and can be matched by up to an additional $400,000 under the federal ecoENERGY program.

The Ontario Solar Thermal Heating Initiative is open to industries, businesses and public institutions including schools, hospitals, municipalities, municipally owned utilities, industrial associations, non-profit organizations and energy service companies.

The change is retroactive to March 1, 2009.

Visit the Ministry's Ontario Solar Thermal Heating Incentive Program site and its FAQ for more details.

First Power Solar Project: Clean Energy for First Nations Communities

Today at the 2009 Solar Conference, the Government of Canada announced an investment of up to $1 million in the First Power solar project through its ecoENERGY for Renewable Heat program. In addition to the federal government's commitment, First Power is also being supported by Solar BC and several financial institutions, including the All Nations Trust Company.

The First Power project will support the installation of domestic solar water heating systems in up to 900 homes, with a focus on remote First Nations communities.

First Power, which will leverage millions of dollars in additional funding to complete its projects, is a partnership between Taylor Munro Energy Systems and the Centre for Integral Economics. This unique hybrid business is designed to support First Nations communities to gain access to and ownership of renewable energy and clean technologies. The project intends to replace diesel power generation by energy systems that deliver all the heat, light and power a community requires through renewables.

Making the announcement on behalf of Minister Lisa Raitt was Senator Linda Frum, who declared: "This investment will generate new economic activity in First Nations communities, while reducing energy costs and greenhouse gas emissions [...] Investing in projects like this will stimulate the growth of a domestic clean energy industry, create high-quality jobs for Canadians and help protect our environment."

Donna Morton, President of the Centre for Integral Economics added: "We believe that First Nations can take ownership of renewable energy and clean technology systems through orally taught training [...] Autonomous energy can give First Nations in Canada both a leading role in building green collar jobs and economic development that respects ancestors, elders and the future."

DOE-funded study concludes wind farms have no effect on home prices

As reported today in the Star, Lawrence Berkeley National Laboratory recently released a study that concludes that industrial scale wind turbines do not have an adverse effect on the value of properties that surround them. The conclusion will be a disappointment to many wind turbine opponents, who have argued for years that the projects depress the value of neighbouring homes.

The study, which was funded by the U.S. Department of Energy, analyzed about 7,500 residential real estate transactions from 1996 to 2007 for single family homes near 24 existing wind farms. The homes were located between 244 meters (much closer than Ontario's new 550 m minimum setback) and 16 kilometers from the turbines. While the study's authors acknowledge that some individual properties may have sold for less than expected, there was no statistically significant adverse effect on home prices.

"Neither the view of wind energy facilities nor the distance of the home to those facilities was found to have any consistent, measurable, and significant effect on the selling prices of nearby homes," said report author Ben Hoen, a consultant to Berkeley Lab. "No matter how we looked at the data, the same result kept coming back - no evidence of widespread impacts."

The study's authors note that further analysis may be warranted as wind farms become more prevalent.

For the meantime, however, wind farm critics may have to look for other reasons to oppose new projects. We expect that the next battleground will be the allegedly adverse health impacts of low frequency noise and vibration.

Canadian Solar Inc. to open solar module factory in Ontario

Canadian Solar Inc. plans to build a $24 million solar module manufacturing facility in Ontario, according to a press release issued this week. The facility is expected to create 500 jobs and will have an annual production capacity of about 200 MW, enough to equip 60,000 homes.

The company's decision to invest in Ontario was driven by the province's commitment to transition to clean energy. "When considering Ontario for our next investment in manufacturing, we looked at the strength of R&D and the governments' commitment to investing in a low carbon economy. We are looking forward to working with government representatives in creating jobs and a viable solar market in Ontario and across Canada," said Milfred Hammerbacher, President of the subsidiary, Canadian Solar Solutions Inc.

Canadian Solar Inc. is rumoured to be playing both sides of the Feed-in Tariff ("FIT") game. As a manufacturer, it hopes to capitalize on the domestic content requirements for solar systems under the FIT, which start at 40% for residential systems and 50% for larger systems in 2010 and rise to 60% across the board in 2011. As a project developer, Canadian Solar may become one of its own best customers. It reportedly submit several applications during the launch phase of the FIT, which closed Monday.

It is expected that more clean energy manufacturing investment will follow. While it remains to be seen how much renewable capacity (including solar) the OPA will procure under the FIT in the near term, the OPA had indicated that the Ontario grid could accommodate about 4,500 MW. While the government is no doubt pleased with the job projections for the Canadian Solar facility, the 500 jobs represent only 1% of the 50,000 green collar jobs former Minister Smitherman promised when he launched the Green Energy Act.

OPA announces revisions to FIT days before end of launch phase

The Ontario Power Authority ("OPA") released updates to the FIT program late yesterday. A summary of the changes is available here.

The program updates include in specific changes to:

• the FIT Rules (see also the blackline to the previous version, which highlights the changes;
• the FIT Contract (see also the blackline); and
• the Standard Definitions.

Developers will no doubt be scrambling to understand the implications of the changes (some of which are substantive) as the November 30 deadline of the launch phase is imminent.

OPA provides critical FIT updates

The Ontario Power Authority ("OPA") has released three important updates to the Feed-in Tariff ("FIT") program:

1) Domestic content Q&A

The OPA has been flooded with questions about the details of the domestic content rules, which are viewed by many as a high hurdle to clear to participate in the FIT program. In response, the OPA has posted some additional details about how it will interpret the "designated activities" set out in the various domestic content tables. For example, where a designated activity refered to the manufacturing of a system that has sub-components (e.g., mounting systems), the OPA has provided additional guidance as to which sub-components must be made in Ontario for the designated activity to qualify under the domestic content rules.

2) Agricultural land restrictions for solar PV

The OPA has been directed by the Minister of Energy and Infrastructure not to enter into FIT contracts for ground-mounted solar PV projects greater than 100 kW that are located on:

• lands comprised of Class 1 or 2 soils, as designated by the Ontario Ministry of Agriculture, Food and Rural Affairs ("OMAFRA") in the Canada Land Inventory ("CLI"); or
• specialty crop areas within the meaning of the Ontario 2005 Provincial Policy Statement.

FIT applicants must demonstrate compliance with these restriction by submitting CLI maps that show the entire property where the project will be located and the specific siting of the project on that property. CLI maps are available for download from OMAFRA. Where CLI maps for the subject property show multiple soil classifications, the applicant must also include a site-specific soil study performed by a qualified independent soil scientist to confirm the CLI classifications using accepted standards.

Additionally, the government has imposed a province-wide cap of 500 MW on projects on Class 3 lands. This 500 MW cap has been allocated between the four Regional Administrative Boundary Alignments (northern, central, western and eastern) of the province (as discussed in a previous posting, 100 MW of the portion of the cap allocated to the western region has been set aside by the province, likely in connection with its negotiations with the Samsung Group). FIT contracts on Class 3 lands will be awarded on a first-come, first-served basis.

Note that the foregoing limitations do not apply to lands zoned for non-agricultural purposes as of October 1, 2009.

3) Enhanced transition options for RESOP contract holders

In a concession to those who have invested time and money developing projects under the old Renewable Energy Standard Offer Program ("RESOP"), the OPA will now allow projects of any renewable technology that have a capacity of 500 kW or less and were purchased or were in service by 11:59 p.m. on October 1, 2009 to transition to the FIT and microFIT Programs. Such projects will be deemed to have met the domestic content requirements.

Proponents holding RESOP contracts for projects that are not yet in service and was not purchased by October 1, 2009 must executed a mutual termination agreement with the OPA to be eligible to transition to the FIT. Proponents of Micro RESOP projects 10 kW and less that were purchased or were in service by October 1, 2009 will have to executed a RESOP to FIT Transition Agreement with the OPA.

Word on the street

Anecdotal reports from local distribution companies suggest that very few FIT applications have been submitted to date. However, there continues to be significant buzz from developers, particularly of solar PV projects on industrial and commercial rooftops. Just under 3 weeks remain in the launch phase of the FIT. With details like those discussed above becoming more clear, we expect to see the trickle of applications increase to a deluge by November 30.

Smitherman steps down to run for mayor

George Smitherman announced his resignation as Minister of Energy and Infrastructure ("MEI") of Ontario over the weekend. The announcement caught few by surprise, as Mr. Smitherman has been hinting over the past few months that he intends to run for Mayor of Toronto. His resignation nevertheless creates some uncertainty for Ontario's emerging green energy sector.

Mr. Smitherman was the chief architect of the Green Energy and Green Economy Act, 2009, which is intended to boost the proportion of Ontario electricity that is generated from renewable sources, attract new investment in renewable project development and manufacturing companies, and create 50,000 new green collar jobs. Mr. Smitherman dropped the last few pieces into the regulatory puzzle in September and officially launched the flagship Feed-in Tariff program on October 1. However, it is too early to measure the success of the green energy initiative. With Smitherman gone, responsibility for its success will fall to Mr. Smitherman's successor, as well as to Premier Dalton McGuinty.

Mr. Smitherman, often referred to as "Furious George" has a reputation as having both a vitriolic temper and an unmatched ability to force change upon the government. This combination of traits made him very effective at driving the Green Energy and Green Economy Act, 2009 through the Legislature and the various Ministries responsible for its implementation. However, his personality may have been less well suited to the long-term management of a bureaucratically intensive array of programs. Hopefully Mr. McGuinty will choose a successor whose skills and interests lend themselves to the steady management of the province's transition to green energy.

In the short term, Premier McGuinty will likely keep his hands on the reigns of the province's second biggest ministry, as evidenced by his appointment of Gerry Phillips as interim Minister, an MPP who previously had no cabinet portfolio. In the long term, some question whether the Premier will not choose to split the portfolio into a separate Ministry of Infrastructure and Ministry of Energy. As it stands, the MEI will have the tendency to attract Minsiter's whose only other career move within the provincial government is to be Premier, a reality which no doubt informed Mr. Smitherman's decision to run for Mayor rather than for his friend and colleague's job.

In recent weeks, Mr. Smitherman has faced significant controversy. Many felt that David Caplan, a popular MPP who resigned as Minister of Health in light of the eHealth scandal, took responsibility for a scandal that may have originated during Mr. Smitherman's tenure as Minister of Health. In the green energy sector, Mr. Smitherman was facing criticism within his cabinet for the proposed $6-7 billion deal he was negotiating with the Samsung Group to bring huge investments in renewable projects and manufacturing capacity to the province. The state of that massive deal, which Smitherman suggested could create 15,000 of the 50,000 green collar jobs he promised, is now unknown.

OEB revises connection cost rules to encourage new renewable generation

The Ontario Energy Board announced last week that it had finalized amendments to the connection cost responsibility provisions of the Distribution System Code ("DSC") and Transmission System Code ("TSC"). The amendments to the DSC and TSC were prompted by the passage of the Green Energy and Green Economy Act, 2009 and by requests for the Minister of Energy and Infrastructure to facilitate the connection of new renewable generation.

The amendments to the DSC are intended to reduce the level of costs that renewable generators must pay to connect to distribution systems. The basic concept of the amendments is that investments in distribution systems will be classified as investments in:

• "connection assets", which will be paid for by generators;
• "expansions", which will be paid for in full by the distributor if the expansion is part of an OEB-approved plan or in part by each the distributor and generator if it is not part of an OEB-approved plan; and
• "renewable enabling improvements", which will be paid for by the distributor.

The amendments to the TSC are intended to facilitate the timely development of "enabler" lines to areas that have significant renewable energy resources. The enabler lines will make it possible for clusters of new renewable projects to conect to the grid. Such renewable generators will pay their pro-rata share of the cost of the enabler lines as they connect. The basic concept is that transmitters will temporarily pool the costs of enabler lines. As generators connect, they will pay their pro rata share of the pool. After a designated period, any costs associated with unsubscribed capacity would be recovered by the transmitter from its rate base.

These amendments are now in force and will likely become increasingly relevant in the coming year. Recall that the first phase of the Ontario Power Authority's FIT application process closes at the end of this month. Distributers and transmitters will likely have a much better idea of the demand for new renewable generation once the OPA runs the Transmission and Distribution Availability Tests and the Economic Connection Tests on the applications received in this first round.

Samsung to bring 15,000 green collar jobs to Ontario?

As part of its green energy initiatives, the Ontario government is reportedly wooing industrial giant Samsung Group to make a major investment in Ontario. Details of the proposed investment are still confidential. However, it is expected that Samsung will participate both as a developer of renewable power projects and as a manufacturer of equipment that meets the local content requirements of the Feed-in Tariff ("FIT"). While potentially a big win for the province, the deal is attracting criticism both from within the McGuinty cabinet and from other players in the industry.

The Toronto Star reports that Minister of Energy and Infrastructure George Smitherman is pegging the investment at $6 to $7 billion and expects that he is "looking at a job count of more than 15,000." The deal would therefore be a huge leap forward in the government's promise to create 50,000 new green collar jobs in the province.

However, not everybody is enamored with the potential Samsung deal. The Star also reports that a major feud over the deal has erupted in Premier McGuinty's cabinet. Some MPPs are (correctly) concerned that taxpayers will ultimately bear the burden of any largess the government bestows on Samsung.

Other industry players are concerned that the deal is unfair, questioning why the government would already bend rules that it just spent almost a year developing. Minister Smitherman apparently retorted that the "economic adder" being offered to Samsung could be available to others: "Anyone who is prepared to make investments on that scale of course warrants our very substantial interest."

However financial incentives are only part of the deal being offered to Samsung. In a directive to the Ontario Power Authority dated Sepetember 30, Minister Smitherman ordered that 500 MW of transmission capacity be held in reserve. This is a significant portion of the 4,500 MW of capacity that the OPA estimates will be available for allocation as of November 30, when the first round of the FIT closes. In a previous directive, Minister Smitherman ordered the OPA to procure not more than 500 MW of ground-mounted solar projects over 100 kW. The September 30 directive further provided that 100 MW of this solar allocation in the Western Region of Ontario were also to be held in reserve. These special reserves are expressly being held for renewable energy generating facilities "whose proponents have signed a province-wide framework agreement with the Province" - i.e., Samsung. Other developers may be right to complain as these reserves have the potential to alter the dynamics of the initial FIT market significantly.

Residential renewable pioneers to avoid FIT local content rules

On October 22, the Toronto Star reported that Minister Smitherman is considering exempting homeowners who bought residential solar systems before October 1, 2009 from the local content rules under the Ontario Power Authority's Feed-in Tariff program. The local content rules have been seen by many as a major impediment to developing renewable projects in Ontario. For small scale residential solar systems, 40% of the project must be manufactured in Ontario (increasing to 60% in 2011).

Minister Smitherman also indicated that some projects that had received contracts under the old Renewable Energy Standard Offer Program, which had significantly lower prices than the FIT, will be upgraded to FIT contracts.

Both of these announcements were well received by "renewable energy pioneers" who had already made substantial investments in renewable energy systems for their homes.

Obama lavishes smart grid sector with $3.4 billion; Ontario remains conservative

On Tuesday, October 27, President Obama announced that the U.S. government would provide $3.4 billion to support around 100 smart grid projects. These projects, to be undertaken by distribution and transmission utilities, will include implementing advanaced metering infrastructure, substation automation, and other information and control systems. The president said the new investment will help build a "smarter, stronger and more secure electric grid." Grants range from $400,000 to $200 million and will be matched by a total of $4.7 billion in private funds.

Ontario's approach is decidedly more conservative. Despite the prominence of the smart grid in the Green Energy and Green Economy, 2009 Act, the province has yet to provide any specifics as to how smart grid development will be supported. Distributors will be required to include smart grid investments as part of green energy infrastructure investment plans. However, distributors are not yet being encouraged to "think big." Rather, in guidance issued in June, the Ontario Energy Board provided that such expenditures should be recorded to a new deferral account (which will be subject to review at subsequent rate hearings) and should be limited to:

• smart grid studies or demonstration projects;
• smart grid planning; and
• smart grid education and training.

Brian Hewson, senior manager of the OEB's Networks & Smart Grid unit, reiterated this guidance at the Smart Grid Summit held in Toronto on October 14 and 15. To a room full of distributors and technology vendors, he emphasized that the OEB was waiting for more guidance from the government and would not approve profligate smart grid spending in the meantime. He also emphasized that any demonstration projects should only be undertaken after the utility has satisfied itself that no similar such project has been undertaken elsewhere.

While the OEB's conservative approach is understandable, one questions whether innovation opportunities are being missed in Ontario as a result. Chronic underinvestment in grid infrastructure has pushed much equipment to (or past) its expected end of life. Ontario's supply mix, and the demands on the grid, are set to change as a result of the introduction of more renewable generation. The time is therefore ripe to invest in the modernization of the grid. By encouraging, rather than restraining, an industry that is ready to change, the government could capitalize on excellent timing while advancing its promise to create up to 50,000 green collar jobs in the province.

OPA and IESO launch FIT websites

The Ontario Power Authority's Feed-in Tariff program opened today. To assist potential applicants,

• the OPA launched websites for both the FIT and microFIT programs; and
• the IESO launched a website explaining the process for obtaining impact assessments and registering with the IESO, as applicable.

Winner of GTA West power procurement announced

The Ontario Power Authority ("OPA") announced today that TransCanada Corporation has been selected to design, build and operate a 900 megawatt (MW) gas-fired electricity generating station in Oakville. The plant will provide dispatchable power that will help meet the demand for peak power as Ontario phases out its coal generating stations.

Earlier this month, the OPA delayed its decision in the GTA West procurement, largely in response to local opposition to the project. Residents expressed concern that the project would adversely effect local air quality.

To allay these concerns, the Ontario Ministry of the Environment announced today that it is launching a program to help improve air quality in the southwest GTA. The program will include:

• striking a new MOE task force that will deliver a plan by the end of June 2010 to improve air quality through the reduction of emissions from local industrial, vehicular, and residential sources;
• making a commitment by the OPA (with the assistance of local electricity and gas distributors) to invest up to $30 million over 5 years to encourage industrial energy efficiency;
• ongoing efforts by the OPA to achieve 500 megawatts of conservation in the west GTA by 2014; and
• establishing a Working Group on Cleaner Energy and Industrial Efficiency with cement company Holcim Canada Inc. to improve its plant's efficiency and overall emissions profile;
• working with local distribution companies to maximize the potential of the new Feed-In Tariff in the southwest GTA.

Green Energy Act update: the 10 steps are complete!

As part of the grand unveiling today:

• The OPA posted finalized rules, contracts and prices for the FIT program;
• The Ministry of Energy and Infrastructure launched the Renewable Energy Facilitation Office's website

The OPA also confirmed the October 1 launch date for the FIT. Dedicated websites will go live September 30, 2009, providing step-by-step instructions and materials to assist developers, homeowners and small businesses with program requirements and the application process.

Today concludes the rollout of the 10 steps to green energy in the province. To recap, those steps have been:

• announcing the early closure of some coal-fired generating units;
• launching an Aboriginal Energy Partnerships Program;
• announcing the $250 million Aboriginal Loan Guarantee program;
• authorizing Hydro One to begin work on 20 transmission projects;
• launching the Community Energy Partnerships Program;
• launching the Municipal Renewable Energy Program;
• establishing the Renewable Energy Facilitation Office;
• making the Renewable Energy Approval process law;
• developing domestic content requirements; and
• finalizing the feed-in tariff program.

For a recap of our postings leading up to today's announcement and stretching back as far as the release of the IPSP in 2007, click here.

Ontario announces key Green Energy Act regulations

Ontario announced a series of long-anticipated Green Energy Act regulations today. The announcement is a major step forward for the transition to green energy. The Minister of Energy and Infrastructure is hoping to have all major components of that transition in place by the end of this month.

Feed-in Tariff

The Ontario Power Authority ("OPA") will begin accepting FIT applications on October 1, 2009 and expects to sign the first contracts in early December.

The FIT program includes a "launch" process whereby the approximately 4,000 MW of connection capacity that is currently available in the province will be allocated preferantially to shovel-ready projects that apply before the first connection availability test is run. We therefore expect that there will be a stampede of applicants on October 1.

Details of the FIT and microFIT programs are available from the OPA.

Provincial Content Requirements

The Ministry of the Energy and Infrastructure also announced the following provincial content requirements:

• Wind: 25%, increasing to 50% on Jan. 1, 2012;
• Micro solar PV (10 kW or smaller): 40%, increasing to 60% on Jan. 1, 2011;
• Larger solar PV: 50%, increasing to 60% on Jan. 1, 2011.

The planned increases are likely intended to accommodate growth in Ontario's green energy manufacturing sector. There is limited manufacturing capacity in the province today. However, we expect that today's announcement will enable many planned investments to move forward. Whether or not manufacturing capacity can keep apace with the development of projects remains to be seen.

Exactly how provincial content will be calculated will be determined by the OPA. Based on drafting with respect to the shovel-readiness criteria for the launch phase of the FIT, the OPA may require that equipment undergo an irreversible manufacturing process in the province to count as Ontario content.

Prime agricultural land

As anticipated, the government will restrict the use of prime agricultural land for solar farms. The government will direct the OPA that there is to be no ground-mounted solar procurement above 100 kilowatts on class 1 and 2 or Specialty Crop Areas. Some ground-mounted solar procurement, up to 500 megawatts, will be allowed on Class 3 lands, allocated on a regional basis.

These restrictions may preclude development in some of Ontario's sunniest lcoations.

Renewable Energy Approval

O. Reg. 359/09 is the new regulation under the Environmental Protection Act that contains the requirements for obtaining a Renewable Energy Approval ("REA"). Brochures describing the thresholds above which an REA will be required are available from the Ministry of the Environment:

• Wind overview: projects under 3 kW do not require an REA; those between 3 kW and 50 kW are subject to simplified requirements; those over 50 kW require full REAs and are subject to a minimum setback requirement of 550 m;
• Solar overview: rooftop and wall mounted systems, as well as ground mounted systems under 10 kW, do not require an REA; ground mounted facilities over 10 kW require a full REA including a noise study;
• Bioenergy overview: to qualify for an REA, bio-energy facilities must use biomass, biofuel or biogas source material as defined under the Electricity Act, 1998 and O. Reg. 160/99 made under the Act; REA requirements vary depending on the facility location (e.g. on a farm), feedstock material (e.g. agricultural wastes) and size (e.g. greater or less than 500 KW); and
• Wind overview: no REA required, but a Water Power Class Environmental Assessment must be performed.

The MOE has also published an FAQ about the REA requirements.

The MOE has promised to release the details of the application process by mid-October.

Stay tuned for further analysis of the details and implications of today's announcement.

Ontario announces funding for community and municipal renewable energy projects

On Wednesday, the Ministry of Energy and Infrastructure announced the creation of two new funding programs for green energy projects:

• The Community Energy Partnerships Program, which is open to community groups, including co-ops, non-profit groups and local partnerships and will provide one time financial assistance of up to $200,000 for project planning costs, as well as environmental and engineering studies. THis financial assistance will be in addition to the up to 1 cent/kwH premium available under the OPA's FIT program to renewable projects with sufficient equity participation by a community group.
• The Municipal Renewable Energy Program will help municipalities pay for certain costs incurred in respect of renewable energy projects, inlcuding repairs to roads, drainage infrastructure, and traffic management. This funding is only available for costs over and above those which the project developer should ordinarily bear.

Details of the application process for the two programs have yet to be announced.

These new programs constitute steps 5 and 6 in Ontario's 10 steps to green energy. The Ministry is expected to make a major announcement today regarding key regulations, including minimum setback requirements for wind farms and restrictions on the use of prime agricultural land for solar farms.

McGuinty coy about potential ban of renewable projects on prime agricultural land

Yesterday, Ontario Premier Dalton McGuinty refused to confirm or deny that restrictions would be placed on the use of prime agricultral land for renewable power pojects. However, rumours are circulating that the government will ban solar panels from class A1, A2 and A3 farmlands.

Speaking at the International Plowing Match in Earlton, Ontario, Premier McGuinty said, "we're going to do a much better job of harnessing energy from the sun and biomass (and) at the same time not compromise quality of life or the environment and not compromise our access to good farmland as well."

Elizabeth McDonald, president of the Canadian Solar Industries Association, reminded the Canadian Press that "all we've said we need is .11 per cent of the agricultural land in Ontario [about 20,000 acres], and much of this land isn't being used right now (for farming)."

The government is expected to announce the relevant regulations later this week.

The "prime ag" question is one of a few key issues remaining with the implementation of the reforms of the Green Energy and Green Economy Act, 2009. Another major outstanding issue is the provincial content requirement, which has yet to be announved. In setting appropriate requirements, the government is walking an economic and political tighrope. If it sets requirements that are too high, it may kill the economics of developer's projects and fail to create sufficient demand for renewable goods produced in the province. If it sets the requirements too low, it may allow too much competition for suppliers based in the province and fail to deliver its promise of creating 50,000 green collar jobs.

Given the recent economic downturn, particularly in Ontario's manufacturing sector, many suppliers are optimistic that the province will aggressively promote job growth. For example, Port Hope's Pro-Energy and Power and CWind Inc. announced this week that they have formed a joint venture (known as WindPro Manufacturing) to build a new wind turbine manufacturing plant in Port Hope.

We expecty these issues to be resolved in Minister Smitherman's 10-step countdown to the transition to green energy. Stay tuned for developments.

OEB completes two green initiatives

The Ontario Energy Board has completed two of the green energy initiatives it has undertaken as a result of the passing of the Green Energy and Green Economy Act, 2009:

1) Amendments to the Distribution System Code ("DSC") and the Retail Settlement Code ("RSC") with regard to the account treatment and settlement of retail embedded generation

Details of the amendments may be found here.

The amendments to the DSC and RSC are intended to facilitate the timely and efficient implementation of the Ontario Power Authority's Feed-in Tariff ("FIT") program. The amendments are summarized as follows by the OEB:

• Customer choice of configuration should be maintained: Customers should retain the ability to choose the connection configuration that they consider optimal. Accordingly, embedded retail generators may be connected either directly or indirectly to a distribution system and, if indirectly connected, may be metered "in parallel" with the associated load customer (i.e., the meter for the generation facility is located upstream of the load meter) or "in series" with the associated load customer (i.e., the meter for the generation facility is located downstream of (or "behind") the load meter).
• Gross load billing should be used for all configurations: Settlement and billing in relation to a renewable generation facility that has a FIT contract and the associated load customer should be based on a "gross load billing" approach. Under the Board's current rules, this would already be the case for embedded retail generators that connect directly or that connect indirectly "in parallel". The proposed approach would, however, change the basis for settlement and billing applicable to FIT-contracted embedded retail generators that connect indirectly "in series".
• An embedded retail generator should be treated as a separate account, regardless of configuration: Distributors should open a separate account for any embedded retail generator that has a FIT contract. This is already the expectation under the Board's current rules in relation to embedded generators that connect directly or that connect indirectly "in parallel". The Ontario Energy Board proposed approach, however, would confirm that this should be the case for FIT-contracted embedded retail generators that connect indirectly "in series" as well.

Of these, the decision to implement gross load billing is likely the most significant for the reasons discussed previously on this blog.

The OEB has been clear that the amendments will apply to both the microFIT (i.e., < 10MW) and FIT programs run by the OPA.

2) Amendments to the DSC to enhance the renewable generation connection process

Details of the amendments may be found here.

According to the OEB, these additional amendments to the DSC, which were discussed in a previous posting, are intended to:

• ensure that viable generation projects, and in particular renewable generation projects, are connected to the distribution system in a timely manner; and
• ensure that generation projects that are not likely to proceed do not impede the allocation of capacity to more viable projects.

Like the "shovel-readiness" criteria that will apply during the launch phase of the FIT, these amendments to the DSC are intended to ensure that scarce connection capacity is allocated only to the most viable projects. Project proponents should therefore review the amendments carefully as they plan their strategy for participating in the FIT.

Ontario announces $2.3 billion expansion of grid infrastructure

Ontario's Minister of Energy and Infrastructure George Smitherman announced yesterday that Ontario will direct Hydro One to spend $2.3 billion to expand transmission and distribution infrastructure in the province over the next 3 years. The projects are intended to "unlock significant potential opportunities for greener, cleaner electricity in all parts of the province."

The announcement constitutes step 4 of the Minister's 10-step countdown of measures to help Ontario transition to an economy powered by green energy. Steps 1, 2 and 3 were announced earlier this month. The remaining 6 steps will be announced later this month.

The Minister's announcement did not mention whether the government would provide any special funding for the projects. Absent such funding, much (if not all) of the cost of the upgrades will be passed on to electricity customers. In anticipation of projects of this size and nature, the Ontario Energy Board is in the midst of a process to identify more "innovative" approaches to cost recovery for such projects.

The infrastructure upgrades are expected to create 20,000 jobs over three year. This could be viewed as a major move towards fulfilling the government's promise that the Green Energy Act would create 50,000 green collar jobs. However, it is unclear what proportion of these 20,000 jobs are jobs that will endure after construction of the grid enhancements is complete.

Ontario announces two programs to enhance aboriginal participation in the new green economy

Last week, Ontario announced the early closure of 4 of OPG's coal-fired generating units. The Ministry of Energy and Infrastructure described the announcement as the first of its 10 steps to "transition the province to electricity generated from green energy which will open investment and opportunities in Ontario's green economy." The Ministry announced steps 2 and 3 last Friday.

The latest steps, which will facilitate the participation of Aboriginal communities in Ontario's new green economy, are the creation of the following:

1) An Aboriginal Loan Guarantee Program

This $250 million program will offer loan guarantees for up to 75% of an Aboriginal corporation's equity interest in a renewable power project. The guarantees will make it easier for Aboriginal communities to take on equity participation in renewable generation and transmission projects. Aboriginal equity participation can make projects more lucrative. Under the OPA's FIT program, projects with greater than 20% Aboriginal equity participation are eligible for a FIT price adder.

While details of the program have yet to be announced, the Ministry indicated that projects would have to undergo a "extensive due diligence process." Projects will have to meet "stringent" eligibility criteria, including the following:

• Agreements in place to sell or transmit electricity at a pre-determined cost (e.g. power purchase agreements for generation or regulated rates for transmission projects);
• Experienced proponents and business partners with track records in construction and infrastructure operation;
• Secured commercial financing arrangements; and
• Aboriginal communities would be required to create wholly-owned corporations to take on all aspects of the project, such as signing contracts and entering partnership agreements.

The Ontario Financing Authority will manage the program.

2) An Aboriginal Energy Partnerships Program

The AEPP will support Aboriginal communities that wish to participate in Ontario's new green economy by providing the following:

• Support for Community Energy Plans. A Community Energy Plan will allow Aboriginal communities to determine local interests, needs and opportunities for renewable energy development, conservation, grid connection and reducing reliance on diesel in remote communities;
• Support through funding project pre-feasibility and feasibility studies, development of business cases, resource assessment, environmental and technical studies as well as other soft costs for First Nation and Métis energy projects; and
• Support to establish the Aboriginal Renewable Energy Network, an online based centre for sharing of knowledge and best practices related to First Nation and Métis green energy projects.

The Ontario Power Authority will manage this program.

OPG shuts down 4 coal-fired units ahead of schedule

Ontario's Ministry of Energy and Infrastructure announced today that OPG will close four of the province's coal-fired generating units in 2010, well ahead of the 2014 deadline for phasing out coal. The Ministry describes the closures as "landmark progress on Canada's largest climate change initiative."

The closure could also be described as long awaited progress, as closure of all coal-fired generation was originally promised for 2007.

The 4 units supply about 2,000 MW (or about 6% of the province's installed generation capacity). Some of that supply may no longer have been needed as electricity demand has contracted in recent months. OPG is hoping to convert some or all of the remaining 11 coal-fired units to burn biomass.

Some observers wonder if the move goes far enough. With electricity demand significantly reduced as a result of the recession and hundreds of megawatts of new generation already under development, many environmentalists would like to see more of the coal units closed ahead of the 2014 deadline.

Other observers wonder if the move goes to far. Not everyone supports the closures. Industry analyst Tom Adams believes that coal-fired generation can idle at lower levels and ramp up more quickly than gas-fired generation. Coal may therefore be a better backstop for intermittent power sources like wind and solar.

Phasing out coal is but one part of Ontario's strategy for moving to a more renewable supply mix. Industry stakeholders are waiting anxiously for the government and the OPA to finalized the regulations and feed-in tariff introduced under the Green Energy and Green Economy Act, 2009. The Ministry said that today's announcement "launches Ontario's ten steps to transition the province to electricity generated from green energy which will open investment and opportunities in Ontario's green economy." We are seeking clarification about steps 2 through 10 - stay tuned.

Cleantech revolution or international trade war?

McKinsey & Company, a consultancy, recently released a report calling on China and the US to work together to create new cleantech industries that will help address climate change. Given the scale of investment, infrastructure and research that will be required, the report warns that the two countries will not be able to "achieve separately what they could jointly." However, recent events suggest that both China and the US (as well as Canada and some European cleantech leaders) are not in the mood to cooperate, choosing instead to protect their domestic industries. If the trend continues, trade wars could erupt and critical climate change negotiations could be compromised.

Signs of Chinese protectionism

China has attracted significant media intention in recent months for a series of potentially trade-distorting measures. A pattern of behaviour may be emerging that suggests both private industry and the state are determined to give every advantage possible to China's domestic cleantech sector. The following are examples:

• Alleged dumping: The CEO of Suntech, a Chinese company that is the world's second largest manufacturer of solar panels, recently told the New York Times that his company is selling products in the U.S. at below marginal cost. He later clarified that the pricing was set to gain market share, but U.S. producers were already characterizing the practice as dumping. As reported in the NY Times, U.S. trade lawyer Alan Wolff (perhaps eagerly?) predicts that such behaviour could eventually trigger a WTO dispute. He noted, "antidumping cases against products from China have to date largely covered traditional, basic products such as chemicals and steel. A case against solar panels from China would be a landmark case."
• Domestic content requirements: China has also been widely criticized for recently enacting Buy Chinese provisions that require companies applying for stimulus money for renewable power and low carbon projects to apply for government permission to source parts and equipment abroad. As discussed by the Financial Times, China enacted these provisions just months after railing against Buy American provisions.
• Preferential treatment for domestic project developers: The Buy Chinese provisions were also enacted in the wake of a series of procurement decisions in which established foreign players like Vestas were shut out of projects in China. See this Financial Times article for more background.
• Import restrictions: China is reported to have recently banned the import of scrap polysilicon into the country. The scrap is a by-products of chip manufacturing that is suitable for making solar panels. Given the current glut of polysilicon on the global market, the ban is seen by some analysts as a move to protect China's domestic polysilicon manufacturers. China characterizes the ban as a move to protect the environment given that the scrap may have come into contact with toxic chemicals. The environmental justification of trade measures has been one of the more intensely litigated issues under the WTO.
• Proposed export bans: According to Business Green, a draft report released in July by the Chinese Ministry of Industry and Information Technology suggests a total ban on the export of terbium, dysprosium, yttrium, thulium and lutetium and a export quota on neodymium, europium, cerium and lanthanum. These minerals and rare earth metals are critical in the manufacture of hybrid cars and wind turbines. Some suspect that China wants to protect supply for its domestic cleantech manufacturers. The report was released after the U.S. and Europe filed a complaint at the WTO in June regarding Chinese export limits on bauxite, coke, magnesium, manganese, silicon metal and zinc.

U.S. also looking inward

The US is by no means innocent. It received its share of criticism for proposed Buy American restrictions on stimulus money. The Obama administration continues to face lots of pressure from powerful groups to make sure that stimulus money and climate/energy policy is crafted to create jobs in the US (see e.g., Big Labor's Made in America Tour), as blogged about recently.

Already, the U.S. has enacted some dubious measures in the name of cleantech, a particularly notorious example being a biofuel tax incentive that turned black liquor into liquid gold for failing pulp producers. The incentive was another blow to the beleaguered Canadian pulp industry. Ottawa responded with a similar, although somewhat more environmentally focused, incentive.

The US is also trying to draw in short term investment in renewable power by transforming a former tax incentive into a grant for up to 30% of the cost of qualifying projects.

Perhaps most tellingly, the draft Waxman-Markey climate bill includes provisions regarding a "border adjustment" mechanism that could be used to impose what amount to carbon tariffs on imports from countries that have less rigorous climate change legislation.

Chinese companies like Suntech see the writing on the wall and are moving to open manufacturing facilities in the US.

Protectionist trend extends to Europe and Canada

Last week, Business Green ran a good piece on cleantech protectionism. While the article points to China as the most notorious culprit, China is not the only country singled out for criticism. Germany and Spain are also accused of providing trade-distorting "soft loans" to domestic producers, as well as of favouring domestic proponents in renewable power RFPs.

Here in Ontario, industry players are anxiously awaiting the release of domestic content requirements under the Green Energy Act. These requirements will require project proponents who wish to participate in the potentially lucrative feed-in tariff regime to source some portion of their components, labour and/or capital in Ontario. The domestic content requirements are a bit of a hot potato for Minister Smitherman who simultaneously wants to declare Ontario's renewable sector to be open for business while making good on his promise to create 50,000 new green collar jobs in the province.

Implications

If the protectionist trend continues, the cleantech revolution could spark a cleantech trade war. Protectionism tends to beget protectionism: protectionist measures in countries like China will be used to justify the imposition of protectionist measures in other countries (and vice versa). While the WTO provides a forum for resolving such disputes, the process is long and the results not always certain (particularly where protectionist measures are draped in environmental justifications).

Perhaps the most disturbing part of the emerging protectionist trend is that it is occurring before the successor treaty to Kyoto or the U.S. cap-and-trade legislation have been finalized. Trade issues are informing the negotiation of both instruments. The protectionist stances taken by key global trading players today may make it harder to conclude either negotiations and may lead to compromises that are not in the world's best economic or environmental interests.

The cleantech "revolution" makes twin promises: that green jobs are the cure to the past year's financial crisis and that technology can solve the climate change problem. China, the U.S., Europe, and Canada all seem to be keying more strongly on the first promise. However, it is not in the world's best interest to create domestic cleantech industries that are premised on government protection. This is particularly the case in light of McKinsey & Company's observation that the scale of the climate change problem demands a cooperative solution.

IESO to launch wind forecasting service

Ontario's Independent Electricity System Operator announced on August 18 that it will launch a centralized wind forecasting service on behalf of wind generators. The service, which is set to launch in 2010, will enhance system reliability and help developers identify windy areas for future wind projects within existing distribution service territories.

"Ontario has been making great strides to install wind power in Ontario,
increasing capacity this year by more than 50 per cent," says Paul Murphy,
President and Chief Executive Officer of the IESO. "Due to the variable nature
of wind generation, accurate wind forecasting is essential to the operation of
an efficient and reliable power system."

Predicting when and where the wind will blow will not only assist the IESO in managing the grid, but will also assist the OPA, the OEB, distributors and project developers to ensure that wind is developed and integrated into Ontario's supply mix in a cost effective manner.

The microFIT has arrived (finally)

Having spent the last 5 months refining the Feed-in Tariff ("FIT") for larger generators, the Ontario Power Authority has now released details of the program for generators with a capacity less than 10 kW (the "microFIT"). The OPA invites comments on the draft rules and draft contract until Friday, August 28, 2009. Comments must be submitted through the OPA's online tool.

Based on a preliminary review of the microFIT documents, we suspect that the issues with which the OPA will wrestle include:

• Settlement pricing and mechanism: As discussed in a previous posting, the Ontario Energy Board ("OEB") is exploring settlement options under the FIT and microFIT that may be different from the options that have been considered by the OPA in its development of the FIT. The microFIT documents contain notes to draft indicating that their final form will depend on the approach adopted by the OEB.
• Allowable connection configurations: The draft rules contemplate three types of connection: (i) direct connections exclusively to the distribution system, (ii) direct connections in parallel with metered loads, and (iii) embedded connections in series with metered loads (i.e., "behing-the-meter" connections). Notes in the draft rules suggest that generators may not always have the flexibility to choose any of these three options.
• Inclusion of battery systems: Small-scale renewable systems such a PV panels often integrate battery storage so that surplus energy generated when the sun is shining can be saved for use when the clouds roll in. However, battery storage could conceivably be abused under the microFIT if energy was drawn from the grid through a load meter at relatively low market prices, stored temporarily, and then injected back into the grid through the generator meter at much higher FIT prices. The OPA acknowledges that it must determine "acceptable battery back-up system configurations").

It also remains to be seen if the OPA, the Ministry of the Environment, and the OEB will move to harmonize their definition of a "small scale" project. Currently, any project under 10 kW qualifies for the OPA's FIT. However, the Ministry of the Environment may still require proponents of some projects under that threshold to obtain renewable energy approvals (e.g., the MoE's draft documents require renewable energy approvals for wind projects over 3 kW). Meanwhile, the OEB recently amended the Distribution Code queue exemption provisions to apply not only micro-embedded generation projects under 10 kW, but also to small embedded generation facilities (name-plate rated capacity of 250 kW or less in the case of a facility connected to a less than 15 kV line and 500 kW or less in the case of a facility connected to a 15 kV or greater line). For small scale distributed generation to take off, consumers will need to know that they can participate in the microFIT, avoid the hassle of a renewable energy approval, and jump to the front of the connection queue.

Stay tuned for new developments.

OEB issues notice of proposal to move to gross load billing under FIT

This week, the Ontario Energy Board ("OEB") released a notice of proposal to amend the Retail Settlement Code ("RSC") and Distribution System Code ("DSC"). The amendments, which apply only in the context of the OPA's Feed-in Tariff ("FIT") program, would impose gross load billing on load customers that draw power both from the grid and from "behind-the-meter" generators (i.e., embedded retail generators that are connected to load customers in series behind the load customers' meters). As discussed below, the proposed amendments would have implications for load customers, embedded FIT generators, the FIT contract, and local distribution companies ("LDCs").

Under the current regime, load customers with behind-the-meter generation pay both for the cost of the electricity and for non-competitive electriticy costs ("NCEC") and other volume-based charges on a "net load billing" basis. The load customer is billed based not on its full consumption, but on its consumption net of the electricity supplied by the "behind-the-meter" generator. Using power from behind-the-meter generation thus allows a load customer to reduce its utility bill.

Under the proposed amendments the load customer would pay on a "gross load billing" basis. The load customer will pay for electricity, NCECs, and other volume-based charges based on its full consumption, regardless of whether the power is supplied from the grid or by the behind-the-meter generator. Using power from behind-the-meter generation will therefore have no effect on a load customer's utility bill.

The proposed amendments have some very significant implications, including the following:

• Load customers will not be able to avoid paying the "socialized" costs of the electricity grid by installing "behind-the-meter" generation, nor will they be able to insulate themselves from the commodity price of electricity (whether under the RPP or in the wholesale market). Load customers will therefore not be able to fund any part of their investments in behind-the-meter generation out of savings on their utility bills.
• Load customers will tend to be indifferent about the source of their electricity. This indifference will matter where the load customer and the behind-the-meter generator are independent entities. In such cases, the behind-the-meter generator will not reasonably be able to expect the load customer to pay for electricity supplied by the generator. In fact, the load customer may demand compensation for giving the generator the privilege of supplying them with electricity.
• The OPA will have to revise the draft FIT contract schedules dealing with settlement of behind-the-meter generators that are not IESO market participants. Those schedules currently provide that payments to such generators would be based on the amount of power delivered by the FIT generator at a price equal to the FIT price minus the applicable commodity price (i.e., rather than allowing LDCs to collect the commodity charges directly from the load customers, the FIT contract currently contemplates that they will collect them indirectly from the FIT generators by way of a FIT price adjustment).
• LDCs will need more working capital. Under a net load billing arrangement, LDCs would have been able to reduce their working capital requirements because they would be billing for less load and would be responsible for FIT payments discounted by the commodity price. Under the proposed gross billing arrangement, LDCs will be billing on based on full consumption (as they do now) and will be responsible for FIT payments based on the full FIT price, which together will tend to require more working capital. The working capital implications of the proposed amendments may be used to justify LDC rate increases.

The OEB's proposal makes it clear that the changes will apply not only to microFIT projects (e.g., a residential rooftop solar system), but to all behind-the-meter projects under the FIT.

The OEB invites comments on the proposed amendments until August 26, 2009.

UK to launch feed-in tariff program

The UK appears to be following in the footsteps of Ontario. The UK's Energy Act 2008 provided the Department of Energy and Climate Change ("DECC") with broad enabling powers for the introduction of FITs for small-scale low-carbon electricity generation, up to a maximum limit of 5 megawatts (MW) capacity (50 kilowatts (KW) in the case of fossil fuelled combined heat and power). DECC has now commenced public consultations on a proposed feed-in tariff ("FIT") regime.

The proposal is detailed here, an is supported by an impact assessment, quantitative analysis and qualitative analysis. Paul Gipe, long time advocate for FITs, provides his take on the proposal here.

Like the Ontario program, the UK proposal places a lot of emphasis on small scale projects, particularly solar PV. Unlike Ontario's program, however, the UK proposal caps all projects at 5 MW. If passed, the UK program may therefore create competing demand for services and equipment for small scale generation. The UK has already created competing demand for services and equipment for utility-scale projects through its Renewable Obligation program.

Clarification from Premier McGuinty: Ontario has only suspended procurement of new nukes

Premier Dalton McGuinty clarified that the procurement of new reactors for the Darlington Generating Station has been delayed, not cancelled outright. However, no indication was given as to when negotiations with private sector vendors might resume.

Premier McGuinty said that a softening in demand for power in the province as a result of the economic downturn has given the province "more breathing space than we originally thought." However, he acknowledged that renewables and conservation alone will not address Ontario's long term demand for electricity. New nuclear capacity will therefore likely still be required.

McGuinty also confirmed that Atomic Energy of Canada Ltd. ("AECL") was "the front-runner but definitely not the clear-cut winner based on the price." The province had earlier indicated that AECL submitted the only compliant bid under the RFP process. However, its bid must have been substantially higher than the anticipated $20 billion budget for the project. Minister Smitherman advised AECL to "sharpen their pencils substantially."

Ontario cancels new nukes, but what will fill their place?

On June 29, the Government of Ontario suspended the Request for Proposal process to procure two replacement nuclear reactors for the Darlington generating site. While Energy and Infrastructure Minister George Smitherman declared that "emission-free nuclear power remains a crucial aspect of Ontario's supply mix," questions are being raised as to what type of generation will fill the 2,000-3,5000 MW capacity gap that the new reactors were to provide.

RFP responses were received from AREVA NP, Atomic Energy of Canada Limited ("AECL") and Westinghouse Electric Company on February 27, 2009. According to the Ministry of Energy and Infrastructure, only AECL's bid complied with the terms of the RFP. However, Minister Smitherman indicated that AECL's bid was many billions too high. He also expressed concern over AECL future, given that the Canadian government recently announced its intention in late May to sell the beleaguered company.

Amir Shalaby, vice-president of power system planning at the Ontario Power Authority, was quick to point out that "the lights will stay on", even if new reactors are not built at Darlington. Such reactors would not have been operational for about 10 years. However, Mr. Shalaby noted that Ontario's most significant capacity crunch will occur 5 years earlier. Ontario has committed to phasing out its 6,400 MW of coal fired generation by 2014. It may also retire Pickering B nuclear station, which provides 2,100 MW of capacity, around the same time (although OPG has begun a refurbishment study).

Questions are being raised as to how Ontario will address the capacity crunch in 2014 and what, if anything, will be done to add capacity in place of the Darlington new nuclear project. Environmental advocates hope that the capacity gap will be alleviated by improved conservation and filled by renewable generation. Ontario's Green Energy and Green Economy Act, 2009 (see here , here , and here ) is intended to pave the way to a greener energy future. However, it is unclear that renewables, many of which provide power intermittently, can completely fill the shoes of nuclear power, which provides a significant majority of the steady baseload required in the province.

There is therefore a chance that coal may continue to be a part of Ontario's supply mix. For example, Sarnia-Lambton MPP Bob Bailey was quoted as saying "bad news for Darlington is good news for us." Mr. Bailey was referring to the possibility that the coal-fired Lambton Generating station may have to be kept in service beyond 2014. Keeping any coal-fired plants in service would likely be a major political blow for the McGuinty government, which has already had to delay (first to 2009 and then to 2014) its promise to phase out coal.

Mr. Shalaby is confident that Ontario has time to develop other options, which could include using more natural gas-fired generation, increasing imports of power, reducing exports, and encouraging combined heat and power projects in urban areas.

OEB launches new portal for its Green Energy Act initiatives

The Ontario Energy Board ("OEB") recently launched a web portal for its green energy initiatives. The OEB is being called upon to help Ontario transition to a green economy powered by renewable energy. Following the enactment of the Green Energy and Green Economy, 2009, the Board has three new objectives:
1) The promotion of renewable energy, including the timely connection of renewable energy projects to transmission and distribution systems;
2) The promotion of conservation and demand management; and
3) The facilitation of the implementation of a smart grid.

The new portal provides current information about the OEB's initiatives to help it meet its new objectives.

OPA posts draft FIT contract

The Ontario Power Authority ("OPA") has released a draft of the standard contract to be used under the Feed-in Tariff ("FIT") program (the "FIT Contract"). The draft contract reflects much of the feedback received during the extensive consultations held by the OPA. Specifically, it includes the revisions to the FIT Program announced by the OPA on May 12.

The draft FIT Contract and associated documents are available online.

The OPA invites comments and feedback on the contract and associated documents until Friday, June 26, 2009. Comments must be provided through OPA FIT website.

OEB releases discussion paper exploring more innovative approaches to cost recovery for electricity infrastructure projects

Further to the Ontario Energy Board ("OEB") Chair's announcement on April 3 and his letter of June 1, the OEB released a Staff Discussion Paper on The Regulatory Treatment of Infrastructure Investment for Ontario's Electricity Transmitters and Distributors on June 10.

The discussion paper was prompted by the passing of the Green Energy and Green Economy Act, 2009 (the "Act") last month. The OEB describes the purpose of the paper as follows:

"This Discussion Paper is intended to solicit input from all interested stakeholders on a range of alternative mechanisms within an integrated framework for the regulatory treatment of infrastructure investment. The focus of this Discussion Paper is specifically on infrastructure investment by electricity transmitters and distributors. The [Act] establishes a legislative framework that imposes responsibilities on electricity utilities in relation to smart grid development and renewable generation connection activities, and that requires the Board to be guided by the objective of promoting or facilitating such activities. Nonetheless, staff notes that this need not preclude the Board from considering use of such a framework for other rate-regulated entities."

Written comments must be filed with the OEB by July 7, 2009. As explained in the cover letter to the discussion paper, cost awards will be available to eligible persons under section 30 of the Ontario Energy Board Act, 1998 for their participation in this consultation

MOE and MNR release draft requirements for approvals under Ontario's new Green Energy Act

Two major pieces of the Green Energy Act regulatory puzzle were released for comment today. The Ministry of the Environment ("MOE") posted proposed regulatory changes pursuant to the Green Energy and Green Economy, 2009 Act ("MOE Regulatory Changes"), including a document describing the requirements of the new Renewable Energy Approval ("REA Approval Requirements"), on the EBR Registry. Simultaneously, the Ministry of Natural Resources ("MNR") posted its draft approval and permitting requirements for renewable energy projects("MNR Approval Requirements").

In announcing the proposed MOE Regulatory Changes, REA Approval Requirements, and MNR Approval Requirements, the Government of Ontario highlighted that the proposals are consistent with the one-window approvals process and standardized requirements for renewable energy projects promised under the Green Energy Act. The MNR emphasized that proponents will be expected to submit a "complete application" that addresses the requirements of the MNR, the MOE, and any other Ministry that has jurisdiction over aspects of renewable project development. Based on our preliminary review of the requirements released today, preparing a complete application for most types of renewable projects will be a very significant undertaking.

MOE Regulatory Changes

MOE proposes to amend five regulations to implement the Green Energy Act:

• Environmental Assessment Act, Ontario Regulation 116/01 (Electricity Projects) will be amended to exempt most renewable energy generation facilities (except large scale hydro) from the requirements of the Environmental Assessment Act ("EAA"). This change, which addresses the last great historical environmental hurdle for developers, will be very significant for those who wondered why the EAA was not addressed in the Green Energy and Green Economy Act, 2009.
• Environmental Assessment Act, Revised Regulations of Ontario 1990, Regulation 334 (General) will be amended to state that renewable energy generation facilities and renewable energy testing facilities that are carried out by the Crown, municipalities or public bodies are exempt from the EAA.
• Environmental Assessment Act, Ontario Regulation 101/07 (Waste Management Projects) will be amended to create an exemption for renewable energy generation facilities, meaning that the regulation and the EAA will not apply to a renewable energy generation facility that is also a waste disposal site.
• Environmental Bill of Rights, 1993, Ontario Regulation 681/94 (Classification of Proposals for Instruments) will be amended to classify the Renewable Energy Approval as a Class II instrument under the Environmental Bill of Rights, 1993, meaning that the MOE would have to give notice of proposals for a Renewable Energy Approval in accordance with the Environmental Bill of Rights Act, 1993.
• Environmental Bill of Rights, 1993, Ontario Regulation 73/94 (General) will be amended to provide that the provisions of the Environmental Bill of Rights, 1993 relating to leave to appeal do not apply to a proposal to issue, amend or revoke a Renewable Energy Approval. Note however that an appeal as of right for third parties exists under the amended Environmental Protection Act.

The MOE is also considering amending Environmental Protection Act, Revised Regulations of Ontario 1990, Regulation 347 (General - Waste Management) to facilitate the intermediate processing of biomass waste and the use of agricultural by-products for biomass projects. Details of these amendments have not yet been released.

REA Approval Requirements

Proponents applying to the MOE for a Renewable Energy Approval will have to provide the following:

• Description of Project, including information about the generation technology, nameplate capacity and expected output, location and land tenure, etc.;
• Construction Plan, including details regarding the mitigation of any impacts of construction;
• Site Plan, including pans showing existing natural features, existing and proposed infrastructure, surrounding land use, points of reception, etc.;
• A Stormwater Management Plan, as applicable;
• A Response Plan for addressing emergencies arising from the operation of the facility;
• A Consultation Summary, including a details of public, municipal, and Aboriginal consultation, what concerns were raised and how they will be addressed;
• Evidence that any Cultural Heritage resource considerations are assessed and mitigated, if applicable;
• Natural Heritage submissions showing that the facility is sited outside setbacks for significant natural heritage features, or documentation of a mitigation approach (approved by MNR);
• Water Bodies submissions showing that the facility site is outside setbacks for sensitive hydrologic features, or documentation of a mitigation approach ;
• A discussion of the extent to which Provincial Policy Plansapply to the renewable energy generation facility, and documentation that development is permitted, if siting on the Niagara Escarpment;
• Technology-Specific Requirements.

Each of these items is discussed in much greater detail in the documentation released today.

One of the most highly anticipated Technology Specific Requirement is the setback requirement for on-shore wind turbines. MOE has proposed a universal minimum setback of 550 m, with larger setbacks required based on a matrix of sound power levels from various numbers of turbines. In applying the setback requirements, all turbines within 3 km of the receptor must be considered, even if they are not part of the same project.

The REA Approval Requirements do not apply to some types of projects. For example, solar photovoltaic facilities with a nameplate capacity less than 10 kW (the smallest class under the OPA's Feed-in Tariff proposal) would not require a Renewable Energy Approval (or any Certificate of Approval).

MNR Approval Requirements

Pursuant to the newly added s. 13.2 of the Ministry of Natural Resources Act, MNR can request documentation in connection with renewable energy projects for the statutes it administers, including the following:

• Ministry of Natural Resources Act;
• Public Lands Act;
• Lakes and Rivers Improvement Act;
• Fish and Wildlife Conservation Act;
• Endangered Species Act, 2007;
• Crown Forest Sustainability Act;
• Forest Fires Prevention Act;
• Aggregate Resources Act;
• Oil, Gas and Salt Resources Act;
• Provincial Parks and Conservation Reserves Act;
• Conservation Authorities Act; and
• Niagara Escarpment Planning and Development Act.

For projects that will be constructed on Crown land, a complete submission to the MNR will include:

• Documentation of public consultation;
• Documentation of Aboriginal consultation;
• Project description;
• Site plan;
• Documentation of natural resource assessment and actions taken;
• Documentation that other interests on Crown land have been addressed;
• Construction plan;
• Post-construction monitoring plan;
• Public safety plan; and
• Decommissioning plan.

The MNR will require additional information for specific generating technologies. For example, developers of on-shore wind farms will have to address bird and bat issues.

The MNR may require even more information if the project will require the removal of aggregate materials, the harvesting of Crown forest resources, or the prevention of wildfires, or if the project is located in a Provincial Park or Conservation Area, near a natural hazard or in an area subject to a Forest Resource or Sustainable Forest License.

It is immediately apparent that some of the MNR's requirements are also required as part of an application to the MOE for a Renewable Energy Approval. We hope but cannot confirm that MNR and MOE will work together to harmonize any overlapping requirements. Ideally, such harmonization will occur with the input of the new Renewable Energy Facilitation Office.

For projects that will be constructed on private land, the MNR will require documentation in respect of the following:

• any impact of the project on species or habitat protected under the Endangered Species Act, 2007;
• any applicable Fish and Wildlife Conservation Act authorizations;
• setbacks from petroleum resources operations; and
• construction plan for any water crossings, bridges, culverts and causeways.

The MNR Approval Requirements include exemptions for specific types of small-scale waterpower, windpower, solar, and biomass, biogas and biofuel facilities.

The MNR Approval Requirements also address the construction of testing facilties, amendments to plans prior to construction, and expansions and modifications of facilities, as well as certain specific types of appeals.

Public consultation

MOE Regulatory Changes, REA Approval Requirements, and MNR Approval Requirements are all open for public comment until July 24, 2009. Comments can be submitted through the EBR Registry or to the individuals identified on the EBR Postings. See posting 010-6516 for the MOE Regulatory Changes and REA Approval Requirements and posting 010-6708 for the MNR Approval Requirements.

In addition, the MOE will be holding 6 information meetings between June 15 and July 25. See the MOE's Renewable Energy Approval page for details.

OEB Chair formally announces initiatives regarding electricity infrastructure investment

Howard Weston, Chair of the Ontario Energy Board ("OEB"), issued a letter on June 1 to all electricity market stakeholders announcing new OEB initiatives to implement an "integrated Regulatory framework" for electricity infrastructure investment. The announcement was foreshadowed by a statement from the Chair in April. The initiatives are all in response to the changes to be implemented by the Green Energy and Green Economy Act, 2009.

The OEB will undertake planning and consultations to address the following 3 related issues:

• Distribution infrastructure planning and funding related to renewable generation connection and smart grid development activities: The Board hopes to implement accounting and funding mechanisms to allow utilities to invest in enhancements to the smart grid upgrades and upgrades to connect new renewable generation;
• Cost recovery for infrastructure investment associated with those activities: The Board will explore more "innovative" approaches to cost recovery for renewable generation and smart grid upgrades. Several possible approaches were discussed in the Chair's earlier announcement.
• Cost responsibility associated with the connection of renewable generation facilities to distribution systems: This issue will be addressed through proposed amendments to the Distribution System Code. The amendments are intended to ensure that "costs are fairly allocated in a

manner that protects ratepayers, promotes the connection of renewable resources and maintains appropriate locational signals as a means of ensuring that site selection for generation is economically efficient."

The OEB will release materials on all three initiatives in the coming weeks. Stay tuned for updates.

The Chair also noted that the OEB is working on further initiatives to "give effect
to the new target-based and global adjustment-funded regime for electricity conservation and demand management."

OEB issues notice to amend Distribution System Code

On May 14, the Ontario Energy Board ("OEB") gave notice that it intends to amend the Distribution System Code ("DSC") (see also a subsequent clarification letter). The proposed amendments will change the rules for generators who wish to apply to connect to distribution systems. While under development before the passing of the Green Energy Act, the proposed amendments appears most squarely aimed at the type of renewable generation projects that will be built pursuant to Ontario's new Feed-in Tariff system.

The OEB identified two related objectives to the proposed amendments:

• "To ensure that viable generation projects, and in particular renewable generation projects, are connected to the distribution system in a timely manner";
• "To ensure that generation projects that are not likely to proceed do not impede the allocation of capacity to more viable projects."

Six major types of changes are proposed:

• The distribution connection queue will be abolished and replaced with a concept of a capacity allocation. Projects that successfully complete a connection impact assessment ("CIA") will receive a capacity allocation instead of a spot in a queue;
• CIA applications will only be accepted for feeders or substations that have available capacity to connect;
• Proponents will have to meet certain CIA application prerequisites, including confirming available capacity, showing that projects will be ready to connect within 3 years, demonstrating site control, and providing certain technical information;
• Proponents will have to pay a Connection Cost Deposit equal to 100% of the estimated connection costs and a Capacity Allocation Deposit equal to $20,000 per MW of nameplate capacity upon execution of a Connection Cost Agreement (although these deposits may be waived for applicants who have tendered security as part of the FIT application process);
• Proponents will have to meet new technical requirements, in particular by submitting engineering designs and detailed electrical drawings to the distributor at least 6 months before the planned in-service date;
• Certain transition mechanisms will be added to accommodate applicants who have already commenced applications or who hold RESOP contracts.

As evident from the notice, the proposed amendments will have to feather together with the requirements of the FIT application process, which addresses issues like capacity availability, security deposits, approval timing, and legacy projects. However, as currently worded, the proposed amendments may not fit neatly together with the Ontario Power Authority's proposed FIT process. For example, the proposed DSC amendments provide that a CIA will not be performed if the project exceeds the technical capacity limits of a distributor's system. Presumably, this refers to the existing limits of the system. In contrast, the FIT application process contemplates situations in which a FIT contract would be awarded where capacity was planned but not actually built.

The proposed DSC amendments are one of several OEB initiatives that have or will be pushed to the front burner as a result of the passing of the Green Energy Act. Other examples include the OEB's decision regarding queue exempt facilities and letter from the Board's chair suggesting that the regulatory process for reviewing capital spending by transmitters and distributors may be reviewed
Other electricity market stakeholders are also adjusting their processes as a result of the passing of the Act. For example, Hydro One Distribution is in the middle of a consultation process regarding proposed distributed generation connection requirements.

The OEB has invited comments on the proposed amendments to the DSC until June 10, 2009.

Ontario launches time-of-day electricity pricing initiative

Ontario has begun implementing time-of-use electricity pricing. Beginning in June, 10,000 homes in Toronto will pay different prices for electricty depending on the time of day when the power is consumed. The province expects to roll out time-of-day pricing to a million homes by next summer.

Under the new pricing scheme, consumers will pay the following:
- On-peak: 9.1 cents
- Mid-peak: 7.6 cents
- Off-peak: 4.2 cents

As detailed here, on-peak, mid-peak and off-peak periods between weekdays and weekends and between winter and summer.

Time-of-day pricing is made possible by new smart meters, which Ontario's electricity distributors have been installing over the past few years.

However some have criticized Ontario's smart meters for not being smart enough. Currently, the meters do not provide real-time consumption feedback to customers. Many feel that time-of-day pricing will not have a significant impact on consumption unless consumers can, to us an anachronism, watch their meters spin.

Ontario passes Green Energy Act

The Ontario legislature passed Bill 150, the Green Energy and Green Economy Act, 2009, today. The Green Energy Act is intended to pave the way for the widespread deployment of renewable power while creating up to 50,000 "green collar" jobs in the province.

In the words of Deputy Premier and Minister of Energy and Infrastructure George Smitherman, "the Green Energy Act will truly set us on the path to a 21st century green economy for Ontario, one that is sustainable, easy on the environment, and focused on the jobs of the future. We'll be working hard to ensure Ontario gets every benefit possible from renewable energy and from the efficiency and savings that come from developing a culture of conservation."

The bill passed third reading by a vote of 59 to 13, with opposition from the Progressive Conservatives, who were concerned that the Green Energy Act would burden consumers with increased electricity prices.

The enthisasm of environmentalists was qualified by a concern that the province still relies too heavily on nuclear power.

Renewable power investors and developers, however, are very excited about the new legislation. The combination of compelling feed-in tariff pricing and a streamlined approvals process sends a strong signal that Ontario is open for business in the renewable energy sector. Developers and investors from around the world have their eyes on Ontario.

As explored in our recent client seminar, translating the promises of the Green Energy Act into successful projects will require an in-depth understanding of the regulatory framework under the Act. Davis continues to track the evolving regulations and will provide updates through this blog.

Green Energy Act goes to 3rd reading, amendments proposed

Ontario Bill 150, the Green Energy and Economy Act, 2009, was ordered for third reading on May 30, 2009. The bill therefore currently appears to be on track to pass in June of this year.

Bill 150 has been intensely debated in the legislature (and in the press) over the past two months and has been the subject of extensive testimony by witnesses before the Standing Committee on General Government.

As a result of these consultations, Minister Smitherman announced a series of amendments to Bill 150 earlier this week:

• Home energy audits will now be required at the buyer's option and related enforcement provisions will be deleted;
• Community consultation and municipal assistance will be assured through specific amendments to the bill;
• Community and aboriginal assistance will be advanced through a parallel policy initiative;
• Health concerns will be addressed by amending grounds for appeal under the Environmental Protection Act;
• Setbacks will be the subject of ongoing consultations by the Ministry of the Environment;
• Domestic content requirements will be explicitly strengthened;
• The Minister's directive powers under the bill will be limited only to renewable energy, energy efficiency and conservation - i.e., not nuclear;
• Energy procurement policy will be reviewed to address energy technologies including geothermal, solar thermal, combined heat and power and small scale wind;
• Stray voltage concerns will be addressed by the Ontario Energy Board; and
• The Environmental Commissioner of Ontario's ability to carry out its role will be ensured through certain amendments.

The full text of the amendments does not yet appear to have been posted on the website of the Legislative Assembly.

OEB Chair issues letter regarding possible changes to regulatory approval of capital spending by transmitters and distributors

On April 3, Howard Wetston, Chair of the Ontario Energy Board ("OEB") issued a statement regarding upcoming changes to the way the OEB will regulate capital investment in Ontario's electricity grid. Ontario's Green Energy and Green Economy Act, 2009, if passed, will place new obligations on transmitters and distributors to upgrade their infrastructure to accommodate distributed generation, renewable generation, and enhanced conservation and demand management (see our bulletin for more details). The Chair notes that the magnitude of these new investments has "led me to consider
how the Board could create conditions which would foster timely investment by utilities in required infrastructure."

In particular, the Chair is "of the opinion that electricity utilities may need greater regulatory certainty prior to making significant capital investments." The OEB will therefore consider modifying the its approach to cost recovery for capital investment. Some of the alternatives that the OEB may consider are the following, which the Chair characterizes "as possible elements of an integrated cost recovery approach for infrastructure costs":

• the ability to recover construction costs while construction is in progress;
• the ability to recover certain project costs as they are incurred or based on the achievement of certain milestones;
• the ability of a utility to apply to the regulator outside of the normal rate application cycle for a rate increase as a result of a single capital project; or
• the imposition of rate riders or surcharges to allow for the recovery of certain specific cost increases without the need for a general rate case.

The Board expects to initiate a formal consultation shortly.

Hydro One Distribution releases distributed generation interconnection requirements for public consultation

The Green Energy Act, if passed, will place a significant onus on owners of distribution systems to connect small scale renewable energy projects to the grid. Hydro One Distribution is readying itself for the change. It recently released draft Distributed Generation Technical Interconnection Requirements - Interconnections at Voltages 50kV and Below for public comment.

Stakeholders are invited to submit question and comments by email to DGConnectionReq@hydroone.com. The deadline for providing feedback is April 23rd, 2009.

Hydro One plans to hold one public meeting to discuss the draft requirements at a date to be determined. More information is available on the Hydro One DG site.

Sun set to shine on Kingston: Everbrite announces plans for $500 million facility

After months of negotiation, Everbrite Solar announced that it will build a $500 million ultra-high efficiency thin-film photovoltaic (PV) manufacturing facility in Kingston, Ontario. According to its press release, Everbrite Solar forecasts that the facility's annual production of thin-film modules will be capable of produce 150 MW of clean power. The plant could generate up to 1,200 direct and indirect jobs in a community whose manufacturing sector has contracted significantly in recent years.

The announcement has attracted significant media coverage, including articles in the Kingston Whig Standard, the Toronto Star, and the Globe and Mail. It is the latest in a series of proposed solar investments in Ontario, as discussed in a recent posting.

Everbrite Solar chose Kingston in part because of the potential for extensive research collaboration with Queen's University, particularly the Department of Mechanical and Materials Engineering. The Department has several professors working on solar technologies, including Joshua Pearce and Steve Harrison. As part of its overall investment, EverBrite Solar is prepared to build a $25 million experimental thin-film manufacturing facility for use by Queen's researchers, provided that a collaboration agreement can be reached. EverBrite Solar CEO Karl Scherre expects that "Queen's participation in Everbrite Solar's Kingston research and development community will ensure that the ultra-high efficiency thin-film modules produced by Everbrite will continue to improve and be best in class for quality, efficiency and production costs." According to the Toronto Star, Dr. Pearce describes the plan as "a dream come true."

Some commentators are drawing parallels with the relationship between ARISE Technologies Corporation and the University of Waterloo, although ARISE established its principal manufacturing facilities in Germany.

Kingston may be well positioned to become a renewable energy centre of excellence. Several green power related initiatives already call Kingston home, including Performance Plants Inc. (which is affiliated with Queen's and has partnered with Lafarge in nearby Bath on a project), Canadian Hydro Developers Wolfe Island Wind Farm, SWITCH's alternative energy cluster, and various participants in Innovation Park. Also PARTEQ Innovations, which helps commercialize Queen's research, was recently awarded $9.1 million from the federal government to establish a National Centre of Excellence for the development and commercialization of Green Chemistry technologies. A company like EverBright Solar could be Kingston's Research in Motion.

EverBrite Solar is a subsidiary of EverBrite Industries Ltd., a full service industrial and commercial electrical contractor located in Toronto, Canada. EverBrite Solar continues to work with several investment advisors to raise the capital required for the proposed plant.

Green Energy Act update

The Ontario Legislature carried Bill 150, the Green Energy Act, at second reading on March 11 and ordered the bill referred to the Standing Committee on General Government. Check here for updates or track the progress of the bill online.

Bill 150 is posted for comment on Ontario's Environmental Registry (ERB Registry Number 010-6017). The deadline for submitting comments is this Thursday, March 28. Comments received before the deadline will be considered as part of the decision-making process by the Ministry of Energy and Infrastructure.

Ontario and its agencies will offer ongoing opportunities to comment on draft regulations. For example, see our recent posting regarding OPA consultations on the proposed feed-in tariff.

The sun is shining on Ontario

The Green Energy Act, and the related Feed-in Tariffs proposed last week, are helping to make Ontario a hot destination for big solar developers. As reported in the Toronto Star, several players have very recently acquired big stakes in the province (or have indicated that they are considering doing so). Transactions of note include the following:

• First Solar's acquired a 2,000 MW project pipeline from OptiSolar, including 200 MW of projects in Ontario;
• Recurrent Energy's acquired a 350 MW pipeline from UPC Solar, including many Canadian projects;
• Nanosolar Inc. indicated to the Toronto Star that it is considering establishing an assembly plant for its thin-film solar modules in Ontario and may be planning Ontario solar farms with EDF Energies Nouvelles (which already has a big wind presence in Quebec and just did a turbine deal with SkyPower Corp.);
• SunEdison Canada has co-ventured with SkyPower Corp. on several projects (a 9 MW project in Lennox-Addington county, 10 MW project in Thunder Bay and a 9.2 MW project in Norfolk County), but would like to see an even higher tariff for ground-mounted solar
• Axio Power, formerly Greenlight, is also developing projects in Ontario.
• The Star reports that at least two other firms - one of them domestic - are planning to set up solar-cell manufacturing operations in Ontario.

While some of these deals pre-date the annoucement of the Green Energy Act, it is clear that the Act makes the province an even more attractive destination for solar investment dollars. As the CEO of Nanosolar told the Star, the proposed feed-in tariff "makes the market predictable and thus investible for the kinds of long-term, fundamental technology improvements and investments that will ultimately make solar a mainstream energy source."

Ontario unveils feed-in tariff program promised under the Green Energy Act

On March 12, the Ontario Power Authority ("OPA") unveiled its proposal for Feed-in Tariff ("FIT") pricing. The FIT is a key feature of the Ontario Green Energy Act, which is currently working its way through the Ontario legislature (see our bulletin for details).

The proposed rates, reproduced below, vary by technology and project size. The prices are intended to cover capital, operating and maintenance costs while providing a reasonable rate of return on a 20-year investment. According to the OPA, the FIT prices were "developed based on experience here in Ontario and in other jurisdictions."

Proposed Feed-In Tariff Prices for Renewable Energy Projects in Ontario

Biomass
Any size: 12.2¢/kWh

Biogas
5 MW or less: 14.7¢/kWh
over 5 MW: 10.4¢/kWh

Waterpower
50 MW or less: 12.9¢/kWh
Community-base, 2 MW or less: 13.4¢/kWh

Landfill gas
5 MW or less: 11.1¢/kWh
over 5 MW: 10.3¢/kWh

Solar PV
Rooftop
10 kW or less: 80.2¢/kWh
10 to 100 kW: 71.3¢/kWh
100 to 500 kW: 63.5¢/kWh
over 500 kW: 53.9¢/kWh

Ground
10 MW or less: 44.3¢/kWh

Wind
Onshore, any size: 13.5¢/kWh
Offshore, any size: 19.0¢/kWh
Community, 10 MW or less: 14.4¢/kWh

(All but wind and solar may be subject to different peak and off-peak prices).

For comparison, natural gas plants are currently paid between 8.5-11¢/kWh; nuclear plants between 6-7¢/kWh; and hydro plants between 5.7-6.2¢/kWh.

The OPA will be holding a series of 8 weekly stakeholder consultation workshops from March 17 to May 5. The agenda for the first session, which will deal with the objectives of the FIT program, is already available.

The OPA will continue to post updates about the program in a new section of its website.

Ontario to host workshops on provincial requirements for renewable energy technologies: March 23, 25 and 26

The Ontario government is beginning stakeholder consultations that will inform the regulations to be written under the Green Energy Act. The first series of workshops is intended to bring together stakeholders from across Ontario to brainstorm and provide advice on potential provincial requirements for renewable energy projects. The Workshops will be held on Monday, March 23 and Wednesday, March 25 from at the North York Centre Library Auditorium and on Thursday, March 26 at the Fairview Library. All three workshops will run from 1pm to 5pm and will feature the same content. A registration form is available online.

Minister Smitherman promises to "supercharge" Ontario's green economy

Minister of Energy and Infrastructure George Smitherman addressed a crowd of 750 people this morning about the Green Energy Act (the "Act") that will be tabled on this coming Monday. He did not discuss the entire Act, but did provide some more specific hints at what we should expect.

He identified the two main thrusts of the Act as being facilitating new renewable energy projects and fostering a culture of conservation. His expects that the Act will "supercharge" the green economy in Ontario and could lead to the creation of up to 50,000 new jobs in the province.

With respect to renewables, he emphasized that the Act would provide an attractive price for power and improved certainty for project developers. The attractive pricing will be in the form of a feed-in tariff regime "inspired by Europe but engineered for Ontario." The regime would apply to on- and off-shore wind, solar, geothermal and biomass projects.

Improved certainty will result from changes to the approval process for projects. The Act will replace the need for multiple approvals with a "one window, one permit" approach. The man who tackled health care wait times also announced that the Act will include service time guarantees. Specifically, complete project applications will be processed within 6 months.

As part of streamlining project development, the Act will replace the patchwork of set-back rules made by municipalities with a province-wide set-back requirement based on the Ministry's review of a wide variety of peer reviewed studies of the health risks associated with living close to wind farms and other renewable projects. This part of the Act, which Minister Smitherman characterized as an "uploading" of responsibility from the municipalities to the province, is likely to raise the ire of the NIMBYs that Premier McGuinty criticized in recent weeks.

The Act also contemplates transmission and distribution system upgrades and investment in smart grid technology, presumably at the distribution level. More accommodation will be made for distributed generation, both by facilitating interconnection and by providing grants and low-interest loans to community and cooperative power initiatives.

The Minister also hinted at an enhanced role for first nations.

As mentioned above, Minister Smitherman did not reveal every detail of the Act (he joked that doing so would take not only breakfast but all the way through lunch). However, he did indicate that the Act proposed to amend 15 existing statutes. He confirmed that the Act will be introduced in the legislature Monday morning. Stay tuned for more details.

OEB to allow small-scale renewable projects to jump the distribution connection queue

Effective February 12, 2009, the Ontario Energy Board ("OEB") amended its Distribution System Code ("DSC") to make it easier for small-scale generation projects to connect to the grid. By default, projects that wish to be connected to a distribution system are considered on a "first come first served" basis. The amendments to the DSC exempt certain projects from the default process, allowing them to jump the queue.

Under the previous version of the DSC, "micro-embedded generation projects", defined as embedded generation facilities with a name-plate rated capacity of 10 kW or less, were exempt fron the queuing process. The amendments preserve the exemption for micro-embedded generation projects and extend it to apply also to "queue exempt small embedded generation facilities", which include the following: any embedded generation facility which is not a micro-embedded generation facility and which has a name-plate rated capacity of 250 kW or less in the case of a facility connected to a less than 15 kV line and 500 kW or less in the case of a facility connected to a 15 kV or greater line.

The expanded exemption applies retroactively to projects already in the connection queue. However, distributors retain the discretion to reject applications where the proposed project may adversely impact a larger generation project already in the queue. Such rejections must be put to the OEB for consideration. A detailed discussion of the amendments, and the discussions leading up to them, is available from the OEB.

In its press release, the OEB justified the amendments as follows: "These changes will support the development of smaller, local generation by allowing pending projects to move forward immediately, and by simplifying the process to connect new smaller generation projects."

The Green Energy Act, to be unveiling next week, may further simplify the process by requiring distributors to connect renewable power projects. The Green Energy Act Alliance (see our related posting ) has been advocating for a "right to connect." We should know by Monday whether such a right is part of Minister Smitherman's bill.

Ontario Green Energy Act imminent

There has been a lot of buzz about Ontario's Green Energy Act in recent months. This week the buzz may become reality.

The "Green Energy Act" that most people have been talking about has been the Green Energy Act Alliance's draft recommendation (see also their executive summary). Despite some apparent confusion, this proposal is not law, but merely an effective PR campaign by the Alliance, an NGO. However, Premier McGuinty announced on February 5 that his government will table a Green Energy Act bill in the legislature later this month. Minister of Energy and Infrastructure George Smitherman is scheduled to address the Toronto Board of Trade about the Green Energy Act this Friday. It therefore appears that the Alliance may soon get its wish.

But will the wish be granted in full? The contents of the bill are still unknown. If it mirrors the Alliance's proposal, it will include provisions addressing the following:

• Setting of renewable power targets for the province;
• Prioritizing conservation and renewable power over the procurement of new traditional generation;
• Recognizing additional economic benefits associated with renewable and distributed power;
• Creating renewable feed-in tariffs to encourage the development of renewable power;
• Providing priority (and in some cases guaranteed) access to the grid for renewable and distributed power projects;
• Financing green power through a public debt fund;
• Recognizing the value of community-based power projects;
• Protecting the interests of First Nations and Metis;
• Upgrading transmission infrastructure to create a smart grid;
• Encouraging conservation;
• Protecting the environment, including by expediting project approvals (perhaps by curtailing recourse to the Ontario Municipal Board (the "OMB")); and
• Protecting vulnerable consumers.

We will post again once the bill is released. In the meantime, Premier McGuinty has already said that the bill will include a major investment in a smart grid for Ontario. Of the remaining measures proposed by the Alliance, the suggestion that the province should be able to fast track project approvals despite local objections has already generated significant controversy. Premier McGuinty has spoken out against unjustifiable local opposition to projects, saying "NIMBYism will no longer prevail" (where a NIMBY is one who cries "not in my backyard"). Citizens have retorted that the Premier is unfairly painting all local objections with the same brush and that the proposed measures will undermine local democracy. We expect the controversy to intensify if the bill contains such approval fast-tracking provisions.

(Interestingly, there is already a section 62.0.1 of the Planning Act (Ontario) would already appear to give the province the option of avoiding Planning Act requirements, including recourse to the OMB, for certain energy projects. However, we are unaware of any time that this power has been used.)

Stay tuned for updates once the bill is released.

OPG seeks expressions of interest to supply biomass to coal plants

Will the mountains of coal at Nanticoke Generating Station one day be replaced by mountains of switchgrass pellets? Ontario Power Generation is taking further steps to answer that question. OPG had already run some pilot projects in which it co-fired biomass with coal in several of its generating stations. It now wants to assess the commercial feasibility of a large scale switch to biomass.

To that end, OPG has issued a request for expressions of interest (RFEI) for the supply of biomass to Ontario's coal-fired generating facilities. OPG is seeking pricing information regarding the entire solid biomass fuel supply chain, including fuel production, loading/storage, quality control, road/rail/ship transportation, rail equipment, and lakeport terminal services. Interested parties must confirm their participation by February 3, 2009. Responses are due at 3:00 pm on February 26, 2009.

For more background on the announcement, see Tyler Hamilton's article in the Toronto Star.

Ontario electricity consumption down 2.3% in 2008

Ontario's used 148 terawatt hours (TWh) of electricity in 2008, 2.3% less than in 2007, reports Ontario's Independent Electricity System Operator (IESO). The IESO attributes the drop to changing economic conditions, increased conservation efforts, and milder weather. Paul Murphy, IESO President and CEO, emphasized the relevance of weather: "While the mild and wet summer of 2008 won't be remembered fondly by vacationers, the increased precipitation led to record levels of hydro output and a low peak demand for electricity due to a reduction in the use of air conditioning.”

Ontario produced a total of 159.3 TWh in 2008 (net exports were 10.9 TWh) from the following sources:

• Nuclear: 53% (84.4 TWh)
• Hydroelectric: 24.1 % (38.3 TWh)
• Coal: 14.5 % (23.2 TWh)
• Gas/Oil: 6.9% (11 TWh)
• Wind: 0.9% (1.4 TWh)
• Other Sources: 0.6 % (1 TWh)

IESO highlighted that coal-fired generation was down 18% from 2007 while wind power was up 35% from 2007. This is consistent with the province's desire to phase out coal while increasing renewable generation capacity. The IESO expects wind production to top 2 TWh in 2009.

Peak demand was also down in 2008. Demand surged above 24,000 MW for only 4 hours in 2008, as compared to 62 hours in 2007.

Despite the softening demand, the average weighted spot market price for energy was $51.67 per megawatt hour (MWh) or 5.2 cents per kilowatt hour (kWh), up slightly from $50.51 per MWh in 2007.

IESO: Ontario still on track to phase out coal

"Ontario is well positioned for the phase-out of coal-fired generation by the end of 2014," concluded the Independent Electricity System Operator (IESO) as part of its most recent Ontario Reliability Outlook, released December 22, 2008. OPG is obliged to wean itself off coal by 2014 by Regulation 496/07, which will prohibit the use of coal to fire the Atikokan, Lambton, Nanticoke, and Thunder Bay Generating Stations after December 31, 2008.

The IESO is confident that 10,000 MW of new or planned generation and demand management will be sufficient to support the elimination of coal-fired generation in Ontario. However, the IESO also concludes that Ontario must transform the way it operates its electricity grid and must make significant improvements to transmission infrastructure if the phasing out of coal (and phasing in of renewables) is to be a success.

Before the 2014 deadline, OPG must mitigate the greenhouse gas emissions of its coal-fired generating stations. Last May, the Ministry of Energy imposed greenhouse gas emission targets on OPG (through a Ministerial Directive that was approved by the Ontario Energy Board and two shareholder resolutions passed by the Minister). Emissions from coal-fired generation may not exceed 19.6 Mt CO2e in the 2009 calendar year and 15.6 Mt in 2010.

On November 28, 2008, OPG delivered to the Ministry a strategy for meeting the targets. The strategy has four prongs:

• OPG will designate certain planned outages as CO2 outages. If the IESO needs to dispatch the units during designated CO2 outages, the emissions released as a result will not count towards the targets;
• OPG will manage the operation of the units to minimize wasteful emissions. OPG will designate certain units as Not Offered But Available ("NOBA") for parts of the year. NOBA units will not be started unless a coal-fired unit is forced out of service or the IESO directs the NOBA unit to operate;
• OPG will apply an "emission adder" to the price of coal-fired power. The emission adder is an additional premium per tonne of emissions that is intended to price the unit out of the market at all but peak demand periods. OPG estimates that an emission adder of $7.50 per tonne wil suffice;
• OPG will match its coal purchases to the target emissions.

Interestingly, OPG's strategy does not mention co-firing coal with biomass. OPG is already piloting the use of biomass in each of its four coal-fired generating stations (see the media backgrounder issued in June 2008). Biomass is considered by many to be "carbon neutral", meaning the amount of carbon released when burned is equal to the amount removed from the atmosphere when being grown. Biomass could therefore be used to reduce the reportable emissions of the coal-fired facilities. That biomass co-firing was not included in OPG's strategy likely reflects OPG's reservations about the large-scale implementation of this emissions reduction option.

Hydro One obtains first approval for Bruce transmission line

On September 15, 2008, the Ontario Energy Board ("OEB") conditionally approved Hydro One's application to build a $635 million high-voltage transmission line from Kincardine to Milton. Once built, the line could carry up to 3,000 MW of nuclear and renewable power from the Bruce Peninsula to the power hungry Golden Horseshoe. The project, which would be the most significant transmission infrastructure upgrade in 20 years, would address one of the "orange zones", identified by OPA as having signficiant transmission capacity constraints.

The OEB's decision is the first major approval required before Hydro One can break ground on the project. The decision is conditional upon the project receiving Ontario Environmental Assessment Act approval. Hydro One will also have to secure property rights from owners whose land will be traversed by the transmission line. The line is expected to be commissioned by the end of 2011.

Smitherman to OPA: Raise the bar on renewables and conservation in the IPSP

According to a press release issued September 18, 2008, George Smitherman, Ontario Minister of Energy and Infrastructure, directed Ontario Power Authority ("OPA") to review a modest portion of its proposed Integrated Power System Plan ("IPSP"), focusing on renewable energy and conservation. The review is intended to ensure that the IPSP maximizes Ontario's potential to provide clean, green, renewable power while creating new "green-collar" jobs and industries in the province.

In remarks he delivered to the Ontario Energy Association, Minister Smitherman said he was inspired to call for the review after visiting California, Germany, Spain and Denmark, all of which have very progressive renewable energy programs. He has asked the OPA to review the following:

• The amount and diversity of renewable energy sources in the supply mix;
• The viability of accelerating the achievement of stated conservation targets, including a review of the deployment and utilization of smart meters;
• The improvement of transmission capacity in the transmission-constrained "orange zones" in northern Ontario and other parts of the province that is limiting the development of new renewable energy supply;
• The potential of converting existing coal-fired assets to biomass;
• The availability of distributed generation; and
• The potential for pumped storage in hydroelectric reservoirs to contribute to the energy supply during peak times.

Left untouched will be the province's commitment to phase out coal by 2014 and its continued reliance on nuclear generation to provide the majority of the base load.

The OPA has posted the Minister's new directive online.

An increased emphasis on renewables could result in more business opportunities as the IPSP is implemented. However, the review may delay the implementation of the IPSP. OPA has applied to the Ontario Energy Board ("OEB") for approval of the IPSP. The OEB approval hearings are underway but are expected to be stalled by the review, which is expected to last six months.

OPA changes the procurement landscape for renewable developers in Ontario

Ontario's Renewable Energy Standard Offer Program (RESOP) may be a victim of its own success. Under the RESOP, the Ontario Power Authority (OPA) expected to contract for 1,000 MW of renewable power over 10 years. After just over 1 year, it has contracted for 1,300 MW. OPA has decided it would be "prudent to review the program to ensure continued success moving forward." As part of its review, OPA announced changes to the RESOP on May 13 that will make it much harder for larger developers to participate in the program. Larger developers can take some comfort in the OPA's concurrent announcement of a new call for 600 MW of renewable power. However a shortage of transmission capacity will continue to be a challenge for both RESOP and RFP participants.

OPA announced 3 major changes to the RESOP:

• Each project proponent will be limited to no more than 10 MW of projects per Transformer Station;


• Each project proponent will be limited to no more than 50 MW of projects in development (i.e., pre-commercial operation) per resource type at any one time; and


• Projects will now be required to meet specific pre-commercial operation milestones to remain eligible for the RESOP

The changes will be most significant for project proponents who are attempting to develop more than 10 MW of generating capacity under the RESOP. For example, by virtue of the first change, a project proponent would no longer be able to build a wind farm with a nameplate capacity of 20 MW by obtaining two 10 MW RESOP contracts. Similarly, by virtue of the second change, a project proponent with six 10 MW project under development would not be able to obtain a RESOP contract for the sixth project until the first reached commercial operation. The effect of the changes will therefore be to push larger developers out of the RESOP, leaving the program available for small and community-based developers.

However, larger developers will still be able to participate in OPA's non-RESOP calls for power, including Renewable Energy Supply III (RES III) , a new 600 MW call for renewable power. OPA is also "moving forward" on several other renewable and clean energy supply procurements, including:

• Combined Heat and Power II (CHP II)


• Renewable Combined Heat and Power (CHP III)


• Northern Hydro Initiative (NHI)


• Clean Energy Standard Offer Program (CESOP)

All RESOP applications received after May 12 will be processed under the new rules. However, exactly how the changes described above will be implemented remains to be seen. For example, can a parent company circumvent the 50 MW limit by incorporating a number of companies to develop projects at the same time? What level of ownership of a project company is required to be considered a "project proponent"? Can a lender that takes a security interest in multiple projects be caught if it ultimately needs to exercise its security rights against several projects? The OPA has responded to many questions such as these by saying that the details of the changes will be addressed in stakeholder consultation and technical sessions.

These stakeholder consultations and technical sessions are already in progress. The OPA will hold three technical meetings in before the end of June. Draft revised rules and a draft update of the RESOP contract are scheduled to be released on the week of July 14. After some additional online questions and answers, OPA hopes to release the finalized rules and contract in the week of August 4.

The changes to the rules do not tell the full story. Part of the impetus for the change is the quickly diminishing supply of available transmission capacity in the province. When announcing the changes to the RESOP, OPA included a map illustrating bulk transmission capability for 2008 procurements (see page 24 of the Renewable and Clean Energy Supply Procurement Update). There is limited or no capacity in all of Northern Ontario, most of Southwestern Ontario (all the way up to the Bruce Peninsula), and in the part of Eastern Ontario closest to the Quebec border. Planned transmission upgrades will improve the situation in Southwestern Ontario, but not in the other two regions. It is unlikely that OPA will issue additional RESOP contracts in any of these regions until new transmission infrastructure is built. Transmission capacity will also be an issue for developers choosing to respond to the RES III RFP, which expressly addresses transmission constraints (see appendices P and Q of the draft RES III RFP released June 5).

Ontario releases its 20-year Integrated Power System Plan

Submitted by Andrew Lord.

On August 29, the Ontario Power Authority filed its 20-year Integrated Power System Plan ("IPSP") with the Ontario Energy Board. According to the OPA's press release, the 4,000-page plan is intended to ensure a "reliable, adequate and sustainable long-term electricity supply for the province."

The plan is OPA's response to the government's Supply Mix Directive dated June 13, 2006. That Directive set out the following priorities and goals:

1) Maximize cost effective conservation to reduce demand by 1,350 MW by 2010 and by another 3,600 MW by 2025;

2) Maximize cost effective renewable generation to increase supply by 10,402 MW by 2010 and by 15,700 MW by 2025;

3) Make up remaining baseload requirements with nuclear power but limit installed in-service capacity to 14,000 MW;

4) Phase out coal-fired generation and replace it with committed and planned resources including gas-fired generation; and

5) Use gas-fired generation as needed to meet peaking requirements.

These priorities are in rank order. For example, the plan addresses the goal of maximizing conservation before addressing the goal of maximizing renewable generation. However, the ranking above does not necessarily represent the order in which actual projects will be undertaken. For example, a renewable energy project may be started before a conservation initiative provided that the conservation initiative will eventually be undertaken.

With respect to the controversial issue of nuclear power, the plan provides for the refurbishment of existing stations but expressly excludes the construction of any new nuclear generating capacity. Nuclear power will be used to fill a significant gap (85 TWh by 2027) between the projected baseload demand and the planned capacity from other sources. OPA also considered combined cycle gas turbine generation as a means of filling this gap. However, it concluded that nuclear power was the superior choice.

The plan also addresses Premier McGinty's very public goal of eliminating coal-fired generation by 2014. Taking into account other planned changes, the OPA concluded that there would still be a supply gap to be filled in certain regions after the coal plants were shut down. The plan will fill that gap with the construction of 1,400 MW of gas fired generation near the GTA, North York, and Kitchener-Waterloo-Cambridge-Guelph regions. Simple cycle and combined cycle gas turbines, as well as co-generation, will also be used to meet peaking requirements in the province.

Overarching all of the priorities in the plan is the issue of transmission. The IPSP repeatedly emphasizes that Ontario's transmission infrastructure will have to be upgraded to accommodate the new mix of generating capacity (particularly renewable generation capacity such as wind power, whose intermittent nature presents specific technical challenges for the grid). Upgrading that infrastructure will therefore present some of the earliest opportunities under the IPSP.

The plan also identifies the following objectives as being part of its near-term action plan for 2008 to 2010:

1) Conserving an additional 1,400 MW;

2) Procuring 2,700 MW of additional renewable resources; and

3) Procuring 2,150 MW of gas fired generation for the GTA, North York, and Kitchener-Waterloo-Cambridge-Guelph regions.

The second objective was put into motion two days before the IPSP was released. On August 27, Ontario announced that it intends to procure an additional 2,000 MW of green renewable power. This announcement doubles the McGinty government's renewable generation target to 4,000 MW. The Ontario Power Authority will commence the process for procuring the first 500 MW of additional generation by the end of 2007. All projects under the new directive must be over 10 MW. The directive therefore complements Ontario's ongoing Standard Offer Program under which the government has set fixed prices for electricity purchased from renewable generation projects under 10 MW.

Stay tuned for additional commentary about the IPSP and Ontario's energy future.