Avocats chez Davis S.E.N.C.R.L.

OPA finalizes ground-mounted solar PV microFIT price and changes the rules for aggregators

The Ontario Power Authority announced today that it has finalized a new price category for ground-mounted solar photovoltaic projects under the microFIT program. In what will no doubt be a controversial parallel announcement, the OPA also revealed that commercial aggregators are no longer welcome in the microFIT program.

The new price of 64.2 cents per kilowatt-hour applies to ground-mounted solar PV projects under the microFIT program. The new price is significantly better than the 58.8 cents/kWh that the OPA first proposed a month ago.

The old price of 80.2 cents/kWh will continue to be available for rooftop solar PV systems.

The new two-tier pricing will apply for any applications received after noon on July 2, 2010, which was when the OPA first revealed that it was considering adding the new price category. Much to the relief of many proponents, anybody who received a conditional offer or submitted an eligible ground-mounted application before noon on July 2 will receive the original price of 80.2 cents/kWh. The OPA had originally suggested that only those with conditional offers in hand would remain eligible for the original price.

However, not all proponents will be happy today. The OPA also announced that commercial aggregators are no longer eligible to participate in the microFIT program. Commercial aggregators are companies that lease land and rooftops from individuals for the purpose of installing multiple sub-10kW projects. Says the OPA of this potential bombshell, "this will ensure that the microFIT program is focused on its original purpose - encouraging homeowners, farmers, farm co-operatives, First Nations, small businesses and institutions such as schools, to own and develop small renewable projects."

The OPA will start accepting microFIT applications again on August 20.

BC's largest independent Run-of-River Hydro Project starts generating clean power

Plutonic Power Corporation (TSX: PCC) and GE Energy Financial Services, a unit of GE (NYSE: GE), today announced today that their Toba Montrose General Partnership ("TMGP") has commenced selling electricity to BC Hydro under an Electricity Purchase Agreement ("EPA") from power generated by the East Toba River and Montrose Creek generation facilities. TMGP has received confirmation from BC Hydro that the project has met its guaranteed commercial operations date commitment under the EPA. Both facilities are now operating at full capacity while their commissioning continues.

The operation of the facilities comes at the end of nearly a three year construction program and is the first operational clean power project in Canada for Plutonic and GE Energy Financial Services. Plutonic and GE have worked on the project over the last three years with their First Nations partners - the Klahoose, Sliammon and Sechelt First Nations.

The two facilities remain under the control of Peter Kiewit Sons Co., which has constructed the project under a fixed price construction contract. The project will sell all of the power generated from the two facilities to BC Hydro under a 35-year EPA. Substantial completion and handover of the facilities to TMGP is expected by the end of the third quarter after further operator training, testing and other commissioning activities.

Until substantial completion is achieved, revenues from power sales will be credited against the $663 million budgeted capital expenditures. As a bonus for early completion, Peter Kiewit Sons Co. is entitled to a portion of energy sales from the East Toba facility prior to July 1, 2010 and from the Montrose facility prior to November 1, 2010.

The project is one of several that Plutonic and GE have undertaken that will help British Columbia meet its goal of electricity self-sufficiency by 2016 by using 93 percent clean domestic generation sources. In addition to the Toba Montrose Project, Plutonic Power and GE Energy Financial Services are constructing the 340,000 megawatt-hours per year Dokie Wind Project near Chetwynd, British Columbia. It is scheduled to achieve commercial operation in the first quarter of 2011. GE and Plutonic have also executed a 40-year EPA with BC Hydro for another hydroelectric power project, the Upper Toba Valley Project.

"For Plutonic Power, the achievement of commercial operations and sale of electricity from the two Toba Valley facilities marks a significant transformational milestone," said Donald McInnes, Vice Chair and CEO of Plutonic Power. "We are extremely grateful to our equity financial partner GE, our First Nations partners, our debt syndicate providers, our customer BC Hydro, our contractor Peter Kiewit Sons Co. and all their subcontractors and the communities that have supported the project."

"Achieving commercial operations of the East Toba River Montrose Creek Project is a significant step toward realizing British Columbia's clean energy potential," said Alex Urquhart, President and CEO of GE Energy Financial Services. "We look forward to continuing our successful partnership with Plutonic, supporting renewable energy growth in the province and expanding our business in Canada."

Proposed regulations for off-shore wind projects in Ontario open for public comment

As announced late last month, the Ontario Ministry of the Environment is soliciting feedback on a discussion paper regarding the proposed Renewable Energy Approval ("REA") requirements for off-shore wind projects. The paper proposes that wind turbines must be located at least 5 kilometers off-shore. The paper also discusses other REA requirement under O.Reg 359/09 for off-shore wind projects, including: natural heritage assessments, water assessments, cultural heritage resources assessments, wind facility reports, technical studies, and consultation requirements.

Additional background is available on EBR Registry posting 011-0089. The paper is open for public comment until August 24, 2010.

In parallel, the Ministry of Natural Resources is entering into a second phase of its review of its site release policies and procedures for wind and waterpower projects. These policies and procedures are intended to provide an orderly framework under which Crown land will be made available for renewable energy development.

A summary of the changes proposed during the first phase of the MNR's review, as well as detailed proposals for wind and waterpower projects, are available on EBR Registry posting 010-7895.

OPA proposes new, lower microFIT price for ground-mounted, small scale solar

The Ontario Power Authority ("OPA") has proposed a new price of 58.8 ¢/kWh for ground mounted solar photovoltaic systems under 10 kW under the microFIT program. The new price is substantially lower than the 80.2 ¢/kWh currently offered for rooftop solar PV systems under 10 kW. The OPA believes the change is consistent with the pricing principles underlying the microFIT program.

"The OPA believes the new price category is fair, reasonable, more accurately reflects the costs associated with ground-mounted projects and maintains the long-term stability of the program," said Colin Andersen, Chief Executive Officer of the Ontario Power Authority. "It enables the program to continue to meet its original goals and provides proper value to both generators and ratepayers."

All microFIT prices are designed to allow project owners to earn a reasonable rate of return having reference to the anticipated capital and installation costs of a typical system. Ground mounted systems are significantly cheaper to install that rooftop systems. Project owners who will receive 80.2 ¢/kWh for their ground mounted systems therefore stand to earn much greater returns than intended. Given that the OPA has already received over 16,000 microFIT applications, many more than expected, the unintended windfall for ground-mounted projects threatened to become a significant burden for ratepayers.

The creation of separate rooftop and ground-mounted solar PV prices will bring the microFIT program more in line with the FIT, which already has separate price categories for larger scale solar PV projects.

Consistent with the FIT Rules, the OPA has clarified that people who already have microFIT contracts or conditional offers in hand will be entitled to the original 80.2 ¢/kWh price.

The OPA will be accepting comments on the proposed change for 30 days, ending August 3. As part of this consultation, it will be holding information sessions on July 6 and 8. See the microFIT website for details.

Ontario ratchets coal plant emissions cap down to 11.5 Mt beginning in 2011

The province of Ontario has lowered its voluntary cap on CO2 emissions from coal-fired generation to 11.5 megatonnes (Mt) for each of 2011 through 2014. While this cap is significantly lower than the cap of the past two years, it is not low enough for many environmentalists, particularly given the level of actual emissions last year.

The government of Ontario, through its Ministry of Energy and Infrastructure, is the sole shareholder of Ontario Power Generation ("OPG"). In that capacity, the government issued a shareholder directive to OPG on May 20 limiting the CO2 emissions from OPG's four coal-fired generating stations to 11.5 Mt per year. A previous directive in April 2008 set the limit for 2009 at 19.6 Mt and for this year at 15.6 Mt. The new limit established by the May 20th directive is therefore 41% lower than the 2009 limit and 26% lower than this year's limit.

However, the new limit is higher than actual emissions in 2009. According to OPG's 2009 Sustainable Development Report, 2009 emissions from coal-fired generation were about 10.1 Mt. The new cap of 11.5 Mt for 2011 and beyond is therefore 14% higher than actual emissions in 2009 (the Ontario Clean Air Alliance pegs the difference at 17% based on 2009 emissions of 9.8 Mt, although we have been unable to determine where they obtained the 9.8 Mt figure).

Several stakeholder groups are crying foul at a limit that exceeds recent historical emissions. The Ontario Clean Air Alliance characterized the decision in particularly harsh terms, saying, "Premier McGuinty's decision to permit Ontario Power Generation to increase the output of its dirty coal-fired power plants by 17% is a cynical betrayal of the public trust. To save lives, reduce asthma attacks and to help prevent dangerous climate change, Premier McGuinty should direct Ontario Power Generation to put its coal-fired power plants on standby reserve and only operate them if they are absolutely necessary to keep the lights on."

Neither the Premier's office nor the Ministry of Energy and Infrastructure have commented on the directive to OPG. However, we suspect that the decision to set the limit above 2009 emissions was informed by the economic downturn of the past year and a half. By setting the limit above 2009 emissions, the government may have intended to leave some generation capacity headroom to accommodate a bump in demand as the economy recovers.

However, it is curious that the limit flatlines at 11.5 Mt through 2014, when coal-fired emissions are to be phased out. We would have expected to see the cap continue to be reduced in the last 4 years of coal-fired generation in the province, particularly in the last couple of years when more and more Feed-in Tariff projects should be coming online.

In any event, OPG may continue its recent track record of keeping emissions significantly below its mandated limit.

BC's Clean Energy Act becomes law

BC's Clean Energy Act received royal assent on June 3, 2010. As previously reported, the Clean Energy Act revamps the province's energy laws to achieve a long list of objectives, including developing renewables, achieving energy self-sufficiency, promoting energy exports, encouraging conservation, and facilitating the participation of First Nations in energy projects.

Significant work remains to be done in writing the regulations required under the Act (for example, to define the promised feed-in tariff program). If Ontario's roll-out of the Green Energy Act serves as a reasonable guide, these regulations could be ready by early fall.

More information about British Columbia's clean energy future can be found at the new Powe of BC website.

U.S. Energy Information Administration releases International Energy Outlook 2010 - long-term assessment of world energy markets through 2035

The U.S. Energy Information Administration (EIA) today released its report entitled International Energy Outlook 2010 (IEO2010). The report consists of the latest edition of the agency's long-term assessment of world energy markets. IEO2010 includes projections of world energy demand by region and primary energy source through 2035; electricity generation by fuel type; and energy-related carbon dioxide emissions. Among other topics, the report provides the EIA's view on long-term petroleum and other liquids fuel supplies, projections for global natural gas markets, prospects for worldwide growth in the use of renewable energy, and energy demand growth among the developing nations.

According to the Reference case projection included in IEO2010, world marketed energy consumption is expected to grow 49 percent between 2007 and 2035, driven by economic growth in the developing nations of the world.

In a statement discussing some of the report's key findings, EIA Administrator Richard Newell stated that "Renewables are the fastest-growing source of world energy supply, but fossil fuels are still set to meet more than three-fourths of total energy needs in 2035 assuming current policies are unchanged [...]"

The EIA's report confirms previously-released data which found that the global economic recession that began in 2007 and continued into 2009 has had a profound impact on near-term prospects for world energy demand. Total marketed energy consumption contracted by 1.2 percent in 2008 and by an estimated 2.2 percent in 2009, as manufacturing and consumer demand for goods and services declined.

In the Reference case, as the economic situation improves, most nations are expected to return to the economic growth rates that were projected prior to the downturn. Total world energy use in the Reference case rises 49 percent, from 495 quadrillion British thermal units (Btu) in 2007 to 739 quadrillion Btu in 2035.

China and India are among the nations least impacted by the global recession, and they will continue to lead the world's economic and energy demand growth into the future. In 2007, China and India together accounted for about 20 percent of total world energy consumption. With strong economic growth in both countries over the projection period, their combined energy use more than doubles by 2035, when they account for 30 percent of world energy use in the IEO2010 Reference case. In contrast, the projected U.S. share of world energy consumption falls from 21 percent in 2007 to about 16 percent in 2035.

The report looks back at average world oil prices which had increased strongly from 2003 to mid-July 2008, prior to a sharp decline over the rest of 2008. In 2009, oil prices again trended upward and this trend continues in the Reference case, with prices rising to $108 per barrel by 2020 (in real 2008 dollars) and $133 per barrel by 2035. Total liquid fuels consumption projected for 2035 is 28 percent or 24.5 million barrels per day higher than the 2007 level of 86.1 million barrels per day.

Conventional oil supplies from the Organization of the Petroleum Exporting Countries (OPEC) contribute 11.5 million barrels per day to the total increase in world liquid fuels production, and conventional supplies from non-OPEC countries add another 4.8 million barrels per day. World production of unconventional resources (including biofuels, oil sands, extra-heavy oil, coal-to-liquids, and gas-to-liquids), which totaled 3.4 million barrels per day in 2007, increases nearly fourfold to 12.9 million barrels per day in 2035.

Other IEO2010 highlights include:

• From 2007 to 2035, total world energy consumption rises by an average annual 1.4 percent in the IEO2010 Reference case. Strong economic growth among the non-OECD (Organisation for Economic Cooperation and Development) nations drives the increase. Non-OECD energy use increases by 2.2 percent per year; in the OECD countries energy use grows by only 0.5 percent per year.
• Petroleum and other liquid fuels remain the largest energy source worldwide through 2035, though projected higher oil prices erode their share of total energy use from 35 percent in 2007 to 30 percent in 2035.
• World natural gas consumption increases 1.3 percent per year, from 108 trillion cubic feet in 2007 to 156 trillion cubic feet in 2035. Tight gas, shale gas, and coalbed methane supplies increase substantially in the IEO2010 Reference case-especially from the United States, but also from Canada and China.
• In the absence of additional national policies and/or binding international agreements that would limit or reduce greenhouse gas emissions, world coal consumption is projected to increase from 132 quadrillion Btu in 2007 to 206 quadrillion Btu in 2035, at an average annual rate of 1.6 percent. China alone accounts for 78 percent of the total net increase in world coal use from 2007 to 2035.
• World net electricity generation increases by 87 percent, from 18.8 trillion kilowatthours in 2007 to 35.2 trillion kilowatthours in 2035. Renewables are the fastest growing source of new electricity generation, increasing by 3.0 percent per year in the Reference case; followed by coal-fired generation, which increases by 2.3 percent per year.
• In the IEO2010 Reference case, world industrial energy consumption grows 66 percent, from 184 quadrillion Btu in 2007 to 262 quadrillion Btu in 2035. The non-OECD economies account for about 95 percent of the world increase in industrial sector energy consumption in the Reference case.
• Almost 20 percent of the world's total delivered energy is used for transportation, most of it in the form of liquid fuels. The transportation share of world total liquids consumption increases from 53 percent in 2007 to 61 percent in 2035 in the IEO2010 Reference case, accounting for 87 percent of the total increase in world liquids consumption.
• In the IEO2010 Reference case, energy-related carbon dioxide emissions rise from 29.7 billion metric tons in 2007 to 42.4 billion metric tons in 2035-an increase of 43 percent. Much of the increase in carbon dioxide emissions is projected to occur among the developing nations of the world, especially in Asia.

Copies of the International Energy Outlook 2010 report will be made available in July 2010, however highlights of the report as well as the underlying data can be found here.

Ontario's Chief Medical Officer concludes that wind farms do not cause adverse health effects

"According to the scientific evidence, there isn't any direct causal link between wind turbine noise and adverse health effects," concludes Dr. Arlene King, Ontario's Chief Medical Officer of Health, in a new report.

The report was based on a literature review of existing scientific evidence on the potential health impact of wind turbines. Its main conclusions are the following:

• While some people living near wind turbines report symptoms such as dizziness, headaches, and sleep disturbance, the scientific evidence available to date does not demonstrate a direct causal link between wind turbine noise and adverse health effects.
• The sound level from wind turbines at common residential setbacks is not sufficient to cause hearing impairment or other direct adverse health effects. However, some people might find it annoying. It has been suggested that annoyance may be a reaction to the characteristic "swishing" or fluctuating nature of wind turbine sound rather than to the intensity of sound.
• Low frequency sound and infrasound from current generation upwind model turbines are well below the pressure sound levels at which known health effects occur. Further, there is no scientific evidence to date that vibration from low frequency wind turbine noise causes adverse health effects.
• Community engagement at the outset of planning for wind turbines is important and may alleviate health concerns about wind farms.
• Concerns about fairness and equity may also influence attitudes towards wind farms and allegations about effects on health. These factors deserve greater attention in future developments.

Similar conclusions drawn in an earlier study prepared for the American Wind Energy Association and Canadian Wind Energy Association. The authors of that study were somewhat more pithy than Dr. King, concluding that "annoyance is not a disease."

While helpful, the Chief Medical Officer's new report will likely not placate wind farm opponents in the province. We anticipate that the alleged health effects of wind turbines will remain at issue as developers seeking renewable energy approvals ("REAs") and may be asserted as grounds for appealing REAs before the Environmental Review Tribunal.

Bill 72, Water Opportunities and Water Conservation Act, 2010 posted for comment

Further to our posting yesterday, Bill 72, Water Opportunities and Water Conservation Act, 2010 passed first reading in the Ontario legislature on Tuesday.

The full text of the bill and its status is available on the Ontario Legislature website.

A proposal notice in respect of the bill has been posted to the Environmental Registry (ERB 010-9940). It is open for comment for 60 days beginning May 18, 2010 and ending July 17, 2010. We expect but have not yet confirmed that the Ministry of the Environment will hold public consultations on the bill at some time in the coming weeks.

Ontario to table Water Opportunities and Water Conservation Act today

The Ontario government is expected to introduce a new water bill today. The Water Opportunities and Water Conservation Act (the "Proposed Act") is expected to create new business opportunities for water technology companies while improving water infrastructure planning and promoting water conservation. Blending economic and environmental objectives in an effort to promote a green economy in Ontario, the Proposed Act has many of the hallmarks of last year's Green Energy Act.

While the text of the Proposed Act is not yet available, several backgrounders have already been posted on the Ministry of the Environment's ("MOE") website. These backgrounders reveal that the Proposed Act will have three main thrusts:

1) Making Ontario the North American leader in developing and selling new technologies and services for water conservation and treatment at home and around the world

The government intends to establish a Water Technologies Acceleration Project ("WaterTAP"), a non-Crown corporation governed by a variety of water industry stakeholders and policy makers. WaterTAP's mandate would include:

• Becoming a trusted source of information about Ontario's water sector by creating an asset map of Ontario water companies, technologies, researchers, users, needs and regulations;
• Being a source of credible advice and guidance to large industrial and municipal water users and governments on emerging technologies, and their applications to conservation efforts;
• Helping to identify opportunities for co-operation, co-ordination and growth within the industry
• Helping to identify research, commercialization and demonstration opportunities; and
• Developing international market intelligence.

It is expected that the government will provide WaterTAP with $5 million in funding over three years.

2) Creating an integrated approach to water infrastructure planning to achieve long-term sustainability

The Proposed Act is expected to promote integrated planning of water use and water infrastructure at the municipal level. Regulations to be promulgated under the Proposed Act would require municipalities to develop long term water sustainability plans. The plans would cover water supply, wastewater and stormwater services. Municipalities would be required to report prescribed performance measures to allow the province to monitor compliance with water sustainability plans.

In March of this year, the government introduced Bill 13, Sustainable Water and Waste Water Systems Improvement and Maintenance Act, 2010. The primary purpose of Bill 13 is to create a new Ontario Water Board, which would be an independent economic regulator of water and waste water services in Ontario (analogous to the Ontario Energy Board). If both the Proposed Act and Bill 13 are passed, it may be the case that the new Ontario Water Board will be charged with approving municipal water plans and tracking performance thereunder.

The government has also indicated that it will continue its Ontario Small Waterworks Assistance Program, which provides capital funding assistance to help small communities improve water conservation and make operations more efficient in their water and wastewater systems.

No doubt the government expects that public investment by municipalities in water infrastructure will help drive demand for private sector products and services in the province. Like the Green Energy Act, the Proposed Act appears to be designed to promote green infrastructure investment as a way of creating green collar jobs in the province. It will be interesting to see if the Proposed Act contains anything like the domestic content requirements of the Green Energy Act, which are intended to keep the broader economic benefit of infrastructure investment captive in Ontario.

3) Helping Ontarians use water more efficiently

The Proposed Act is expected to implement a variety of measures to reduce water consumption in the province.

To address demand by residential consumers, the Proposed Act may amend the Ontario Water Resources Act and Building Code Act, 1992 to introduce more stringent water efficiency standards for consumer products sold in Ontario such as toilets, faucets and showerheads. It may also introduce new water consumption labelling requirements.

Industrial and commercial water takers may also be asked to manage consumption more directly. The Proposed Act may require the MOE to develop a regulation to require non-municipal water takers to develop and adhere to water conservation plans.

We will post a link to the full text of the Proposed Act once it becomes available. As it did for the Green Energy Act, the government will likely undertake significant public consultations as the Proposed Act moves through the legislature. We will provide updates as they become available.