Ministry of Energy and Infrastructure
4th Floor, Hearst Block
900 Bay Street
October 15, 2009
Dear Honourable Minister Smitherman,
I am writing to first of all congratulate you and the rest of your team on the successful launch of the Feed-in Tariff (FIT) program and its respective regulations. Your efforts to phase out coal, kick start the economy and empower Ontarians to become conservers and generators of clean, green, renewable energy put Ontario in the lead in North America.
However, in the interest of achieving the goals of the Green Energy and Green Economy Act, I am compelled to bring to your attention several matters of serious concern that are likely to severely undermine and impede the rapid deployment of renewables in general and the Community Power sector specifically. We fear that if changes are not made to the current rules and regulations, with their bias for commercial development, that not a single community power project will secure a FIT contract in the initial round, as was the great failure of the preceding RESOP.
Setbacks and the Definition of Participating Landowner
It has become acutely obvious that the 550-metre minimum setback and the current definition of “participating landowner” may kill a large number of community owned and private sector wind projects. Two of these include:
1. The joint venture between the Barrie Wind Catchers Co-operative and the City of Barrie to erect a single windmill on the city’s former dump. Significant funds have been spent to complete wind studies for this project, which is broadly supported by neighbours that surround the site. However, they are located within the prescribed 550 metres, making this worthy project unviable.
2. Windy Hills Caledon not-for-profit near Bolton Ontario, members of which are all local residents, that plans to develop a wind farm. At considerable expense and relying on volunteer time, wind studies have been conducted and local farmers consulted. However, the minimum setback requirements will force these plans to be seriously cut back, risking the viability of the entire project.
In earlier discussions with the Ministry of the Environment, the Ministry of Energy and Infrastructure, the Ontario Power Authority and, more recently, the Renewable Energy Facilitation Office, OSEA and its partners in the Green Energy Act Alliance recommended rules that promote a land pooling/collaborative land lease, common in jurisdictions where wind farms are extensive. A blanket standard land lease guaranteeing that all landowners benefit, while also allowing them to become shareholders in the project, creates a social contract among them. Allowing all landowners in the area to become “participating landowners,” whether a turbine or equipment is located on their land or not, significantly reduces the amount of social friction. The lease (and, if desired, certain types of shares) can be fixed to the land title, thereby ensuring that the value associated with the project goes to the current and future landowner.
Recommendation: We recommend that the interpretation of participating landowner should favour the land pooling/collaborative land lease approach allowing for a broad interpretation of the regulation, and that landowners should be able to waive their rights permanently by amending the land title of their property in the land registry if they are receiving direct benefit from the project through a land lease or by owning shares in the project.
Provincial Content Requirement
There is significant distress regarding the provincial content requirements among the proponents of solar and wind power, including homeowners who purchased their systems and have been waiting to connect since the RESOP was frozen; bulk purchasing groups that have secured their vendor; installers with racking, inverters and other components in stock; dealers whose trusted suppliers have proven track records; investors trying to minimize risk with proven technologies; and larger scale developers with millions already invested who are ready to break ground and install megawatts. They are concerned that the requirements are ramping up too quickly and that, as a consequence, the program will stall and many small, medium and potentially even larger players will be put out of the game. Others even point out that there is the risk that there will not be enough competition in the local market to ensure a choice of high quality products. Cited below are a two of OSEA’s members and supporters who have been adversely affected by the stringent domestic content rules:
1. Graham Findlay, an OSEA director installed an array of panels on his home in Ottawa in anticipation of the feed-in tariff program. The irony is that while his solar system illustrates the website pages of the Ministry of the Environment promoting solar, he can’t hook up his system to the grid because he doesn’t meet the domestic content requirements: His racking, which he made himself, doesn’t qualify.
2. Superior Energy Solutions of Sault Ste. Marie has over $3 million in components for contracted projects that can’t be implemented because of the domestic content rules.
Recommendations: We recommend the following actions be taken to improve the provincial content requirements:
1. That the date for meeting the content requirements be deferred by 24 months to encourage suppliers to assess the performance of the FIT program and measure their chances of success in the Ontario market.
2. That the milestones be altered for wind (FIT to 25% by 2012 and 50% by 2015) and solar (FIT to 40% by 2012 and 60% by 2015 and micro-FIT to 35% by 2011, 50% by 2012 and 60% by 2015).
3. That the provincial content allocations be broken down into smaller percentages for different components to allow for various combinations to meet the requirements.
4. That Ontario owned and generated intellectual property (patents, trademarks, etc) including intellectual property be recognized as a “designated activity” with a 5% qualifying percentage.
5. That preferential treatment be given to higher performing content, either by establishing an absolute minimum performance criteria for qualifying for a FIT contract, or by giving higher qualifying percentage points to “designated activities” that hold world class efficiencies (e.g. solar panels, inverter, blades, etc.). This will stimulate the production and deployment of world-class technologies in Ontario and products that are competitive outside Canada’s borders.
6. That a system of fair penalties be developed in the event that an audit reveals insufficient domestic content. Advanced rulings on content should be allowed, so that an audit is not likely to find a problem.
7. That shortfalls in minimum domestic content levels be permitted in the event of supply market conditions or construction market conditions beyond the reasonable control of the developer.
Market Assessment of Suppliers
The market is evolving rapidly with the introduction of the Green Energy and Green Economy Act and the FIT. It will be important to have a thorough understanding of the starting point and the markets evolution when the next iteration of the FIT takes place in two years time.
Recommendation: In addition to changing the current program, we also recommend that a market assessment of suppliers be undertaken to provide a baseline to measure success while ensuring that a reasonable level of production can be met to provide a suitable degree of competition to ensure that products aren’t second rate.
Migration of Rooftop RESOP Projects to Micro-FIT
There has been significant discussion during the past year and a half regarding the need to reward, not punish, early adopters. Many of the province’s best ambassadors are those who pioneered the sector and applied for RESOP contracts despite the limited payback and lack of support. The number of solar contracts for rooftop projects is minimal, but has significant value both to the systems as well as from a public outreach perspective. There are two categories that need to be migrated:
1. Those contracts that fall under the net metering program and the RESOP
2. Those projects that were completed in expectation of either the reinstatement of the RESOP or the introduction of the FIT
Recommendation: We recommend the following actions be taken to improve the provincial content requirements:
1. That all current rooftop solar contracts be migrated over to the FIT program.
2. All projects installed prior to December 31st 2009 should also be eligible for FIT contracts.
Connection Impact Assessments
The focus on shovel readiness during the acceleration period favours large-scale non-local developers and is prejudicial towards Aboriginal and Community Power projects. Communities that are developing or planning projects are not given any recognition of the benefit of local involvement and are expected to give up their connection impact assessments (CIAs) with the hope that they get the remaining capacity left in their local area. Local citizens have invested in the publically owned grid for the past 100 years and should retain their “as of right principle” enshrined in to the Green Energy Act, which guarantees that renewable energy will be connected to the grid system.
An example of this circumstance is A&T Energy, a locally owned Community Power group in Kapuskasing that is developing a 7.5 MW solar farm in nearby Val Rita-Harty with a $35million investment and funding from NOHFC and the Northern Energy Program. To receive a FIT contract, it will need to give up its CIA and is likely to be bumped out of the remaining capacity by a foreign developer who will be able to gain more points during the acceleration period. This means that the Community Power initiative is likely to be delayed for years while waiting for the grid to be upgraded.
Another example is the case of the Wikwemikong Unceded Reserve on Manitoulin Island, which has a CIA for a 10MW wind farm and another pending from Hydro One for an additional 10 megawatts, which is above the red line. The project has been in development for the past five years and has cost approximately $2 million. Now Wikwemikong is deeply concerned that if it is required to give up its CIA, it will not have access to the transmission system, which is very limited, due to competition from Northland Power, which is planning a 77 MW wind project on the island.
Recommendations: First, we recommend that all of the Aboriginal and Community Power projects that currently hold completed CIAs retain their connection rights and capacity on the grid. We estimate that, at minimum, 200 MW of distribution and transmission capacity will be needed for Community and Aboriginal Power during the next three years and quite possibly more depending on the partnerships that arise. This is not a set aside, although a precedent for a set aside has been set recently with the announcement that more than 500 MW is being reserved for outside developers coming into the Canadian market.
Community Power Definition
Several small municipalities in rural Ontario have raised concerns that the definition of Community Power within the FIT excludes them. This is a significant concern, especially in rural and northern communities. For example, the municipality of Blind River when faced with no premium and the increased security deposits, coupled with the low population and a limited economic base may not be able to move its projects forward, thereby undermining attempts to diversify, strengthen and improve their local economies.
Recommendation: We recommend that the definition of community be expanded to include municipalities with populations of less than 10,000 people that do not have their own local distribution company.
Lack of Support for Aboriginal and Community Power
Over the past few months, several new funds and entities for building networks for Aboriginal and Community Power projects have been directed by the Minister of Energy and Infrastructure. None of these mechanisms are in place or are expected to be operational until January, at the earliest, and most likely later based on the recent experience with the Green Energy and Green Economy Act and the launch of the FIT and associated regulations. The initialization period has already begun and will only last 60 days during which time all proponents, including communities, are required to give up their CIA’s and be rated based on shovel readiness. This means that Aboriginal and non-Aboriginal communities are again being excluded from the launch of the program thereby jeopardizing the broad-based pick up (and associated support) of the program, which may result in a significant backlash.
Recommendation: As noted in the above section on the Connection Impact Assessment, the connection rights of Aboriginal and Non-Aboriginal Community Power proponents should be recognized and capacity guaranteed for their projects within the current system.
We appreciate how rapidly you and your government have moved to pass the Green Energy and Green Economy Act and the ensuing programs and regulations. The need to develop and deploy renewable energy to reduce our greenhouse gas emissions is urgent. However, we ask that during this period of transition, flexibility be shown, and suggest that the renewable energy facilitator be given the authority, on a case-by-case basis, to exempt community and Aboriginal projects from some of the more exacting requirements that would otherwise prevent them from being realized.
Ontario Sustainable Energy Association
Hon. Dalton McGuinty, Premier of Ontario, MPP
Hon. George Smitherman, Minister of Energy and Infrastructure, MPP
Hon. John Gerretsen, Minister of the Environment, MPP
Hon. Michael Gravelle, Minister of Northern Development, Mines and Forestry, MPP
Hon. Sandra Pupatello, Minister of Economic Development and Trade, MPP
Colin Andersen, Chief Executive Officer, Ontario Power Authority
Jim MacDougall, Manager of Distributed Generation, Ontario Power Authority
Chief Angus Toulouse, Chiefs of Ontario