In our August 2016 Blakes Bulletin: September Deadline: Last Chance to Participate in Ontario’s Large Renewable Procurement Program, we reported that Ontario was moving ahead with the Request for Qualifications (RFQ) portion of phase two of the province’s Large Renewable Procurement program (LRP). However, in a surprising move, on September 27, 2016, Ontario announced that it is suspending all new procurements of renewable generation capacity under the LRP and cancelling the RFQ process.
The LRP was a competitive process for procuring renewable electricity projects; it was instituted in 2014 as a replacement to the large renewable portion of Ontario’s previous feed-in tariff program. The first phase of the LRP was concluded in April 2016 with Ontario awarding contracts for the development of 16 renewable generation projects. Prior to the September 27, 2016 announcement, it was expected that Ontario would be awarding several other contracts for additional renewable facilities during a planned phase two of the LRP.
REASONS FOR LRP SUSPENSION
The cost of electricity for Ontario consumers has increased substantially over the last decade. The public perception is that much of the increase has been caused by climate change initiatives to reduce greenhouse gas emissions, such as Ontario’s efforts to increase its level of renewable electricity generation.
Renewable energy now comprises 40 per cent of Ontario’s installed capacity and generates approximately one-third of the electricity produced in the province. When combined with nuclear resources, which account for one-third of Ontario’s installed capacity and produce nearly 60 per cent of its electricity, these non-fossil sources now generate approximately 90 per cent of the electricity in Ontario.
In response to increasing public complaints over the cost of electricity, one of the goals of Ontario’s Climate Change Action Plan (discussed in our June 2016 Blakes Bulletin: Ontario Announces Five-Year Climate Change Action Plan) is to keep the cost of electricity affordable.
In its September 15, 2016 Throne Speech, the Ontario government announced measures to implement this portion of the Climate Change Action Plan, including providing homeowners and other eligible consumers with a rebate of the eight per cent provincial sales tax on the cost of electricity, and a plan to expand the number of businesses eligible to benefit from the Industrial Conservation Initiative (discussed in our September, 2016 Blakes Bulletin: New Opportunities for Ontario Businesses to Benefit from Electricity Rate Relief Program).
The suspension of the LRP builds on the Wynne government’s response to concerns regarding increasing electricity costs.
Ontario announced that it suspended the LRP because further procurement of electricity capacity is not needed at this time as Ontario is forecast to have a robust supply of electricity for the next decade, and the suspension of the LRP is expected avoid additional spending of C$3.8-billion in electricity system costs relative to Ontario’s 2013 Long-Term Energy Plan forecast (reflecting approximately C$2.45 per month for a typical residential electricity consumer, relative to previous forecasts).