As Davis LLP had previously reported, British Columbia's recently enacted Clean Energy Act (the "Act") has set the stage to adopt a Feed-In Tariff program meant to foster the development of emerging technologies in sustainable power generation.
What is a Feed-in Tariff?
Plainly stated, a Feed-in Tariff ("FIT") is a payment per kilowatt-hour for electricity generated from a renewable source, linked to a long-term contract (typically from 10 to 40 years). The price paid is based on the cost to generate the power, plus a reasonable profit for the producer. Therefore, depending on the technology used and their cost to deploy, various types of sustainable power generation will command different rates pursuant to a FIT.
To illustrate, Ontario's FIT Program offers 80 cents/kWh for small rooftop solar photovoltaic systems under 10 kW, while similar ground-mounted system earns 44 cents. Offshore wind producers are paid 19 cents/kWh, while onshore wind production is at 13.5 cents/kWh. FITs are also used to pay for biogas, biomass, district heat, energy from waste, geothermal, sewage methane and small hydroelectric production. In British Columbia's case, it would also cover ocean energy. To put the foregoing costs into perspective, there is current power capacity from existing coal-fired or gas-fired plants on the North American market for approximately 5 cents. New capacity, such as electricity from new coal-fired or gas-fired plants, comes in at around 10 and 13 cents respectively, whereas nuclear power is available at anywhere between 10 and 20 cents. With a FIT Program, ratepayers or taxpayers cover the delta between the cost of FIT generation and the market price for electric power.
A Feed-in Tariff in British Columbia?
Similar to the province of Quebec, but contrary to many other FIT jurisdictions, British Columbia generates 95% of its power via large hydroelectric dams. At 12 cents/kWh or less, the response to BC Hydro's latest Clean Power Call demonstrates that the province has a relative abundance of green power, although the term "green power" often gives rise to heated debates when applied to large hydro projects. Notwithstanding the province's overwhelmingly carbon-friendly power generation portfolio, certain remote off-grid areas in the province still depend on diesel-fired generation. On certain remote First Nations reserves where the diesel has to be delivered by helicopter, such power can cost up to $1/kWh.
A decision not to go ahead with a FIT program as a result of the greater cost of certain clean technologies such as biogas, biomass, geothermal, ocean energy, small wind, solar and waste-based renewable generation would likely result in such sustainable power generation technologies not taking hold in the province. In addition, job creation linked to the development of such technologies may also arguably choose to locate elsewhere failing local implementation. The province is therefore faced with the following conundrum: adopt a FIT program and most likely generate a surplus of power that will ultimately be exported for less than what taxpayers or ratepayers have paid for it, or choose not to do so and risk missing out on the so-called "green revolution".
Public Consultation on FIT Consultation Paper until September 30, 2010
With an aim of having the Feed-In Tariff Regulation (the "Regulation") come into force in early 2011, the British Columbia Ministry of Energy, Mines and Petroleum Resources (the "Ministry") has released a Consultation Paper which sets forth the Ministry's intentions. The Regulation would notably require the BC Hydro and Power Authority ("BC Hydro") to establish a feed-in tariff in accordance with the Act and would set out eligibility criteria for participation in a FIT, along with other key aspects of the program. Following public consultation, any ensuing Regulation would be drafted and submitted for consideration and decision by the Minister of Energy, Mines and Petroleum Resources (the "Minister") and Lieutenant Governor-in-Council.
The Consultation Paper states that the purpose of the FIT Program is to create a market to foster the development of innovative technologies that can supply the province electricity from its renewable resources. The six specific objectives BC's FIT Program wishes to address are the following:
- Use and foster the development of innovative technologies that support energy conservation and efficiency end the use of clean or renewable resources;
- Ensure BC electricity rates remain among the most competitive in North America;
- Reduce GHG emissions;
- Encourage the creation and retention of cleantech jobs in BC;
- Foster the development of First Nation and rural communities through the use and development of clean or renewable resources; and
- Reduce waste by encouraging the use of waste heat, biogas and biomass.
The most notable particularities contained in the FIT Consultation Paper are the following:
- No traditional hydro, solar or wind generation, other than in remote, off-grid areas;
- Projects limited to a maximum of 5 MW;
- Contracts limited to 5 years;
- Annual expenditure above the cost of acquiring the power through BC's Standing Offer Program limited to a maximum of $25 million;
- Proposals invited for renewable electricity production from biogas biomass, geothermal, in-stream hydrokinetic and ocean energy.
The deadline for submitting responses to the Consultation Paper is September 30, 2010 and interested parties are invited to submit comments in writing to:
Email: [email protected]
Renewable Energy Development Branch
BC Ministry of Energy, Mines and Petroleum Resources
PO Box 9314 Stn Prov Govt
Victoria BC V8W 9N1