With a bold step towards a renewable and sustainable energy future, the McGuinty government introduced Bill 150 to enact the Green Energy Act, 2009 (GEA) on February 23, 2009. It is the next significant step on a dramatic change to Ontario's energy economy. Following the announced closure of Ontario's coal plants, the GEA hits the "sweet spot", (as labelled by the Premier), as it is intended to provide the catalyst for the development of 50,000 new green economy jobs, improve Ontario's environment, implement Ontario's ongoing commitment to climate change initiatives and create a culture of energy conservation.

Deputy Premier and Energy and Infrastructure Minister George Smitherman describes the renaissance of Ontario's energy industry as having "two equally important thrusts". The first is to "bring renewable energy projects to life" and the second is to create a "culture of conservation". Underlying both thrusts is the desire to create a "sustainable green employment for Ontarians" as a direct response to the world's economic crisis.

The genesis of many of these changes is based on European initiatives, some of which were initiated 15 to 20 years ago in countries such as Germany, Denmark and Spain. The Ontario government has expressed a willingness to learn from these initiatives in order to develop a "made-in Ontario" renewable energy economy. While the proposed GEA is short on detail, which may be frustrating for some, there is no doubt that the essential principles of the government's position are firmly in place. This principled commitment of the McGuinty government is reflected in the manner in which this legislation has been presented. The government retains a strong central role in being able to issue directives, set priorities and regulate as necessary, in order to ensure that conservation and renewable energy retain the highest priority in Ontario. It is clear that this initiative is critical to this government and the impact of the proposed legislation is intended to bring about change quickly and throughout a wide range of sectors and consumers.

The stated objectives of a number of the affected statutes are to be modified to ensure that all discretionary decision-making not otherwise directed by the government takes into account this new government priority. With the framework clearly outlined, with details to follow, there is now a sense of urgency that is being placed upon the OPA, the IESO, the OEB, the transmitters and distributors and other stakeholders within Ontario to act quickly to take steps that will bring real change and results. There are enough hints in the speeches, leading up to the introduction of the proposed legislation, such as the Minister's announcement at the Board of Trade in front of 750 people on Friday morning, that the government understands the practical side of implementing this major new policy initiative. Some key provisions of the proposed legislation include:

Conservation

  • Individual Consumers. The GEA would encourage energy conservation by individual consumers through real property energy audits and appliance and product efficiency requirements. The GEA includes a broad requirement that sellers or lessors of real property must provide information regarding energy consumption and efficiency in respect of the real property to buyers or lessees. The GEA would also require that prescribed appliances and products meet energy efficiency standards. While the regulations defining such standards have not yet been released, the Minister has indicated that the government will continue to support EnergyStar ratings.
  • Industrial Consumers. The Minister has clearly indicated that conservation must occur on every level of energy consumption. The proposed GEA does not speak directly to specific emission or energy consumption reductions, but does amend the Ontario Energy Board Act to require that the OEB assess consumers, gas distributors, licensed distributors, the IESO and any other person prescribed by regulation, an amount, as prescribed by regulation, incurred by the Ministry in respect of its energy conservation programs. The extent of these potential assessments remains unclear until further defined in the regulations.

Feed-in tariff

  • A key component of the proposed GEA is the government's renewed and expanded commitment to feed-in tariffs. Ontario experimented with feed-in tariffs in the last couple of years through the OPA's Renewable Energy Standard Offer Program (RESOP), which was originally directed by the Ministry. However, issues with implementation, particularly from a transmission and distribution perspective, caused the RESOP to be put on hold in May 2008.
  • A feed-in tariff will be viewed by many as a positive response to the strong demand from the renewable energy sector. Proponents of renewable energy had been advocating that a long-term feed in tariff was the best way to ensure a strong renewable energy sector for Ontario.
  • Recent remarks by the Minister acknowledge the need for certainty for a long term commitment at "fair price" to ensure that feed-in tariffs will work. We anticipate pricing, timing and the rules relating to the feed-in tariff will be actively developed, with opportunity for public comment, by the OPA in the coming months.

Transmission and distribution expansion

  • The GEA vests substantial powers in the Minister to mandate transmission and distribution reinforcements to integrate renewable energy resources and to require transmitters and distributors to give preferential or priority access to renewable energy projects.
  • The GEA requires the OPA and the IESO to provide information about the transmission and distribution systems' ability to accommodate renewable energy generation and mandates the IESO to complete connection assessments within prescribed periods of time.
  • The GEA requires transmitters and distributors to connect renewable energy generation facilities provided that certain requirements are met. The GEA further empowers the Minister to direct the OEB to take such steps, including through licence amendments, to require transmitters, distributors and others to reinforce, enhance or expand their transmission, distribution or other systems to accommodate the connection of renewable energy generation facilities.

Project approval streamlining

  • The Minister promised in recent speeches that the GEA would streamline cumbersome approval processes and would coordinate approvals from the Ministries of Environment and Natural Resources through a one-window, one-permit process and that it would aim to issue permits within a six-month service window. The Environmental Protection Act will likely provide the platform for this process, although additional reforms will come through further regulations and directives.
  • The GEA would create a Renewable Energy Facilitation Office within the Ministry of Energy for the purposes of facilitating the development of renewable energy projects, including working with proponents of renewable energy projects and other ministries to shepherd projects through the various approvals processes and through engagement with local communities.
  • The GEA amends the Environmental Protection Act to provide that persons engaging in renewable energy projects shall be exempted from specified approval and permitting requirements including certificate of air and certificate of waste approvals. The GEA also amends the Planning Act to exempt renewable energy generation facilities and renewable energy projects from demolition control by-laws, zoning by-laws and other related by-laws and development permit regulations.
  • The GEA does not specifically reference the Environmental Assessment Act. However, based on Minister Smitherman's promise of an expedited six month process, it is anticipated that, as in the case of recent regulations regarding transit project approvals for the Greater Toronto Area, regulations may be introduced exempting certain projects # e.g. transmission reinforcements to facilitate the integration of green energy sources # from individual or class environmental assessments.

Participation by aboriginal peoples

  • In connection with the procurement of up to 2,000 MW of Renewable Energy Supply, then Ontario Minister of Energy Dwight Duncan emphasized the importance of early consultation of First Nations and Métis peoples in the planning and development stages for new renewable energy projects. The Ontario Power Authority was directed by the Minister to develop processes and guidelines in connection with that renewable energy procurement to ensure appropriate consultation with First Nations and Métis peoples. The GEA's proposed amendments to the Electricity Act build on this theme.
  • The GEA would amend the Electricity Act to permit the Minister to direct the Ontario Power Authority to establish measures to facilitate the participation of aboriginal peoples in the development and implementation of renewable energy generation facilities and transmission and distribution systems. The amendment presumably seeks to address the perceived obstacles to obtaining meaningful participation by aboriginal peoples in renewable energy procurement.

OEB mandate

  • The GEA would expand the OEB's mandate to include the promotion of conservation, the facilitation of the implementation of a smart grid and the promotion of the use and generation of electricity from renewable energy sources.
  • The GEA would also expand the OEB's rate-making powers beyond transmission, distribution and retailing to other "prescribed activities". As well, the GEA requires that for leave-to-construct applications, the OEB, in addition to considering the interest of consumers with respect to prices and the reliability and quality of electricity service, consider "the promotion of the use of renewable energy sources".
  • The GEA would vest significant powers in the government to promote its green energy policies through the OEB. Specifically, the GEA would authorize the Minister to issue directives to the OEB to establish conservation and demand management targets to be met by distributors and other licensees, including through licence conditions or, in the case of conservation targets applicable to distributors, through contracting with the OPA.
  • The GEA would authorize the Minister to issues directives to the OEB requiring the OEB to take steps relating to the establishment, implementation and promotion of a smart grid. Further, the GEA provides that the Minister may direct the OEB to amend licence conditions of distributors, transmitters and other licensees to enhance or reinforce their transmission, distribution or other associated systems to accommodate the connection of renewable energy generation facilities within prescribed period of time.

Procurement

  • The GEA would amend the Electricity Act to give the Minister the authority to issue directions to the OPA to undertake a request for proposal, any other form of procurement solicitation or any other initiative that relates to the procurement of electricity supply and capacity, including supply and capacity from renewable energy sources, reductions in electricity demand or measures related to conservation or the management of electricity demand.

Electricity generation and distribution by municipalities

  • Through amendments to the Electricity Act, the GEA would permit municipalities to directly own renewable energy generation facilities (up to 10 MW) rather than through a corporation incorporated under a business corporations statute.

Smart grid

  • The GEA would amend the Electricity Act to permit the Lieutenant Governor in Council to make regulations setting a timeframe for the development of a "smart grid" in Ontario, including assigning roles and responsibilities for its implementation and standardization.
  • A "smart grid" would be defined in the Electricity Act as, in part, "the advanced information exchange systems and equipment that when utilized together improve the flexibility, security, reliability, efficiency and safety of the integrated power system and distribution system" for the purposes of (a) enabling the increased use of renewable energy sources and technology, (b) expanding opportunities to provide demand response, price information and load control, and (c) accommodating the use of emerging, innovative and energy-saving technologies and system control applications.
  • The GEA would expand the OEB's jurisdiction to include the facilitation of the implementation of a "smart grid" in Ontario. In addition, every licence issued to a transmitter or distributor under the Ontario Energy Board Act will be required to prepare plans, in the manner and at the times mandated by the OEB, for approval for the development and implementation of the "smart grid" in relation to the licensee's transmission or distribution system. A licensee will be required in connection with any approved plans to make investments for the development of the "smart grid" in relation to the licensee's transmission or distribution system.

Pricing

  • In connection with the feed-in tariff program, the GEA would amend the Electricity Act to provide standard pricing for classes of generation facilities differentiated by energy source. Pricing is to be guaranteed for the life of the project.
  • The GEA would expand the powers of the Ministry of Energy and Infrastructure over pricing through amendments to the Electricity Act and the Ministry of Energy Act, allowing the Minister to issue directives specifying energy pricing.

The proposed GEA provides a principled framework within which further regulations will bring about significant changes to both the generation of and the conservation of energy. The McGuinty government has indicated that this initiative is essential to the development of Ontario's economy and will be swiftly carried through to practice. As the regulatory aspect of the GEA is developed, watch for draft initiatives and opportunities for public comment. The regulatory component to the GEA will be critical in ensuring that the new energy sector is workable, effective, and affordable.