On August 2, the Ontario Government implemented a number of significant changes designed to provide greater certainty and stability to all renewable power participants, including developers, investors and initiatives suppliers.
Amendments to Feed in Tariff (FIT) Contract Terms
Minister of Energy Brad Duguid issued a Directive to the Ontario Power Authority (OPA) on August 2nd introducing a new process allowing FIT contract holders with projects seeking project financing and a manufacturing partner to have the opportunity to request the OPA to waive its termination rights if they meet certain conditions.
The Minister’s Directive established a December 31, 2011 deadline for approved Domestic Content Plans and equipment purchase agreements (wind and solar). The OPA has established the following timelines:
- Non-Capacity Allocation Exempt projects (generally larger than 500 kW) must submit the waiver, a Domestic Content Plan and evidence of agreement(s) for the purchase of Generating Equipment as follows:
- the Waiver by October 14, 2011;
- a Domestic Content Plan, in the Prescribed Form titled “FIT Contract Form of Domestic Content Plan (Waiver)”, by October 14, 2011; and
- evidence of agreement(s) for the purchase of Generating Equipment, in the form of a Statutory Declaration, by November 30, 2011.
Each waiver request and Domestic Content Plan will be reviewed by the OPA for completeness and substantiation.
- Capacity Allocation Exempt projects must submit the waiver and a Domestic Content Plan by 5 p.m. December 30, 2011.
If those requirements are not met by the specified deadline, the waived termination rights will be reinstated. The OPA will be hosting a web-enabled teleconference on August 9 to discuss the process for obtaining a Waiver and to answer questions.
Currently under Section 2.4(a) of FIT Contracts, until the OPA issues Notice to Proceed to the supplier and the supplier has provided to the OPA the Incremental NTP Security, the OPA is entitled to terminate the contact unilaterally at any time. This termination right created significant contractual risks for industry participants, investors and lenders which cumulatively and negatively impacted financing for such projects. The amendments made on August 2 will give clean energy developers and all industry participants more stability in planning, more flexibility to obtain financing and greater confidence in placing firm orders for equipment. From a political perspective, this will theoretically entrench the legal rights of up to 1800 renewable energy contracts that were threatened for potential cancellation by Progressive Conservative Leader Tim Hudak, which resulted in great uncertainty and instability in the industry.
Government Efficiency: Streamlining the Renewable Energy Approval Process
The Renewable Energy Approval (REA) process has been plagued by systemic caution and delay as the result of the involvement and overlapping jurisdiction among several government ministries. The government is moving to minimize bureaucratic delays and red tape to the maximum extent possible.
The Ministry of the Environment (MOE) reduced the amount of time it takes for the initial screening review of applications from 90 days to 40 days by:
- Establishing a dedicated REA team focused only on the management and review of REA applications.
- Holding over 250 pre-consultation meetings with proponents to ensure awareness of REA requirements.
In addition, the MOE also released:
- a new Technical Guide to Renewable Energy Approvals to help renewable energy developers meet the requirements of the Renewable Energy Approvals regulation (O. Reg. 359/09). The Guide provides further guidance on how to prepare the required technical and scientific reports as well as conduct more effective consultations with municipalities, the public and Aboriginal communities.
- an Aboriginal Consultation Guide for proponents that has been developed by consulting with technical experts within key First Nations organizations and other ministries.
The Ministry of Natural Resources has also introduced a number of procedural and clarifying steps and new tools to save developers time including:
- Developing technical guidelines on protection of natural heritage and significant wildlife habitat that provide clear rules for the renewable energy industry.
- Releasing new tools, templates and resources to streamline processes for completing REA approval requirements, including rapid assessment tools for significant wildlife habitat and wetlands.
- Establishing a regional team of specialists to focus on the new Bruce to Milton Feed-in-Tariff projects - developers will be contacted by the ministry within three weeks of receiving their FIT contracts to begin the regulatory review process.
In addition, the Ministry of Tourism and Culture has committed to implement a 60-day service guarantee for written comments on the review of all REA heritage and archaeological assessment reports.
All of these inter-departmental measures are intended to streamline the application process and to minimize confusing inter-departmental oversight challenges
Changes to Property Tax Treatment of Renewable Energy Facilities
Regulatory amendments are being proposed to Ontario Regulation 282/98 regarding the property tax treatment of renewable energy facilities.
The Assessment Act and Ontario Regulation 282/98 currently set out rules governing the property tax treatment of energy generation facilities. However, in some situations, these rules may not be sufficiently detailed to address issues relating to emerging types of energy installations.
The objective of the proposed regulatory amendments is to provide clarity and certainty to property owners, municipalities and the Municipal Property Assessment Corporation, and to ensure that property tax does not act as a disincentive to energy generation, particularly small-scale generation by persons who are not ordinarily in the business of generation.
In announcing these challenges to advance Ontario as the leading destination for clean energy investment, the Provincial Government advised that more than 20,000 clean energy jobs have been created in Ontario to date, and that the Province is on track to create 50,000 by 2012. Clearly, the Liberals are positioning the creation of green energy jobs (and Hudak’s dismantling of the program) as a prominent plank in their electoral platform for the upcoming campaign.