Introduction

On July 11, 2012 Ontario's Minister of Energy issued a directive (directive) to the Ontario Power Authority (OPA) clarifying certain policies and slightly adjusting the feed-in tariff (FIT) program rules and contract. The directive was issued following the Ontario government's review of feedback regarding the draft rules, contract forms and definitions for the revised FIT 2.0 program issued in April of this year.

Summary of the Directive’s Key Points:

  1. Prioritization of Community and Aboriginal Participation Projects

The ministerial directive clarified that the OPA will prioritize applications for projects with (a) greater than 50 per cent community equity interest held by a co-operative with at least 50 members being local property owners, or (b) greater than 50 per cent Aboriginal equity participation. With respect to the contract capacity set aside for projects with at least 50 per cent community or Aboriginal equity participation, the OPA is now directed to offer contracts to projects described in (a) or (b) before offering contracts to other projects in the application window.

Further, it has now been made clear that a change in the prescribed levels of community and Aboriginal participation will constitute grounds for termination of the contract. 

  1. Other Changes to Priority Points

The directive amended the FIT program priority points. The modified priority point system table was set out in Appendix A of the directive.

One key modification was the expansion of the project readiness category:

  • One priority point will now be awarded for projects that applied on or before July 4, 2011; projects that applied on or after July 5, 2011 will be awarded 0.5 priority points.
  • These points may be added to the one point that is awarded if a solar rooftop applicant owns or has firm site control, or if an applicant has sufficient space and a firm lease/option or ownership of the land for a wind, solar ground-mount, bioenergy or waterpower project. 
  • There is a maximum of two points to be awarded for this category.
  1. Protection of Agricultural Lands

Ground-mounted solar photovalic (PV) facilities greater than 10 kW are now prohibited from being located on (or relocated onto) any of the following sites:

  • Land with any class 1, 2, and 3 soils (as per the Canada land inventory agricultural capability maps), unless the site is located on one of the following: airport/aerodome, closed landfill, contaminated site, a sited zoned and primarily used for industrial use, a federal military installation, or for class 3 soils only, a site owned by a municipality at the time the application was made.
  • Land with a mixture of class 1, 2, or 3 soils with another soil class. However, if the solar facility is located on the part of the property that is not class 1, 2 or 3, the site is not prohibited.
  • Land with organic soils (as per the Canada land inventory agricultural capability maps).
  • Land that is designated as “specialty crop areas” by the provincial policy statement.

Note: The land restrictions above do not apply to existing FIT contract holders who requested site amendments before April 5, 2012.

  1. Community Energy Partnership Program (CEEP) Eligibility

The ministerial  directive instructs the OPA to amend the CEEP eligibility requirements to match those for community projects under the FIT rules, as set out in the April 5, 2012 directive.

The OPA is also directed to allocate $1,000,000 a year for education funding and capacity building, $100,000 of which is to be specifically allocated to the Association of Municipalities of Ontario for education programs.

  1.  Land Use Rules

The directive also instructs the OPA not to amend existing FIT contracts to permit relocation of facilities greater than 10 kW to properties that are any of the following:

  • Zoned to permit residential use or border a property zoned to permit residential use.
  • Zoned for commercial or industrial use, but where not such use is occurring.
  • Zoned for commercial or industrial use and the solar ground-mounted PV generation facility is (or will be) the sole or primary use of the property.

Going forward, the Ministry of Energy will establish a working group made up of a number of interested stakeholders (including the OPA). The working group will provide recommendations and solutions to project siting issues. Further revisions to the FIT rules may arise out of this working group.

  1. Connection Point and Project Location Proximity

The directive instructs the OPA to amend certain rules for non-hydroelectric plants. Specifically, the rules are to provide a limit on the distance between such a project’s connection point on the transmission or distribution grid and the area of the project property that the applicant has access rights to. Further, the distance between a proposed project and its proposed connection point on the grid can be no greater than 50 km.

  1. microFIT ‘Offer to Connect’ Timelines

The microFIT rules (for projects of 10 kW or less) will be amended to require applicants to seek an Offer to Connect within 30 days of the OPA confirming their application. The applicant will then have a 90-day period in which they must receive and accept an offer to connect from the local distribution company.

  1. Changes to the FIT Contract

In direct response to strong feedback from the project development and finance committees, the minister has directed that the proposed FIT 2.0 contract clauses pertaining to termination for convenience (which would have made most projects non-viable) be set aside. The OPA will not change termination for convenience clauses from the FIT 1.0 contact.

In addition, the voluntary withdrawal period for existing FIT contract holders is now extended to September 30, 2012.

  1. Pilot Program for Solar Projects on New Buildings

By the end of 2012, the OPA is now directed to create and implement a pilot program in which applicants with unconstructed buildings can apply for small FIT rooftop solar contracts. Up to 15 MW of the overall 2013 small FIT contract capacity will be reserved for the pilot program.

Analysis:

With the launch of Japan’s feed-in tariff program and the anticipated renewable industry growth in South America, South Africa and Central Europe, analysts expect less attention to be focused on the slowing Ontario market. Although significant panel, turbine and EPC supply opportunities still exist in respect of FIT 1.0 contracts to be fulfilled, the policy complexity and uncertainty associated with FIT 2.0 is expected to slow the pace of new market entry in the province.

At this stage the OPA now needs to implement the changes associated with the ministerial directive – a process which we expect to see competed over the course of the summer months.