In a surprise move on Friday, February 11, 2011, Ontario’s Ministry of Environment announced a halt to development of all offshore wind projects on the Canadian side of the Great Lakes.
Citing environmental concerns, the Ministry indicated the cancellation of all existing Crown land lease applications for offshore wind development in the Great Lakes that do not yet have an Ontario Feed-in Tariff (FIT) contract with the Ontario Power Authority, including those with Applicant Record status.
This announcement took Ontario’s offshore wind energy industry by surprise and it remains unclear what process will be undertaken by the Ontario government to study environmental concerns in the Great Lakes (or what environmental concerns have led to the current policy reversal).
Also unclear are the legal rights which Crown land lease applicants and Ontario FIT Program applicants (and contract holders) may assert as a result of their reliance on Ontario’s stated objectives in the establishment of the offshore wind portions of the FIT Program.
Naturally, the surprise cancellation of the Province’s offshore wind FIT Program is not seen as a strong signal of stability for renewable energy policy in Ontario. Millions were invested in reliance on the attractive price incentives offered for offshore wind projects under Ontario’s FIT Program. Even larger dollar amounts have been invested by the private sector in onshore wind, solar and biogas initiatives.
By coincidence, Ontario’s offshore moratorium announcement came just a few days after the opening of the State of Virginia’s Offshore Wind Technology Center in Chesapeake, and the announcement by the U.S. Federal Government of $50.5 million in development funding for projects that support offshore wind energy deployment and the creation of several highpriority wind energy areas in the mid-Atlantic.
As offshore wind energy developments get underway in Québec, Nova Scotia, New Brunswick, British Columbia, Newfoundland and Labrador, New York, Illinois, Pennsylvania, Ohio, Michigan, Minnesota, Indiana and virtually all other coastal jurisdictions in Canada and the United States, Ontario has ceded an early lead in this particular renewable energy arena.
That said, the FIT Program did give Ontario an excellent head start in the renewable energy sector more generally.
Although offshore developers will need to settle up with the government on offshore matters in the coming months, other subsectors of the renewable power generation industry are moving forward from project planning stages through to financing and development quite nicely. Furthermore, although both onshore wind and solar developers have experienced not insignificant law and policy uncertainty over the past few months, it does appear that Ontario may see through the construction of more than 3,000 MW of carbon-free, clean and renewable energy generating assets.
This is a commendable achievement for a subnational government in a province with a population of less than 15 million.
Of course, given the Ontario FIT Program’s pending metamorphosis over the coming months, and given Canada’s generally welldeserved reputation as being politically and economically stable, out-of-country investors may ask, “Where else in Canada can we invest our renewable energy dollars to mitigate the political and policy risk in Ontario?”
At this stage, the truth is that no other jurisdiction in Canada or the U.S. has yet established a renewable energy off-take program with power purchase commitments as attractive over the longer term as those which have been offered by the Ontario government. Unfortunately, the Ontario FIT Program is: (a) due for review in 2011; and (b) may, in fact, be cancelled and/or entirely revamped (and, certainly, rebranded) if the Ontario Liberal Party fails in its bid to be re-elected as the majority government in the October 6 elections.
Traditionally, Ontario has managed to respect its commitments to energy project developers as governmental policy priorities have shifted and changed. As the FIT Program continues to evolve, we expect that the Province will again endeavour to honour its commitments.
However, several other provinces in Canada also merit serious attention: British Columbia, for instance, has made it clear that wind energy will form an important part of its future energy and economic development plans. Although close to 90 per cent of its electricity already comes from hydro, the introduction of B.C.’s Clean Energy Act underscores an orientation towards clean, renewable energy. BC Hydro’s 2010 competitive call for clean power is expected to result in the construction of six projects totalling 534 MW of capacity.
Similarly, Nova Scotia’s 2010 energy policy sets a mandatory target of supplying 25 per cent of the province’s electricity needs from renewable sources by 2015. Nova Scotia’s ComFIT program differs from others in North America and Europe by making feed-in tariff rates available only to community-owned projects. It will also be the first in North America to specifically pay for community-owned tidal power plants.
Hydro-Québec recently announced the results of its tendering process for First Nations and regional municipalities that will help meet the Province’s goal of 4,000 MW of wind energy by 2015.
Finally, the governments of Saskatchewan, New Brunswick, Manitoba, and Newfoundland and Labrador also continue to develop policies oriented toward clean, renewable energy generation.
As a result, we believe that prospects for Canada’s renewable energy industry over the next few years are very promising and that renewable energy in Canada is only in its infancy.
With more than 1,000 MW of renewable energy generating assets expected to be installed across Canada this year, 2011 will be a record year for the industry. And, although Ontario’s FIT Program may undergo significant changes in the coming months, the fact is that renewable energy generation has entered the fabric of the Canadian energy sector. Renewable energy will form an essential part of the evolution of the sector as smart grid opportunities, electric vehicle demands, and transmission and centralized generation capacity constraints transform the energy sector in coming years.
This, in combination with Canada’s stature in the world as a great place to invest, makes Canada’s renewable energy sector an excellent target for investment in the foreseeable future.