Last year, Ontarians went to the polls in a provincial election and Canadians brought back the Conservatives in the federal election. Now, the United States is gearing up for the 2012 presidential election. The Energy portfolio has come to occupy a regular spot on the political agenda. Energy, and increasingly, renewable energy, has long been seen as a Hot Potato or Golden Egg of opportunity for many a political candidate.

Whether it was the provincial Ontario or federal Canadian elections or the 2012 presidential election in the United State, the Energy portfolio has come to occupy a regular spot on the political agenda. Energy, and increasingly, renewable energy, has been either a Hot Potato or Golden Egg of opportunity for many political candidates.

In 2012, key changes will unfold in Canada's renewable energy sector. Some of these may only be of interest to those directly in the sector. For example, a number of jurisdictions are heavily engaged in facilitation the integration of renewable generation into the electricity grid. But other reviews are likely to attract the attention of concerned citizens, like Health Canada's expected new guidelines on the placement of wind turbines.

In this issue, we survey a sampling of these key events in Ontario. In later issues, we will devote additional attention to each topic, as well as other Canadian jurisdictions, as significant developments unfold.

ONTARIO'S FIT PROGRAM UNDER REVIEW

By now, most North American renewable energy industry participants are familiar with Ontario's Green Energy and Green Economy Act, 2009 (“Green Energy Act”) and the subsequent Feed-in Tariff Program (“FIT Program”) that is undergoing its first review.

The Ontario Power Authority (“OPA”) has been charged with conducting the review. The review is intended to address a range of issues, including:

• pricing with a view to balancing the interests of ratepayers and the continued encouragement of clean energy investment;
• expansion of the program to include new and emerging technology types;
• policy and program assessment to ensure support of manufacturing excellence and clean energy job creation in the province; and
• consideration of outreach techniques to complement the province's renewable energy approval (“REA”) process.

Almost 3,000 responses were submitted to a review survey during the period from October 31 to December 14, 2011. The survey responses were in addition to numerous group consultations and stakeholder sessions held during that period.

By most counts, the review is expected to result in reduced FIT prices for future contracts. However, the specific shape these changes will take remains to be seen. Parties are also anxious to find out if any existing procedural rules will be affected, such as the general time stamp approach to connection. The results of the review are expected to be released in March.

APPEALING REA's

In July 2011, Ontario's Environmental Review Tribunal issued its first appeal decision on a renewable energy approval that had been granted by the Ministry of the Environment (“MOE”) for the 20 MW Kent Breeze wind farm of Suncor Energy Services Inc. in Chatham-Kent, Ontario.

The REA has become the approval instrument in Ontario for renewable energy projects following the enactment of the Green Energy Act. The statutory test set out in the Environmental Protection Act to appeal a REA is whether the project would cause serious harm to human health. The burden is on the appellants to satisfy this test. In the Suncor appeal decision, the appellants failed to satisfy this test. Specifically, the ERT states in its conclusions that:

"This case has successfully shown that the debate should not be simplified to one about whether wind turbines can cause harm to humans. The evidence presented to the Tribunal demonstrates that they can, if facilities are placed too close to residents. The debate has now evolved to one of degree. The question that should be asked is: What protections, such as permissible noise levels or setback distances, are appropriate to protect human health?... it was essentially up to the Appellants to prove that the Ontario standards are wrong in the context of the specific Project under appeal (leaving aside the related question about possible non-compliance with the standards)."

The decision is an important one for the renewable energy industry as it demonstrates that the ERT will apply the statutory test strictly, thus providing a welcome element of stability to the developer. That said, the jurisprudence in this area is only just beginning. In fact, appellants to wind projects may be finding justification in the excerpt reproduced above as the basis for further appeals of REA's.

Developers and wind opponents alike will be watching for the outcomes of appeals, such as those made to the REA issued for the NextEra Conostogo 23 MW project in Wellington County and the Zephyr Farms wind project in Middlesex-Lambton County. The Conestogo appeal is already revealing additional twists. The ERT recently granted a motion to adjourn the appeal proceedings pending the resolution of an application for judicial review brought by one of the appellants. Granting this motion will delay the REA appeal procedure. The extent of the delay and the implications of the judicial review on the REA framework, remain to be seen.

The consideration of these appeals are likely to occur around the time of the release of the FIT review. Hopefully, any tribunal, court and policy decisions rendered, work in rational tandem.

SO WHERE SHOULD WIND TURBINES GO?

Many appeals or opposition to a wind project are based on perceived negative impacts on health, such as sleep disturbances caused by excessive noise. Various jurisdictions have guidelines or regulations in place which are intended, in part, to address these concerns. The guidelines or regulations are certainly not consistent and consensus as to appropriate setbacks has yet to emerge.

Health Canada is currently working with the provinces and territories to develop national guidelines for wind generators which will establish a recommended minimum safe distance to homes. In addition, the guidelines are expected to deal with noise and shadow flicker, and to account for the power of the turbine, the size of the blade and the local geography.

While the Health Canada guidelines will be voluntary, they will no doubt have an influential effect on what will be expected from industry. Draft guidelines will be subject to public consultation prior to being finalized.

UNLOCKING CONGESTION: REALIZING A COMPONENT OF ONTARIO'S LONG TERM ENERGY PLAN

Eliminating gridlock has been a constant theme in the renewable energy landscape. It is also a key element in energy policy generally, as has been articulated in Ontario's Long Term Energy Plan (“LTEP”). Key elements of the LTEP are focused on supply mix, including a prominent role for renewable and clean energy, planning for demand growth of about 15 percent, and becoming coal-free by 2014. An important facilitator is ensuring sufficient transmission capacity is available and so the LTEP identifies priority transmission projects. The East-West Tie line is the first priority transmission project on which Ontario has initiated its transmitter designation process.

In August 2010, the Ontario Energy Board (“OEB”) issued a new policy framework for new transmission development in the province. The policy is directly related to the facilitation of connecting renewable generation and intended to:

• allow transmitters to move ahead on development work in a timely manner;
• encourage new entrants to transmission in Ontario; and
• support competition in transmission in Ontario to drive economic efficiency.

The policy framework contemplates the OEB designating a transmitter for a particular transmission project. Once a transmitter is designated, a leave to construct proceeding is still required to determine whether the project will be approved for construction.

The transmitter designation policy contemplates that facilities needing designation may be identified in a number of ways. For example, one of the OPA's legislated objectives is to develop an integrated power system plan (“IPSP”) and file such with the Board every three years. The IPSP could determine priority transmission projects. In addition, FIT Program includes an economic connection test (“ECT”) procedure through transmission investments are assessed as required and economically justified to connect FIT applications whose projects cannot be accommodated by existing transmission capacity. And as noted above, the LTEP identified priority transmission projects.

In March 2011, the Minister of Energy wrote to the OEB to undertake a designation process to develop the East-West tie line. The eight transmitters that registered their interest in seeking designation last fall are now invited to file a plan for the development of the East-West Tie Line. The filing date has not yet been set by the OEB but parties who wish to seek intervenor status must do so by March 5, 2012.

As the first designation process since the OEB first issued its new transmission development policy, it will be followed with great interest. That the first project to undergo this designation process comes from the LTEP, and not the ECT, has not been lost on industry participants. Parties may speculate on the future of the ECT as industry sees the designation process unfold at approximately the same time that the results of the FIT Program review are announced.

WHERE ARE WE GOING?

In addition to the significant events discussed above, much more work continues in the renewables sector. The Independent Electricity System Operator in Ontario continues its detailed work on the integration of renewable generation. Various provincial utilities and governments continue their policy development and calls for renewable power.

While the shape of the sector may undergo adjustment in Canada over the next year, there is little suggestion that renewable energy is on the decline. Indeed, the policy and program reviews and industry debates unfolding illustrate a sector that continues to grow and mature.

About the Author

Bernadette Corpuz is a Senior Associate in the Electricity Markets Group of the law firm Borden Ladner Gervais LLP (BLG). As a member of the Electricity Markets Group, Bernadette advises a wide range of energy market participants, including distributors, transmitters, generators, and commercial users with respect to a variety of commercial and corporate transactions related matters, including mergers and acquisitions, financing and energy markets. Bernadette can be reached at bcorpuz@blg.com or 416-367-6747.