Renewables in Ontario – Small stay FIT; Large to Compete
Volume 4 - Issue 19

1. The Trilogy – FIT 3.0

Ontario’s Feed-in Tariff (“FIT”) Program keeps on going with the next FIT application period expected in early November 2013. In preparation, the Ontario Power Authority (“OPA”) has posted draft versions of the FIT 3 Program Rules (“FIT 3 Rules”), Contract and Standard Definitions for comment. Feedback on the draft documents will be accepted until September 20, 2013. The OPA states that the drafts are intended to reflect the policy decisions of the Minister of Energy set out in the Minister’s June 12, 2013, and August 16, 2013, directions.

The release of FIT 3 also launches the Unconstructed Rooftop Solar Pilot (“URSP”) program. The draft FIT 3 Rules contain provisions for applicants who want to participate in the Unconstructed Rooftop Solar Pilot program, including a separate procurement target of 15 megawatts (“MW”). The timeline for the pilot program will be the same as for other FIT applicants who will apply in the fall 2013 application period.

Summary of Rule Changes in FIT 3.0

1. In keeping with the Ministerial directions (discussed below), the FIT Program is now only open to Small FIT Projects (< 500kW). Consequently, all references to Large FIT Projects have been removed from the FIT Rules. Project proponents that are interested in developing larger projects may be able to participate in future competitive procurement processes for renewables.
2. What is acceptable to demonstrate site access has been tightened. Site access must be held in the form of: a lease, an option to lease, title, an option to acquire title, or a license. Memorandums of understanding and letters of intent have been eliminated as eligible forms of Site Access.
3. A microFIT and a FIT Project are now permitted on the same deemed single property as long as the microFIT Project is in commercial operation at the time the FIT Application is submitted. The aggregate capacity permitted on a deemed single property has been reduced from 10 MW to 2 MW. The underlying rationale is that larger projects are intended to participate in the future renewables competitive procurement process.
4. An Unconstructed Rooftop Solar Pilot (“URSP”) has been established along with a 15 MW Procurement Target for the pilot. URSP Projects must be located on an Unconstructed Building. Five applications per URSP applicant will be permitted in the upcoming Application Period.
5. URSP Applications must have a professional engineer or architect attest that the building is an unconstructed building and that it can support the proposed project.
6. URSP Projects are proposed to be screened through transmission and distribution availability tests in advance of normal FIT 3 Projects for this upcoming application period. USRP Projects are proposed to jump to the first of the line in the screening order, as follows: (i) URSP Projects; (ii) FIT 3 contract capacity set aside (“CCSA”) Projects; and (iii) FIT 3 other than CCSA Projects. All projects continue to be screened in order according to priority points (as set out in the FIT Rules) and timestamp.
7. URSP applicants must have 100 percent economic interest from a prioritized group, i.e., Aboriginal, Community (co-operatives), municipality or public sector entity in order to receive project type priority points.
8. Municipalities and public sector entities, i.e., schools, colleges and universities, hospitals and long-term care homes, public transit entities) are now eligible to receive project type priority points (previously only health and education were eligible). A CCSA has been also established for municipalities and public sector entity projects with >50% economic interest.

2. The Background – The Directions

On June 12, 2013, Ontario’s Minister of Energy issued a direction to the OPA to amend the FIT Program. Under the directive, the OPA was tasked with revising the FIT program for renewable projects between 10 and 500 kW (i.e. Small FIT) to give priority to projects partnered or led by municipalities and public sector entities. These incentives include the provision of a ‘price adder’ to the standard FIT pricing, the provision of priority points during the application process and the creation of capacity set-asides.

This continued to signal Ontario’s commitment to small renewable energy projects by making a total of 900 MW of new capacity available between now and 2018 for the Small FIT and microFIT (10 kW and under) Programs. The OPA will open a new procurement window for Small FIT and microFIT starting in the fall of 2013. The fall 2013 procurement target will be 70 MW for Small FIT and 30 MW for microFIT, with annual procurement targets being set thereafter at 150 MW for Small FIT and 50 MW for microFIT. The direction also announced that the OPA will launch a pilot program for rooftop solar projects on unconstructed buildings during the new procurement window for Small FIT.

The Minister also directed the OPA to develop a competitive procurement process for renewable energy projects over 500 kW, which will replace the existing large project stream of the FIT Program. Under the new competitive procurement process, the OPA will be required to engage with municipalities to help identify appropriate locations and siting requirements for future large renewable energy projects. The Government has also asked the Independent Electricity System Operator and the OPA to consult on the development of regional energy plans.

Global Effects on Local Program

By now the global renewables sector has seen the rulings adopted by the World Trade Organization (WTO) over the challenges made to Ontario’s Feed-in Tariff program. The Ontario Government intends to amend the FIT Program for compliance with these rulings. While the Province works towards a full implementation plan for compliance, the Government has directed an interim plan. On August 16, 2013, the Minister of Energy issued a directive to the OPA to reduce the domestic content requirements for new FIT procurement.

The directive provides that new FIT contracts will require facilities to achieve the following minimum domestic content:

• For on-shore wind facilities, the minimum domestic content level shall be 20 percent
• For solar photovoltaic, (PV) facilities utilizing crystalline silicon PV technology, the minimum domestic content levels shall be 22 percent
• For solar PV facilities utilizing thin-film PV technology, the minimum required domestic content level shall be 28 percent
• For solar PV facilities utilizing concentrated PV technology the minimum required domestic content level shall be 19 percent

These required levels will be in effect until the Minister issues another directive to the OPA for final implementation requirements in relation to the WTO rulings.

It is no secret that local economic development ranks alongside renewable energy as an objective of Ontario’s FIT Program. But local does not mean the program operates sheltered from the global vacuum. In addition to integrating local objectives with global rules, the FIT Program continues its evolution in integrating Ontario’s renewable energy objectives with other important policy objectives of the Government such ensuring the needs of Aboriginal and public sector communities are met. In some ways, you could say renewables policy in Ontario is truly growing up as its evolution is not singularly focussed on the development of renewable energy in a tunnel, but rather as an integral part of other Government policy objectives.

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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.