In a much anticipated decision, the Ontario government released its changes to the province’s groundbreaking Feed-in Tariff Program last week.
Most significantly, the government emphasized its continued commitment to developing its renewable energy resources, the use of feed-in tariffs policy for doing so, and a further expansion of Ontario’s green energy economy.
The government approved the new program, dubbed FIT 2.0, and regulations are now being developed by the Ontario Power Authority to implement it.
For the most part, renewable energy advocates breathed a sigh of relief with the announcement.
No other jurisdiction in North American has such a comprehensive policy covering most renewable energies, nor the tariffs to incentivize development.
California and New Jersey, for example, have programs for solar PV, and overall targets for renewable energy that typically favor large wind projects. Importantly, Ontario, and the smaller province of Nova Scotia, emphasize community or local ownership of renewable generation.
Nevertheless, Ontario’s announcement did not address a major barrier to the rapid expansion of renewables in the province: the antiquated grid and the reluctance of the grid operator to increase connections.
Reflecting the rapid downward prices of solar PV, Ontario substantially cut those tariffs from 10-30% from previous levels.
Small systems under 10 kilowatts (kW) are cut 30% and large groundmounted systems are cut 22%.
Still, the new tariffs are substantially higher than those for comparable size systems in Germany.
Wind tariffs are cut nearly 15%, while tariffs for hydro, biomass, on farm biogas, biogas, and landfill gas remain the same.
Significantly, it also raises the inflation adjustment for biomass and biogas 20%, leaves wind and hydro the same, and doesn’t include one for solar PV. The degree that tariffs rise with inflation can make or break a long term investment that has a contract of 20 years or more.
FIT 2.0 doesn’t broaden the program to include other technologies, such as solar hot-water, storage, small wind turbines or ground-source heat pumps.
The program will come up for review annuallly to keep pace with cost changes, particularly for solar PV. The next review begins in November and new prices will be implemented in January, 2013.
Preference for Community-Owned Generation
FIT 2.0 includes steps to boost community-owned generation.
The previous first-come, first-served approach to awarding contracts didn’t account for the increased complexity and time needed for required to develop community-owned projects.
- Introduce a system for prioritizing connections for community, aboriginal, and public institutions,
- maintain price adders or bonus payments for community- and aboriginal-owned projects, and
- set aside 10% of grid connection capacity for community and aboriginal projects with a minimum of 50% equity ownership.
Projects with more than 50% of the equity owned by aboriginal communities receive a bonus payment of $0.015 CAD/kWh.
Projects with more than 50% of the equity owned by community groups, farmers, and cooperatives receive a bonus payment of $0.01 CAD/kWh.
New contracts will be awarded on a points system. Community and aboriginal-owned projects get the most points (3), followed by schools and other public institutions (2). Projects that have municipal council support get 2 points as do “shovel-ready” projects. Hydro and bioenergy projects get 1 point for providing “system benefits.”
Increases Renewable Energy Target
Despite this aggressive Feed-in Tariff Program, Ontario has a tiny renewable energy, 13% by 2018.
To address concerns that Ontario will quickly reach this target, FIT 2.0 moves it up to 2015, allowing development to occur more quickly.
The government says it will review the target in 2013 and possibly raise it.
Connection Barriers Remain
Analysts are quick to note the biggest obstacle to more renewable projects is connecting them to Ontario’s aging grid.
Hydro One, the largest local distribution company in Ontario, is notorious for arcane, contradictory and often arbitrary rules for interconnection. No more than 7% of any distribution transformer can be used for renewable energy, according to Hydro One.
Despite some drawbacks, Ontario’s government withstood fierce opposition from the anti-renewables lobby and refined a pioneering program that has made the province a beacon of renewable energy policy in a sea of mediocrity in North America.