Green Energy Act affords opportunities, but expect higher prices

Ontario is hoping its new Green Energy and Green Economy Act will be the catalyst for major job growth and revitalization for the province’s economy, and at the same time be good for the environment. 

Along with new business opportunities, the GEA signals increases in the cost of electricity in the province.

The overarching goals of the act are to create an environment conducive to the development of more renewable energy projects (solar, hydro, wind, biomass, biogas, landfill gas), and to create a culture of conservation in Ontario.

The GEA laid the foundation for a variety of programs to be implemented by regulation or directives to be issued by Ontario’s Minister of Energy and Infrastructure. Ontario has been gradually releasing the details of those programs.

As of September 2009, key features of the act have been implemented including Canada’s first feed-in electricity tariff or FIT, that began accepting applications Oct. 1, 2009.

Another key feature means renewable energy projects are now exempted from existing environmental approval and permitting requirements, and instead these projects are required to obtain a new comprehensive renewable energy approval. Environmental impact assessment requirements under the Environmental Assessment Act and air quality standards under the Environmental Protection Act are now combined in the single renewable energy approval process.

Ontario has announced a number of incentive programs to help community groups and First Nations with the costs related to developing a renewable energy project in Ontario, including a $250-million aboriginal loan guarantee program.

A Renewable Energy Facilitation Office has been established to assist renewable energy project proponents to access available resources in other government ministries and agencies, and to provide information relating the various government incentive programs.

A $2.3-billion program for major upgrades to Ontario’s electricity transmission grid is underway.

The FIT program is a major component of the province’s plan to develop green energy and jobs in Ontario by establishing a government procurement process for electricity generated from renewable sources with standard program rules, standard contracts, and standard pricing.

Ontario hopes the program will attract a diverse range of renewable energy producers including homeowners, community-based and First Nations groups, and larger-scale commercial generators by paying producers some of the highest prices for electricity in North America. 

For example, Ontario proposes to pay 13.5 cents per kW-h for electricity generated from onshore wind turbines, 19.5 cents per kW-h for electricity generated from offshore wind turbines, and 80.2 cents per kW-h for electricity from small residential rooftop solar facilities.

The prices being offered under the FIT program are far higher than the price that Ontario consumers are currently paying, which on average this year has been less than 4 cents per kW-h. As renewable power projects connect to the power grid over the next few years, expect the price of electricity in Ontario to rise as consumers start paying for more expensive green energy.

There have been some early indications of energy developers responding to the opportunities. Just days after the official launch of the feed-in electricity tariff program, Canadian Hydro Developers, Inc., the largest operator of renewable generation facilities in Canada, announced it had acquired the rights to a huge wind turbine project to be built in one of the Great Lakes. According to Canadian Hydro’s press release, “When completed, this facility would be the largest offshore operation in the world, supplying enough renewable energy to power over two million homes.”

The FIT contract contains domestic content requirements that are intended to help foster investment, green manufacturing, construction, and installation jobs in Ontario. Wind and solar projects will be required to have a certain percentage of their project costs come from Ontario goods and labour at the time they reach commercial operation.

The programs that have been implemented to date focus on the first goal of the GEA — development of electricity from renewable sources. In the coming months we can expect additional regulations and programs focusing on the second goal — energy conservation. Expect those programs, including changes to the building code and the requirement for energy audits for buildings, to come with a green price tag too.

Sharon Wong is a partner in the energy and litigation groups at Blake, Cassels & Graydon LLP in Toronto.

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