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6 issues to watch in Ontario’s new Green Energy Act

On Monday, February 23rd, the Ontario government introduced its proposed Green Energy and Green Economy Act, 2009 (Bill 150) into the legislature. The eagerly anticipated Act is the first step in the government’s goal of creating a nimbler development mechanism for renewable energy, and an attempt to encourage all Ontarians to use energy more efficiently. While the Act looks promising, it leaves some interesting questions on the table. Will the streamlined approvals process lead to more conflict? How will the appeals process change? Will it allow development of renewables in ecologically sensitive areas? And will energy audit provisions add to the cost of property deals?


March 9, 2009
By Robert Colman

The general consensus appears to be that the Act is pointing the province in the right direction.

“It sets a framework clearly in place for a government that wants to promote more renewable power,” notes Richard King, an environmental and energy lawyer at Ogilvy Renault LLP. “It has removed some key barriers for development. Premier McGuinty has pursued renewables quite seriously since being in office, and he now has a few years of experience of how things work.”

1. Feed-in tariffs
One of the most critical moves the government made was to introduce a feed-in tariff for green energy projects. A feed-in tariff is a fixed price guarantee. The price can vary according to the type of energy, the location of the generation project, and other factors.

“The government had been obtaining power through RFPs,” explains King. “If they wanted to add 1,500 MW of wind power, they would go through rounds of RFPs. This system isn’t very flexible. Developers had to wait for RFPs to be introduced, and they competed blindly on price, The feed-in tariff is just a standing offer – if you can develop a project at a certain price, you go ahead.”

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The only question remaining regarding the tariff system is its structure.

“The Act provides all necessary guidance to support this important reform, but is not sufficient to deliver it,” notes Tom Brett, a partner at Fogler, Rubinoff LLP. “Delivery responsibility falls to the OPA, which has an uneven record in delivering expeditious programs.”

2. Better transmission/distribution access
The new Act makes it clear that the approval process for connection and transmission and distribution is to be accelerated for renewable energy generators. The Environmental Protection Act is being amended so that renewable energy projects will only require a single “renewable energy approval.” They will be exempt from a number of others, such as certificates in regards to air and noise emissions, waste disposal systems, etc.

The Act will allow the creation of time limits for the completion of assessments by distributors and transmitters – a six-month window. And renewables will be given priority access.

3. A right to appeal?
The Act also takes away the ability of municipalities to restrict renewable projects in that Bill 150 will exempt renewable energy generation facilities and renewable energy projects from zoning by-laws under the Planning Act and municipal development permit regimes.

“I believe this is aimed primarily at wind power,” notes King. “Municipalities were putting limits on wind development, creating setback rules to make it more difficult to develop in certain areas.”

However, at the same time, there is a new right of appeal for individuals concerned with a new renewable energy approval. Such an individual can now appeal to the Environmental Review Tribunal for a hearing if they believe the approval will cause “serious and irreversible harm to plant life, animal life, human health or safety or the natural environment.”

While this may sound stringent, it does suggest there is a right of appeal, which is different from the current rules.

“Renewable power developers are concerned about this ‘right of appeal’ stipulation,” notes Richard King. “Right now, the public has to seek leave to appeal, but the language in this suggests a right to appeal, unless some parameters are put around that.”

4. Municipal generation benefits
While municipal powers under the Planning Act have changed, so have their rights to generate power. The Bill will make it possible for electricity distributors to own and operate small (under 10 MW) renewable generation facilities, combined heat and power facilities and energy storage facilities. Currently, distributors are prohibited from doing so.

“With the current rules, municipalities need to form a separate business corporation in order to generate electricity,” explains Michael Lithgow Corporate Energy Services Manager for The Regional Municipality of York. “Nothing we would do on a facility basis would be any larger than that. It opens up opportunities for us. On a standalone basis, there are a number of possibilities – the use of wastewater for power, some kind of biogeneration would be interesting to explore.”

Also of interest to Lithgow is proposed amendments to decision-making and approvals processes involving the Ministry of Natural Resources, conservation authorities and the Niagara Escarpment Commission.

“I wonder about how this might impact the Greenbelt and Oak Ridges Moraine. We recently looked at a number of sites in terms of wind energy potential and we deliberately left out a couple of promising ones that are sited on the Oak Ridges Moraine, because we figured it would be very difficult to get approval on something like a wind turbine there. Now, I’m wondering how that might change.”

This is a concern for Brett, in the sense that he notes, “the Act does not demand consistency with or conformity to the provincial vision set out in cabinet approvals for the Growth Plan, Greenbelt Plan and the Provincial Policy Statement; instead, it seeks to narrow or exclude the application of these plans and instruments to green energy projects.”

5. Energy audits
Through the legislation, energy conservation will become a central theme of the Ontario building code. Alongside that proposed change is a suggestion that an energy audit will be required before a property is sold or leased.

 “I’m not sure I support this move 100 per cent because there’s a lot of room for doing audits incorrectly,” says Lithgow. “Quite often, energy use is more driven by lifestyle or corporate culture rather than the actual building. I know that in houses for instance, lifestyle is the single biggest determinant of how much electricity you use – less so the number of people in the house, the age of the house, or the particular appliances. It’s how you use all that, how it fits together. And water use, in a residential setting at least, is somewhat similar. It’s a little more tied into the efficiency of the fixtures. Gas is the least affected by lifestyle, most by the building. So for heating, having some kind of audit is good, but for the others it’s questionable.”

It seems to be that the audit will apply only to residential buildings, but clarification will have to come out in the regulations.

It appears that in the Act the government can require public agencies to prepare energy conservation and demand management plans, and require that they be updated regularly. Included in this requirement would be ministries of the Ontario government and municipalities.

As Lithgow notes, this is similar to the provisions of the Energy Conservation Leadership Act (ECLA), which has been in place since 2006, awaiting regulations to back it up. While ECLA gets repealed with the introduction of Bill 150, it leaves municipalities with the same challenge.

“It’s not a small task to gather all of the information about your energy use, especially for smaller municipalities that don’t have the resources to do this stuff,” adds Lithgow. “There aren’t even good benchmarks out there for many building types in terms of what should be measured and what range they should fall within. Municipalities run pretty specialized buildings, like arenas, community centres, water and wastewater facilities, solid waste facilities — what’s the appropriate benchmark for those?”

Lithgow notes there is a lot of working going on in this area at the moment, between the Association of Municipalities of Ontario and the Canada Green Buildings Council, but there is a lot of work still to be done to make effective benchmarking possible.

6. Smart grid
The Act introduces the concept of the “smart grid” for the first time in Ontario energy legislation, and sets the task of promoting development and promotion of a smart grid in provincial government hands. As has been noted by many professionals and the U.S. government, the smart grid is key to boosting the provincial economy, so this is an important first step on that journey.

What’s missing?  
Most commentators have praised where this new Act is taking the province, although each is looking for certain clarifications.

“It’s a good piece of enabling legislation,” says Peter Rowles, VP of energy efficiency at Energy Advantage, and a columnist for Energy Management. “All of this is adding more teeth to attracting investors to invest in renewable energy projects in the province.”

The feed-in tariff and promotion of renewable energy projects is a very positive point for Rowles, but he stresses that not everyone should be looking to enter the generation business.

“I have industrial clients that are interested in the idea of generating power and sending it back to the grid, but for any business thinking this way, I recommend working with developers to establish third party arrangements,” says Rowles. “It’s great to host this technology, but it’s not the core business of most companies, and core business is particularly important today.”

Tom Heintzman, president of Bullfrog Power, agrees that the Act looks positive, “but so much is going to depend on how things are flushed out in regulations,” he says. “It’s premature to say much, but all the right moves are being made in terms of advancing renewable energy and encouraging, and even to some degree forcing energy conservation.”

Heintzman would like to know how the voluntary market is treated by the changes – individuals, like Bullfrog’s clients, who are voluntarily buying renewable energy but not necessarily putting solar panels on their roofs.  

Michael Lithgow, meanwhile, would like to see some comment or content regarding demand response issues.
 
“That’s of particular interest to us right now,” says Lithgow. “There doesn’t seem to be much addressing that, although I do note that on Friday February 27th, the Ministry of the Environment came out with some policy on the use of generators, including emergency generators for demand response, so it’s kind of unrelated but I don’t know if the timing was coincidental or not. This announcement made it quite a bit easier for us to use emergency generators for demand response.”