Ontario reorganizes its FIT program

The one-year extension to the PTC and its delayed interpretation by the IRS hints at the U.S.’ struggle with the issue of financing wind farms. Meanwhile, Canada has plotted a different course.

In June, Ontario’s Energy Minister, Bob Chiarelli, issued a Directive to the Ontario Power Authority (OPA) regarding amendments to the province’s Feed-in Tariff (FIT) program. This follows the public announcements made by Minister Chiarelli at the recent CanSIA Solar Ontario Conference in Niagara Falls. Canadian law firm Gowling Lafleur Henderson LLP (www.gowlings.com) is highly active in renewable energy projects across Canada and provided this update. This recent Directive lays out a number of important changes to the FIT program, such as:

• Setting annual capacity targets for Small FIT development at 150 MW and for a microFIT at 50 MW for each of the next four years
• Replacing the Large FIT program with a new competitive procurement process that requires developers work with municipalities and Aboriginal communities to identify appropriate locations and planning requirements, and
• Providing support for local participation in Small FIT projects by means of incentives to municipalities and public sector entities, including transit services, schools and hospitals.

“Gowlings regularly receives questions about ongoing changes to the Ontario FIT program and the impact of the recent World Trade Organization decision on its domestic content requirements,” says Gowlings Partner and Renewable Energy Practice Lead, Thomas J. Timmins.

“Now that the Directive has been issued, the next step is for the OPA to receive and implement its contents — a process likely to take several months, but which is well underway.”

The OPA will continue to procure renewable energy capacity under the microFIT program (projects of 10 kW or less). “Once the OPA issues its revised pricing schedule, up to an additional 30 MW will be made available for the remainder of 2013,” says Timmins. Beginning in 2014, annual procurement targets for microFIT will be set at 50 MW. If the full annual target is not allocated in a given year, the remaining capacity will be added to the following year’s microFIT target.

The OPA will also continue to procure renewable energy capacity under the Small FIT program (projects with a capacity of 500 kW or less), but will amend the program to support local participation. “Changes to the program will provide municipalities and public sector entities with special incentives including the provision of priority points during the application process, capacity set-asides and a price adder for eligible projects. Applications will be given priority based on the number of priority points they are awarded,” says Timmins. Projects with identical points will be prioritized by time stamp. Projects without at least one priority point will not be offered FIT contracts. In addition, municipalities and public sector entities will have access to funding for development and design costs associated with their Small FIT projects.

The next application window for Small FIT projects is expected be the fall of 2013, for procurement of up to 70 MW of renewable energy. Beginning in 2014, annual procurement targets for Small FIT will be set at 150 MW. If the full annual target is not allocated in a given year, the remaining capacity will be added to the following year’s Small FIT target. In addition, the OPA will reserve 15 MW of capacity for a pilot program for rooftop solar projects on un-constructed buildings that will launch with the fall 2013 Small FIT window.

The Large FIT program will be replaced with a new competitive procurement process requiring developers to work with municipalities and Aboriginal communities to identify appropriate locations and siting requirements for future renewable energy projects. “The OPA is consulting with stakeholders and Aboriginal communities as it develops the new process. It is required to report back to the Minister of Energy with interim recommendations on September 1, 2013. A further Minister’s direction will be issued at a later date to authorize the commencement and content of the competitive procurement process,” adds Timmins.

Any Large FIT applications submitted prior to June 12, 2013 for which a contract offer has not been made will be discontinued. Fees and securities paid in relation to discontinued applications will be returned.

With respect to domestic content, the Ministry will comply with the recent WTO ruling which held the FIT program’s domestic content requirements violate Canada’s trade obligations. “The Ministry also plans to pursue legislative steps necessary to address this situation. Project developers and investors should understand that the domestic content changes are on a go-forward basis only. This change is not retrospective, so, projects which are currently contracted and still under development still need to comply with the applicable domestic content rules,” he adds. WPE