This article, from law firm Gowling Lafleur Henderson LLP, is authored by Thomas Timmins and Leslie Blumer, and may give U.S. based wind power advocates ideas for financing future wind farms.
On June 12, 2013, 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 CanSIA Solar Ontario Conference in Niagara Falls last month. (See: Ontario’s Minister of Energy Announces Changes to Feed-in Tariff Program.)
This most recent Directive lays out a number of important changes to the FIT program, including:
- Setting annual capacity targets for Small FIT development at 150 MW and for 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 to work with municipalities and Aboriginal communities to identify appropriate locations and planning requirements;
- 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.
The firm Gowlings says it regularly receives questions about ongoing changes to the Ontario FIT program, the impact of the recent World Trade Organization (WTO) decision on the FIT program’s domestic content requirements, and the issues raised by local stakeholders which must be addressed by project developers, municipal governments, local distributors, financiers, investors and prospective project acquirers. This article provides a brief overview of the Directive, and the anticipated consequences and opportunities for industry participants. 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 weeks, but which we understand, 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. 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. 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 will consult 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.
Any Large FIT applications submitted prior to June 12, 2013 for which a contract offer has not been made will be discontinued. Any fees and securities paid in relation to discontinued applications will be returned.
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 plans to pursue the legislative steps necessary to address this situation. Further direction on this matter will be issued to the OPA on a later date.
Gowling Lafleur Hnderson LLP
Filed Under: Financing, News, Policy