Guest article: Ontario, Canada set to become a wind power-house

What follows is a guest post from Toronto-based attorney Sven Hombach of the National Renewable Energy Group of the Fraser Milner Casgrain LLP law firm regarding the groundbreaking renewable energy legislation promulgated earlier this year in the province of Ontario, Canada, New York state’s “neighbor to the north”. The views expressed herein do not necessarily represent those of Clifford Rohde. If you would like to submit a guest article of potential interest to followers of wind power developments in New York State, please contact Clifford Rohde.

Ontario set to become a wind power-house

What do you get when an Ontario politician visits several European countries on a quixotic journey for wind farms? You get a surprisingly ambitious piece of legislation designed to bring the Province to the forefront of renewable energy in North America.

Following the European tour of Ontario Minister of Energy George Smitherman, the Province of Ontario introduced “Bill 150 – the Green Energy and Green Economy Act, 2009” this past February in the wake of a commitment to phase out coal-fired power generation in the Province by 2014. Less than three months later, Bill 150 has been reviewed, revised, and passed into law. While the detailed technical regulations are still being developed, the framework is already in place and heralds a new era of wind power incentives.

The Feed-In Tariff – Take it to the Bank

The heart and soul of Bill 150 is the creation of a European-style feed-in tariff by which the Ontario Power Authority enters into 20-year Power Purchase Agreements (“PPAs”) for certain prices per kWh. For wind power, the proposed prices are:

  • On-Shore Wind Power: 13.5 cents/kWh
  • Off-Shore Wind Power: 19 cents/kWh
  • Community-based or aboriginal wind projects up to 10 MW: 14.4 cents/kWh

The biggest implication of the feed-in tariff program is that project proponents will be able to provide lenders with a firm commitment by an entity at arm’s length with government to purchase power for virtually the entire life span of a project. In the current risk-adverse lending environment, a signed PPA can be expected to make financing much easier than it has been in the past.

Wind Power Siting – Reducing NIMBY

Anti-wind power interest groups and municipalities in Ontario have traditionally been able to use the municipal zoning process to their advantage to block certain projects. With the specific intention of reducing NIMBY (“Not In My Back Yard”), Bill 150 empowers the Province to invalidate municipal zoning bylaws designed to prevent otherwise meritorious renewable energy projects. This provision has received substantial criticism for disenfranchising local opposition and the conflict this creates. In order to alleviate such concerns, the final version of Bill 150 contains an added clause requiring the provisions of the statute to be applied “in a spirit that promotes community consultation”.

The environmental appeals process has also frequently been used by third party wind power opponents attempting to prevent or delay projects. In order to continue to allow legitimate appeals but curb frivolous ones, the jurisdiction of the provincial Environmental Review Tribunal has been limited to instances where an approval “will cause serious and irreversible harm to plant life, animal life, human health or safety of the natural environment,” as opposed to the current more lenient appeal clause.

Grid Access – Power to the People

The connection of generating facilities to the electrical grid has always been a bottleneck requiring developers to wait in line. While projects were provided with a queue position, this position by no means guaranteed timely connection. While Bill 150 does not address the core problem of the matter —namely limited resources to construct new infrastructure— it provides renewable energy projects with a competitive advantage over traditional sources of energy. Bill 150 specifies that renewable energy projects receive priority access to the grid, thus allowing them to jump the queue. However, there will not be any relative priority between renewable energy projects themselves.

What’s Next?

All of the various ministries and agencies tasked with implementing Bill 150 are working on developing the required technical regulations, which are expected to be released in draft during the second half of 2009. Project proponents and opponents, lenders, and lawyers alike are eagerly awaiting the release of the proposed “nuts & bolts”, as there will be an opportunity for public consultation. One thing, however, is clear: if coal, which currently accounts for 15 percent of all electricity generated in Ontario, is to be phased out by 2014 as planned, there will be tremendous opportunities for wind power to fill the void.