Legal Briefing

New opportunities under Ontario’s Green Energy Act 2009

The In-House Lawyer Logo

Canada | 29 December 2009

The Ontario government recently announced several new regulations and programs to give effect to some of the major components of the Green Energy and Green Economy Act 2009 (the 2009 Act). The 2009 Act is designed to provide a legal framework for the establishment of an attractive investment climate for green power developers, generate certainty in the market, and make Ontario a leader in renewable energy and energy conservation in North America. As of 24 September 2009, the following key features of the 2009 Act have been implemented:

  • Canada’s first feed-in electricity tariff program began accepting applications as of 1 October 2009;
  • the new Renewable Energy Approval (REA) required for renewable energy projects is now available;
  • the province has announced several incentive programs to help with the costs relating to developing a renewable energy project in Ontario;
  • the Renewable Energy Facilitation Office (REFO) has been established; and
  • a C$2.3bn program for major upgrades to Ontario’s electricity transmission grid is underway.

Feed-In Tariff Program

The feed-in tariff (FIT) program is a major component of the province’s plan to develop green energy and jobs in Ontario. The FIT program establishes a government procurement process for electricity generated from renewable sources (wind, solar, water, bioenergy), providing standard program rules, standard contracts and standard pricing. For example, the Ontario government proposes to pay 13.5 cents per kWh for electricity generated from onshore wind turbines, 19.5 cents per kWh for electricity generated from offshore wind turbines, and 80.2 cents per kWh for electricity from small residential rooftop solar facilities. The Ontario government hopes that the program will attract a diverse range of renewable energy producers, including homeowners, community-based and First Nations groups, and larger scale commercial generators. 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. For wind, the requirement will start at 25% and increase to 50% on 1 January 2012. For micro-solar-photovoltaic (10kW or smaller) projects, the requirement will start at 40% and increase to 60% on 1 January 2011. For larger solar-photovoltaic projects, the requirement will start at 50% and increase to 60% on 1 January 2011. Small renewable energy projects that generate less than 10kW of electricity have a different application process than larger commercial projects and will be administered as micro-FIT projects. The Ontario Power Authority (OPA) is responsible for administering FIT programs and applications to the program began to be accepted on 1 October 2009.

ReA

Renewable energy projects are now exempted from existing environmental approval and permission requirements, and are instead required to obtain a new, comprehensive REA. The REA integrates two existing environmental approval processes. Environmental impact assessment requirements under the Environmental Assessment Act 2006 and air quality standards under the Environmental Protection Act 1999 are now combined in the REA process. This new permit or approval replaces what was largely an applicant-driven environmental assessment framework with specific provincial rules and requirements for wind, solar, bioenergy and water facilities.

Wind

Wind facilities generating less than 3kW do not require an REA. Small wind facilities generating between 3kW and 50kW must get an REA, but the requirements are simplified and there is no mandatory setback. Facilities generating over 50kW require an REA, and, if the facilities generate a noise level of 102 A-weighted decibels (dBA) or louder, they must be set back a minimum of 550m from buildings used by people. Where roadway noise exceeds 40dB, a noise study can be done to determine the appropriate distance. All turbines over 50kW must be set back the height of the tower from properties where the landowner is not involved in the project. This can be reduced to at least blade-length plus 10m where there are no surrounding land use concerns. Such facilities must also be set back by at least blade-length plus 10m from the right-of-way for roads and railways.

Solar

The most common form of solar electricity generation is the photovoltaic cell. Rooftop or wall-mounted solar generators of any size do not require an REA. However, most facilities mounted on buildings will require a municipal building permit. Ground-mounted solar facilities over 10kW require an REA and also require a noise study demonstrating that they can meet a 40dB noise level (approximately the noise level of a quiet office). The noise study assesses the potential impact on a residence or other building of sound emitted by the solar facility’s electrical equipment.

Bioenergy

Bioenergy facilities use organic matter (such as agricultural residues, animal manure, waste wood, wood chips and bark) to generate electricity. To qualify for an REA, the facility must use biomass, biofuel or biogas source material, as defined under the Electricity Act 1998. The requirements that must be met to obtain an REA vary depending on the location and size of the facility, and the material used to generate electricity. Large industrial facilities will have to submit studies on noise, odour and pollutant output, and ways in which their impact will be addressed.

Water

Waterpower projects do not require an REA because they are subject to regulations set out in the Class Environmental Assessment for such projects, revised in 2008. Facilities must also obtain permits and approvals from the Ministry of the Environment and the Ministry of Natural Resources.

Consultation

The REA has established requirements for public consultation and community awareness. Proponents must notify nearby landowners and the community early in the planning process, and hold at least two community consultation meetings. Proponents must also consult municipalities and aboriginal communities.

Incentive Programs

The Ontario government has announced several programs to help with costs relating to the development of renewable energy projects.

Community Energy Partnerships Program

The Ontario government will provide grants to community groups to pay for development costs such as feasibility, engineering and environmental studies. Co-ops, charities, not-for-profit corporations, and individual Ontarians wishing to develop renewable energy projects can apply forthese grants.

Aboriginal Support Programs

The C$250m Aboriginal Loan Guarantee Program and the Aboriginal Energy Partnerships Program will support First Nations and Métis communities in renewable energy development. Aboriginal communities will be eligible for loan guarantees of up to 75% of an aboriginal corporation’s equity participation in certain renewable energy generation and transmission projects. The Aboriginal Energy Partnerships Program will provide support for aboriginal community energy plans, and funding for feasibility studies and the development of an aboriginal renewable energy network. There are also two incentives to encourage participation by aboriginal communities in the FIT Program.

  • Reduced security payments: projects in which aboriginal communities have a 50% interest are eligible for reduced application security (C$5,000 per megawatt (MW), regardless of the fuel type).
  • Price adders: any project in which an aboriginal community has 10% or more of an economic interest is eligible to receive an increased price per kWh (a price adder) above the standard FIT price, proportional to the level of aboriginal involvement and up to a specified maximum amount. For example, the maximum aboriginal price adder for a wind or solar photo-voltaic project is 1.5 cents per kWh above the standard FIT price.(Lower price adders are available fornon-aboriginal community projects where community members have10% or more of an economic interestin the project.)

Municipal Support Programs

The Municipal Renewable Energy Program reimburses municipalities for direct costs incurred in the development of renewable energy generation facilities. Examples of eligible costs to be paid through reimbursement intended under the program could include:

  • infrastructure affected by construction or installation phases of projects, including roads, drains, easements, parklands, and cultural and natural heritage sites;
  • traffic management;
  • surface drainage to protect adjacent property and roads; and
  • emergency management costs, including details relating to on-site safety and measures to ensure emergency services personnel are adequately trained.

ReFO

The Ontario government has established a REFO to assist renewable energy project proponents such as developers, communities and municipalities. REFO is designed to connect proponents with appropriate resources in other government ministries and agencies, and provide information relating government incentive programs.

Transmission Upgrades

The Ontario government has permitted Hydro One, the operator of the province’s main electricity transmission grid, to begin work on 20 transmission projects across the province. Six core transmission network upgrades are being undertaken, including north-south lines from Sudbury to Barrie and Barrie to the Greater Toronto Area, and an east-west line from Nipigon to Wawa. Another series of core-supporting transmission projects and distribution upgrades are also being undertaken. Current constraints on transmission facilities limit the ability to connect new generation facilities to the transmission grid. The planned transmission upgrades will relieve some of these constraints and allow the province to connect more renewable energy generation facilities to the grid.

By Sharon Wong, partner, andRichard Corley, partner,

Blake, Cassels & Graydon LLP.

E-mail: sharon.wong@blakes.com;richard.corley@blakes.com