The Ontario government today officially launched its new renewable energy Feed-In Tariff (FIT) program.  The Ontario Power Authority is responsible for administering the FIT program and will begin accepting applications starting October 1, 2009. The OPA expects to sign the first contracts in early December.

The FIT program provides generators with long term, government-backed contracts at fixed, posted prices.  Hydro-power projects will receive 40 year contracts and other renewable projects will receive 20 year contracts. The prices are calculated to generate an 11% ROE for typical operations. Unlike FIT and similar programs in other jurisdictions, there is no capacity limit to the overall Ontario FIT program, although some specific technologies have maximum individual project sizes. In addition, the FIT program imposes no geographic constraints on applicants, although transmission access limitations may cause delays in connecting generation in some areas. Under the Ontario Green Energy Act amendments to the Electricity Act, FIT generators have rights to “mandatory connection” to transmission or distribution systems. Transmission and distribution companies and the OEB have new obligations to promote the connection of renewable generators.

The major technology sectors expected to be most active initially under FIT include on-shore wind power, ground-mounted PV, roof-top PV and biomass. The FIT price schedule is as follows:

All technologies, except for rooftop PV, are eligible for a First Nation, Métis or community-based price adder of up to $15/MWh. All technologies, again except for PV, are entitled to annual CPI escalation on 20% of the price. Hydropower and bio-energy FIT projects will receive prices that are 35% higher from 11 a.m. to 7 p.m. on business days, and a 10% lower price during off-peak hours.

Biogas and landfill gas are expected to provide small amounts of capacity in the near term. Off-shore wind of any size and hydropower of less than 50 MW in size are eligible for FIT but the lead-times for these developments suggest that these projects are unlikely to come into service for several years.

The OPA is prioritizing “shovel ready” projects and anticipates that the most rapidly deployed projects will come on line within 12 months.

The OPA’s wind power financial model assumes a capacity factor of 30%, approximately equal to the annual average for the wind farms in Ontario of 40 MW and above brought into service in the period 2006 to 2008. During consultations with stakeholders on developing the FIT program, AMPCO argued that the OPA’s capacity factor assumption was overly generous to developers (and unnecessarily costly to consumers), particularly since data from the US and Canada indicates steady improvement in capacity factors with successive generations of wind farms.

In a survey of the development potential for renewable generation in Ontario, the OPA identified as much as 15 GW of FIT supply.

The FIT rules announced today include rules for a minimum content of Ontario goods and labour for eligible projects at the time they reach commercial operation. For wind power projects, the requirement starts at 25% and increases to 50% on January 1, 2012. For solar PV larger than 10 kW, the requirement starts at 50% and increases to 60% on January 1, 2011. 

Today’s announcement also included a new Renewable Energy Approval law for Ontario.  The new law consolidates approval requirements that were once distributed among municipal planning, environmental assessment, certificates of approval, permits-to-take-water and other Ontario government approvals and permits.  The new rules provide a six-month service guarantee per project once a proponent is deemed to have provided a complete application.

The Ontario government has indicated that it will direct the OPA that there is to be no ground-mounted solar procurement above 100 KW on Class 1 and 2 or Specialty Crop Areas. Ground-mounted solar procurement up to 500 MW will be allowed on Class 3 lands, allocated on a regional basis.

The Renewable Energy Facilitation Office, mandated by the Green Energy Act, is also now in operation with purposed with promoting the interests of renewable developers. The government describes the Office as “an umbrella body with no regulatory responsibilities”.

The Ontario Power Authority is hosting a web-enabled teleconference for stakeholder and the public scheduled for Monday, September 28th from 2:00 to 4:00 p.m. (Eastern Time).

For more information on the government’s announcement: www.mei.gov.on.ca