New FIT Rules: Hit and Miss
The results of Ontario’s review of the Feed-in Tariff (FIT) program are in—Ontario Energy Minister, Chris Bentley, announced a number of changes this morning, in line with what industry organisations and energy observers had been expecting.
The FIT program was created in conjunction with the Green Energy and Green Economy Act in 2009, with the goal of providing above market payments to companies to start up green energy projects such as wind, solar, biomass, and small hydroelectricity.
The two-year review was part of the program design. Setting the right rate for renewable energy producers is not easy; a regular review ensures that payments are in line with the market cost of developing and operating an energy project.
Changes include a reduction in the prices paid to wind and solar projects, stricter regulations on the placement of solar projects, a reduction in the application timeline and bureaucracy for FIT project approval, and more emphases on community engagement in the development of new energy projects.
The prices paid have dropped most dramatically for solar projects with reductions ranging from 30.5 per cent to for projects with an output of less than 10 kilowatts (kW), to a 9.3 per cent reduction for projects larger than five megawatts (MW). Prices paid to all wind energy projects will drop from 13.5 cents to 11.5, a change of 14.8 per cent.
The Canadian Wind Energy Association (CanWEA) president, Robert Hornung, said in a release today, “We believe that this new price will prove extremely challenging for many projects and could prevent a number of them from proceeding. This is particularly true for smaller projects and new entrants to the industry, reducing the number of communities and the diversity of players able to contribute to and benefit from the government’s ambitious objectives.”
However, industry knew the price would drop and CanWEA and others have been supportive of the review, and resulting changes to the program.
The more interesting change is one meant to enhance community engagement and support for clean energy projects. The program review recommended a new point system for small and large projects, which awards points to “projects that have demonstrated support from local municipalities or Aboriginal communities.” Essentially, the points system will reward companies who make community engagement a priority by putting the projects with the most points to the head of the administrative line for FIT contract approvals. This should provide an excellent incentive for companies to prioritize community engagement as part of their planning process.
The most arbitrary change is the new placement rules for solar projects. The recommendation, made in response to opposition from a number of municipalities, prevents solar projects from being built on class 1, 2, and 3 agricultural lands. However, unless the government is planning to ban farmers from growing corn for ethanol or private citizens from purchasing land with no intention of growing crops, it seems like this policy will have a minimal impact in preventing class 1, 2, and 3 lands from being used for non-agricultural purposes.