Feed-in-Tariff Program Review. AMO Written Submission to the Ministry of Energy and the Ontario Power Authority (OPA) December 6, 2011

Transcription

1 Feed-in-Tariff Program Review AMO Written Submission to the Ministry of Energy and the Ontario Power Authority (OPA) December 6, 2011 Association of Municipalities of Ontario 200 University Avenue, Suite 801 Toronto, ON M5H 3C6 Canada tel: fax: website:

2 AMO Submission on the Feed-in Tariff (FIT) Program Review Page 2

3 AMO Submission on the Feed-in Tariff (FIT) Program Review Page 3 Introduction... 4 Recommendations Improving Municipal Engagement and the Approvals Process... 8 Improving Municipal Participation New Technologies Program Sustainability Conclusion... 15

4 AMO Submission on the Feed-in Tariff (FIT) Program Review Page 4 Introduction The Association of Municipalities of Ontario (AMO) represents Ontario s municipal governments and advocates on behalf of those governments and their property tax payers and citizens. AMO well understands the needs of municipal governments. As the second largest energy consuming sector in the province with annual spending of over $1 billion and as hosts for energy projects, the municipal sector has a significant stake in planning for future energy generation, conservation, and related infrastructure. Municipal leaders have to consider energy projects in terms of how they impact on municipal bottom line as consumers, the property tax base, system efficiencies, concerns from residents, as well as other social or environmental policy objectives. The mission of the FIT Program is clear to foster the growth of renewable energy projects that use cleaner sources of energy and to remove barriers to renewable energy projects and a green economy. The OPA and the Ministry are looking to the FIT review process in terms of the sustainability of the program, consider new technologies, improve public consultation, review the approvals process, and enhance municipal participation. This submission addresses all five areas with suggestions meant to refine both the FIT and the approvals process that supports it. We would be remiss not to first comment on the division among municipal governments on the planning and approval process. For some, the removal of municipal planning authority is significant, whereas others feel ill equipped to conduct the reviews necessary or appear before the Ontario Municipal Board (OMB) or other adjudicators to defend their positions. Triple Bottom Line Approach AMO continues to apply a triple bottom line approach to its analysis of pertinent policy issues. In its broadest sense, the triple bottom line concept captures the spectrum of values that organizations must embrace economic, environmental and social. In practical terms, triple bottom line means expanding the traditional working framework to use financial outcomes as well as environmental and social performance. The decisions that result will:

5 AMO Submission on the Feed-in Tariff (FIT) Program Review Page 5 Lead to greater physical, cultural and financial access and equity in service delivery and activities Use fewer natural resources Promote and maintain economic development and growth in a sustainable manner. AMO believes that the objectives of the FIT program satisfy this approach, but that some oversights have occurred in the implementation phase. Feed-in tariffs support local, decentralized energy production which generates multiple benefits and improved efficiencies in the electricity system overall. AMO has consistently, over time supported renewable energy as a supply method through our policy positions and program delivery through our subsidiary, Local Authority Services Limited (LAS). New generation from clean sources and distributed generation is an excellent way to enhance grid security, develop local economies, and fight climate change. Municipalities are well positioned to assist Ontario to become a leader in the efficient economy via numerous, distributed renewable generation projects. Indeed, the FIT program was partially justified as a vehicle to allow for the participation of small communities and local groups in the energy market. However, the connection between those who develop projects and those that house them has been weak to date. This combination of a lack of communication and a flawed approvals process has created resistance to energy generation projects in many communities throughout the province. While developers, municipal governments, utilities, and provincial agencies have been learning as we go certain mistakes could have been avoided. A clean, green vibrant economy that serves the people of Ontario and the communities in which they live remains a worthy objective. The next two pages summarize AMO s key recommendations on the FIT Program Review as developed by our Energy and Planning Task Forces and endorsed by our Board of Directors. A fuller explanation follows this summary.

6 AMO Submission on the Feed-in Tariff (FIT) Program Review Page 6 Issue Recommendation Rationale Improving Municipal and Public Engagement and the Approvals Process The Province must do a better job communicating and educating municipalities, developers, investors, and the general public on the municipal consultation process and all other renewable energy approval processes. The OPA, Ministries of Energy, Environment, and Municipal Affairs and Housing should hold a joint meeting with AMO to review the Renewable Energy Approval (REA) and REA-exempt project approval processes. The OPA must launch the Municipal Renewable Energy Program (MREP) immediately. The OPA must provide details on how the microfit relocation program will work and how potential host municipalities may be affected. A lot of opposition to renewable energy has been fueled by ignorance of the current regulatory process, including the required consultation with municipalities. The Province should empower the agency it set up to coordinate approvals, the Renewable Energy Facilitation Office (REFO), to deliver clear and consistent messaging to municipalities, project proponents, and all stakeholders. A number of unintended negative consequences to local land use planning have resulted from the current approval processes, some of which contravene other provincial policy goals such as those under the Provincial Policy Statement (PPS). AMO and our affected member municipalities can provide advice on how to enhance the system moving forward. More than 25 months have passed since this much-needed program was announced. The program is necessary to compensate municipal hosts for costs not covered by developers. This program was announced in August but the OPA has yet to specify program details. This program may affect municipalities both as project developers with applications on hold due to connection constraints and as hosts of relocated projects. Greater Municipal Involvement The OPA must amend the definition of community to ensure that municipalities are eligible for the same tariff adders as co-operatives and other community groups. The Minister of Energy must direct the Community Energy Partnerships Program (CEPP) to change the definition of community to include municipalities. Municipalities, especially those under 50,000 population, face the same capacity and investment challenges facing community and aboriginal groups and should also qualify for the same supports available to those two groups.

7 AMO Submission on the Feed-in Tariff (FIT) Program Review Page 7 New Technologies Program Sustainability The OPA must clarify that municipal water reservoirs and parking structures are to be deemed as roof-top facilities for the purpose of developing solar PV microfit and FIT projects. The OPA should add Energy from Waste (EFW) and Combined Heat and Power (CHP) Facilities to the list of designated technologies with fixed tariffs under the FIT program. The Ministry of the Environment (MOE) must develop a streamlined approach for EFW and CHP facility approvals and the Ministry of Energy should exempt all such projects from Section 144 of the Electricity Act. The OPA must ensure that any new FIT and microfit pricing, rules, and/or other restrictions should not affect projects retroactively but should only apply to those applications submitted after the review commenced. The OPA and the Ministry of Energy must provide greater notice (at least 90 days without retroactivity) to proponents, hosts, and the industry in advance of any future FIT or MicroFIT tariff or rule changes. The program rules should also be reviewed with an intention of simplifying what is becoming an overly complex process. Hydro One must improve how it consults with stakeholders on all of its FIT and microfit related policy decisions. The Minister of Energy must direct Hydro One to comply with the timing requirements set out in Distribution System Code as amended by the Green Energy Act. Municipal water reservoirs and roofed parking structures are clearly facilities built above grade that should qualify for the higher program contract rate for rooftop solar projects. EFW is a natural extension of the bioenergy category already in the FIT program, including landfill gas capture and anaerobic digestion. The current exclusion of EFW acts as a disincentive for new facilities as they share the same feedstock. EFW and CHP projects are socially and environmentally responsible solutions to waste and energy generation and should be encouraged in the same fashion as other renewable energy projects. Retroactive tariff or rule changes will cause financial harm to project proponents and increase uncertainty in the marketplace. The complexity of the application and connection processes along with the uncertainty of program rules have cast a shadow on the FIT and microfit programs that has caused many potential applicants to reconsider, which, in turn, has negatively affected existing manufacturers and potential investors. Hydro One must adopt the IEEE standard for grid connections, comply with the DSC as directed, and improve how it interacts with stakeholders in order to stop being an obstacle to project development.

8 AMO Submission on the Feed-in Tariff (FIT) Program Review Page 8 Improving Municipal Engagement and the Approvals Process Improving the approvals process will result in better, more meaningful engagement of the municipal sector in renewable energy development. The current planning process was implemented to remove duplication and to provide clarity for new renewable energy projects across the province. While it arguably may have removed duplication, it certainly has not provided clarity and may not have streamlined the process. A major problem, that has recently started to be addressed by the Renewable Energy Facilitation Office (REFO), is the lack of communication and jurisdictional confusion in the sector. There are a number of ministries and other agencies involved in renewable energy projects, but the Province has missed opportunities on developing clear and consistent messaging to municipalities, developers, investors, and the general public. The Province must do a better job and it should empower the REFO to educate all involved about the processes currently in place and how municipal governments can protect its interests in the approvals processes. Recommendation #1: The Province must do a better job communicating and educating municipalities, developers, investors, and the general public on the municipal consultation process and all other renewable energy approval processes. While AMO does have some other FIT-specific suggestions on how to enhance municipal engagement, the focus must be on making sure the entire planning and approvals regime, not just the Renewable Energy Approval (REA) process, is reevaluated. Recommendation #2: The OPA, Ministries of Energy, Environment, and Municipal Affairs and Housing should hold a joint meeting with AMO to review the Renewable Energy Approval (REA) and REA-exempt project approval processes. A number of unintended loopholes have emerged in the existing renewable energy project approval process. For example, a number of ground-mount projects have been developed on vacant lots in existing subdivisions as well as on lots freshly subdivided only for the purpose of qualifying for a microfit contract. Similar situations have arisen in small communities on employment designated lands eroding the availability of adequate employment lands and contravening the requirements of the Provincial Policy Statement (PPS) which requires that 20 year employment capacity be maintained. This loophole can potentially have a similar effect on the residentially

9 AMO Submission on the Feed-in Tariff (FIT) Program Review Page 9 designated lands. AMO would like to propose a ban on ground-mount solar projects in all residentially and employment zoned lands. For larger projects, there is a need to recognize the aggregate impact of projects on a community instead of treating all new projects in isolation. Chatham-Kent, for example, is supportive of green energy as it is currently host to 211 wind turbines, but it is struggling on how to integrate another 111 and 120 wind turbines in 2012 and 2013, respectively. Municipalities that host so many large-scale projects have a right to examine the collective impact on their communities we must work together to ensure that we can preserve the environmental and social fabric of our communities while enabling renewable energy development. These are a few issues that have been brought to our attention. We know our members are struggling with others. As a result, AMO suggests that a meeting be convened between the inter-ministerial working group currently examining the approvals process, AMO staff, and a representative sample of municipalities that have or are currently dealing with renewable energy projects in order to discuss how best to improve the existing systems. The shared objective is to see that the renewable energy approval processes respect municipal interests and safeguard public health, safety, and the environment with a view to appropriate enforcement. Recommendation #3: The OPA must launch the Municipal Renewable Energy Program (MREP) immediately. The Municipal Renewable Energy Program (MREP) remains outstanding. When the MREP was announced on September 23, 2009, AMO was very pleased that one of our key recommendations related to the change in municipal land-use planning under the Green Energy Act (GEA) was going to be implemented. Throughout the GEA consultations, our members voiced their concerns that they would be caught with extra costs associated with new renewable energy projects not covered by developers. However, as more than 25 months have passed, we are quite concerned about the lengthy delay in commencing this much-needed program. We understand from OPA staff that the program was drafted over nine months ago.

10 AMO Submission on the Feed-in Tariff (FIT) Program Review Page 10 Recommendation #4:The OPA must provide details on how the microfit relocation program will work and how potential host municipalities may be affected. The Minister of Energy directed the OPA on August 19, 2011, to allow any Constrained Applicant with one project the option to relocate their project from the original location to another location in Ontario upon written notice to the OPA. The same program allows proponents with multiple constrained projects to combine up to 50 of these projects to a threshold of 500 kw. While this program was announced over three months ago, the OPA has yet to specify program details. This program may affect municipal governments both as project developers with applications on hold due to connection constraints and as hosts of relocated projects. Improving Municipal Participation Municipal participation in the FIT program has been minimal. The FIT Program is designed to give developers and their lenders the confidence needed to undertake projects. The FIT Program also provides assistance through reduced security payments, additional price incentives and opportunities for funding to aboriginal and community-based entities to develop community-based renewable energy projects. Despite being the front-line service provider to Ontario communities, municipalities do not qualify for any of these supports. Recommendation #5: The OPA must amend the definition of community to ensure that municipalities are eligible for the same tariff adders as cooperatives and other community groups. Community and aboriginal groups that develop renewable energy projects can benefit from an increase of between 0.4 to 1.5 /kwh to the tariffs depending on the type of generation. Section 9.1 of the current FIT Rules (version 1.5.1) states that: Community Investment Means (i) one or more individual residents in Ontario; (ii) a Registered Charity with its head office in Ontario; (iii) a Not-For-Profit Organization with its head office in Ontario; or (iv) a co-operative corporation as defined in the Co- Operative Corporations Act, all of whose members are Resident in Ontario. Thus, this precludes municipal governments from qualifying for this additional tariff despite the fact that they are meant to stimulate renewable energy project

11 AMO Submission on the Feed-in Tariff (FIT) Program Review Page 11 development in small communities across Ontario and among groups that traditionally lack access to large amounts of capital. AMO argued during the initial FIT consultations (March 2009) that small municipalities (with less than 50,000 population) face the same challenges that community and aboriginal groups do in terms of staff capacity and access to capital and therefore should also qualify. Recommendation #6: The Minister of Energy must direct the Community Energy Partnerships Program (CEPP) to change the definition of community to include municipalities. The Community Energy Partnerships Program (CEPP) is a grant program to support community power to assist not-for-profit, charitable and co-operative organizations develop renewable energy projects. Support is available to entities developing projects according to how much of the ownership is held by the community as defined by the current FIT Rules. Just like the tariff adder, these eligibility rules preclude municipalities from qualifying for this funding despite the fact it is meant to stimulate renewable energy project development in small communities across Ontario. Recommendation #7: The OPA must clarify that municipal water reservoirs and parking structures are to be deemed as roof-top facilities for the purpose of developing solar PV microfit and FIT projects. Municipal water reservoirs and parking structures are currently deemed ground-mount applications for solar PV instead of recognizing these facilities as having a roof-top. Municipal water reservoirs are clearly facilities built above grade that commonly have ground shoved up against the walls and a covering over the roof such as a green roof. Roofed parking structures are also clearly above grade and have a roof just like other buildings currently deemed eligible for the rooftop solar rate. However, OPA staff have stated to a number of municipalities that both qualify as ground-mounted solar applications meaning these projects are no longer feasible given they would be subject to the lower program contract rate (44.3 /kwh versus 71.3 or 80.2 /kwh). AMO would like to suggest that the OPA and Ministry of Energy should explore how to utilize grid access to incent greater municipal and private-public partnerships. For example, projects with full community ownership should be provided contracts first, those in joint ventures second, followed by privately held firms during the next Economic Connection Test (ECT) process.

12 AMO Submission on the Feed-in Tariff (FIT) Program Review Page 12 New Technologies As part of our triple-bottom line approach AMO has always analyzed energy policy in a wholesale fashion that includes an examination of all current externalities and potential for inclusion of other energy sources to maximize efficiencies. As a result, we continue to call for the inclusion of both energy-from-waste (EFW) and combined heat and power facilities (CHP) in the FIT Program. EFW and CHP projects utilize current waste products to increase the efficiency of energy production and should be encouraged appropriately. The Province should continue to encourage all municipalities to find local solutions to issues like waste disposal and waste heat as this encourages local economic development and lessens environmental impacts. Recommendation #8: The OPA should add Energy from Waste (EFW) and Combined Heat and Power (CHP) Facilities to the list of designated technologies with fixed tariffs under the FIT program. Energy-from-Waste is any technology, which recovers energy from the management/processing of waste materials. This includes Anaerobic Digestion, Mass Burn, Gasification, Plasma Gasification, and Landfill Gas Recovery. EFW facilities have been around for a long time and their emissions and efficiency are heavily regulated. EFW is a natural extension of the bioenergy category already in the FIT program, including landfill gas capture and anaerobic digestion. The current exclusion of EFW acts as a disincentive for new facilities as they share the same feedstock. Including EFW in the FIT program would help to remedy Ontario s current landfill capacity crisis and the pricing could help promote Ontario s waste hierarchy. As a result EFW pricing should fit between landfill gas capture at 10.3 cents kwh and 16.0 cents kwh for biogas. This pricing could be tiered to incent more efficient facilities to simplify the current one-off process for energy pricing and help to level the playing field. The current uptake of CHP in Ontario is still relatively low despite the multiple benefits to Ontarians and the 1000 mw target in the Long Term Energy Plan (LTEP). CHP is 80-85% efficient in converting fuel to useable energy and would bring multiple benefits to Ontarians as ratepayers and citizens. For example, because CHP is more efficient than single cycle generation it has fewer greenhouse gas emissions, which could further reduced by utilizing locally produced biogas, biomethane (renewable natural

13 AMO Submission on the Feed-in Tariff (FIT) Program Review Page 13 gas) or biomass. CHP systems can be located close to demand for electricity and the power is dispatchable resulting in numerous system efficiencies. Integrating CHP into the FIT process would help overcome hurdles and stimulate the development of smallscale CHP. In addition to developing a tariff that recognizes the system efficiencies and scale of investment, the current application process should be simplified for smallscale CHP to make them more commercially attractive and to allow longer timelines that recognizes the complexity of CHP project development and its supply chain. Recommendation #9: The Ministry of the Environment (MOE) must develop a streamlined approach for EFW and CHP facility approvals and the Ministry of Energy should exempt all such projects from Section 144 of the Electricity Act. EFW and CHP projects need to be encouraged in the same fashion as other renewable energy projects and thus should benefit from the same regulatory streamlining. The Electricity Act, 1998 (section 144) was never intended to capture facilities designed for the purpose of waste management as it intended to break-up the Ontario Hydro monopoly not to regulate waste projects. Section 144 was intended as a means to regulate the structure of a corporation whose main function is to produce electricity. Section 144 was not meant to address a situation where the generation of electricity is a by-product of a waste management process. A section 144 exemption entails no policy change but would clarify the non-application of the Electricity Act, 1998 to a publicly owned waste project that was not intended to be caught by its provisions. Program Sustainability In addition to being hosts to renewable energy projects, a number of municipal governments are also interested in developing projects but many have changed their minds as a result of the freeze cast over the investment community as a result of problems connecting to the grid and frequent FIT rule changes. Municipal governments can be leaders in advancing the green technology agenda. Recommendation #10: The OPA must ensure that any new FIT and microfit pricing, rules, and/or other restrictions should not affect projects retroactively but should only apply to those applications submitted after the review commenced.

14 AMO Submission on the Feed-in Tariff (FIT) Program Review Page 14 Currently, the OPA is suggesting that all pricing and rule changes will apply retroactively to microfit projects (submitted after Aug. 31st, 2011), capacity allocation exempt (submitted after Dec. 8th, 2010) and capacity allocation required (June 5th, 2010) FIT projects. The OPA should ensure that any changes that result from the FIT Program Review are not retroactive as this will inevitably cause both financial damage to project proponents, regardless of how conservative their business cases were at the time, and increase uncertainty in the marketplace. Recommendation #11: The OPA and the Ministry of Energy must provide greater notice (at least 90 days without retroactivity) to proponents, hosts, and the industry in advance of any future FIT and microfit tariff or rule changes. The FIT and microfit programs have been plagued with policy change and uncertainty since their launch. The Green Energy Act was supposed to eliminate the barriers that plagued the Province s previous renewable energy program (RESOP) in order to create a simple and straightforward program which the average Ontarian could participate in. However, the complexity of the application and connection processes along with the uncertainty of program rules have cast a shadow on the FIT and microfit programs that has caused many potential applicants to reconsider, which, in turn, has negatively affected existing manufacturers and potential investors. Recommendation #12: The program rules should also be reviewed with an intention of simplifying what is becoming an overly complex process. The OPA should develop clear, transparent, predetermined triggers for price digression to provide project developers and manufacturers with the certainty they require to make long-term investments in our system. Tariffs should continue to be based on the principle of project costs plus a reasonable return on equity and the contract application process should be streamlined as much as possible. Recommendation #13: Hydro One must improve how it consults with stakeholders on all of its FIT and microfit related policy decisions. Hydro One remains a significant obstacle for renewable energy project development as it often appears as an unapproachable black box to project developers. It has too many silos, event at the sub-regional level. Hydro One must adopt a wider interpretation of IEEE standard that it currently applies in order to increase grid ability

15 AMO Submission on the Feed-in Tariff (FIT) Program Review Page 15 from 7% to 15%. It must improve how it explains its policy decisions, communicates with project applicants, and interacts with relevant stakeholders before a given policy decision. Recommendation #14: The Minister of Energy must direct Hydro One to comply with the timing requirements set out in Distribution System Code as amended by the Green Energy Act. Over the last 18 months, there have been significant delays in acquiring local distribution company (LDC) authorization to connect to the distribution system. There was widespread deployment across Ontario in 2010 of systems mostly without formal connection agreements with applicable LDCs since connection was never considered significant criteria for microfit projects and no prior indication from either the OPA or LDCs was made to eligible participants. Even after Hydro One delays forced the OPA into changing the rules (February 2011) to ironically require CAE facilities to be deemed as capable of connecting at the proposed connection point, Hydro One continues to delay projects by implementing standards that are much more conservative than globally recognized standards (i.e. IEEE) and not meeting timing requirements set out in Distribution System Code specifically put in place to enable renewable energy project development. Conclusion Ontario has before it a historic opportunity to utilize the FIT program along with strategic investments in key infrastructure projects and new technologies to revolutionize our energy system to place the province at the forefront of the new, green economy. But the role of municipal governments, as hosts and providers needs better attention. AMO believes that acting upon the recommendations provided in this report will help provide a more active and engaged municipal sector which will ensure a brighter future for renewable energy project development across this great province.