GLOBE-NET NEWS, May 29, 2008
The Ontario government and the Ontario Power Authority have made significant changes to the Renewable Energy Standard Offer Program (RESOP). Questions remain whether this Is simply a mid-course correction to help make room for smaller projects or whether the Ontario government has completely changed the rules of the game. Either way, the move could potentially hurt several renewable energy projects being developed in the province?
Ontario’s RESOP is similar in many respects to successful European programs. But it was for a time the only one of its kind in North America. RESOP encourages projects of 10 megawatts (MW) or less with no limit to the number of projects that may apply for a contract. This allowed companies to develop projects that when combined exceeded the 10 MW ceiling.
In a mid-May conference call, the Ontario Power Authority announced it was now limiting the size of projects that qualify. Companies now can channel no more than 10 MW through any transformer station, and have no more than 50 MW capacity under development at any time.
According to the Ontario government, the previous RESOP was allowing large firms to crowd out smaller firms. The change is meant to force large firms to shift to another program, which requires them to bid to sell renewable electricity, said Ontario Power Authority spokesperson Tim Taylor.
As a result of the decision, large renewable energy projects have lost access to the feed-in tariff offered by RESOP, which many see as the key to implementing projects. The Program pays an incentive or a “feed in tariff” of 42 cents per kilowatt (kW) hour of solar power produced in order to create a diversified and sustainable supply energy mix for Ontarians.
The Standard-Offer Program was always intended for smaller producers, Taylor said. “We want the big solar and wind boys to play in the large sandbox and leave the smaller sandbox for the smaller guys.”
As a result of the decision, large renewable energy projects have lost access to the feed-in tariff offered by RESOP, which many see as the key to implementing projects. The Program pays an incentive or a “feed in tariff” of 42 cents per kW hour of solar power produced in order to create a diversified and sustainable supply energy mix for Ontarians.
Those within the renewable energy sector believe taking such action without warning the industry – and the companies who had invested heavily in various projects – may put the industry in jeopardy. According to industry spokespersons, the only reason Ontario exceeded its target of 1,300 MW of renewable energy developed in one year, was because larger projects were getting through the Program.
“The province was just starting to go places, attracting significant interest from both Canadian and international investors,” said Elizabeth McDonald, Executive Director of the Canadian Solar Industries Association (CanSIA). “The expansion of this market was promising to translate into a new clean economy, green collar jobs, and as well as generate growth in areas of the province in need of economic stimulus. Now the provincial government has decided to put everything on hold. You cannot build an industry in this sort of uncertain environment.”
A feed-in tariff is employed to subsidize the cost difference between renewable energy rates and conventional energy rates. The intent is to bring the cost of renewable energy on par with conventional energy thus making renewable energy more palatable to utility companies.
Studies have shown that feed-in tariffs have spurred innovation and increased interest and investment in renewable energy around the world. For example, power from eligible forms of renewable generation under Germany’s feed-in law more than doubled between 2000 and 2004, from 14 TWh to 37 TWh. In several countries, feed-in policies have had the largest effect on wind power, but have also influenced biomass and small hydro development.
Now it is expected companies will have to offer prices below the standard-offer level. The solar industry will be hit especially hard because, with its far higher capital costs, it can’t compete in the bidding process, according to CanSIA.
Members of Ontario’s renewable energy industry are now feeling unprepared on how to move forward. The kind of competition suggested by the province hasn’t been held since 2005. Apart from the three-year gap, preparing bids costs millions, CanSIA argues.
Projects approved before the announcement can continue but some companies have been left in limbo. For example, the 50-MW limit means one of the largest solar developers, OptiSolar Farms Canada, with 60 MW underway near Sarnia, can’t start other planned projects, said spokesperson Peter Carrie.
“This will send people to other jurisdictions and other places,” said McDonald.
After allowing RESOP to function in this manner for three years, it seems likely to those within the industry that the government of Ontario has pulled an about face regarding the program.
CanSIA has offered to work with the Ontario government in partnership to bring the program back on track immediately to ensure longevity and stability to the industry, its investors and the workforce it employs. According to CanSIA, polling indicates Ontarians want to “go green” and be the leaders in deploying a renewable energy strategy for Canada. The RESOP is an important part of that.
“To begin, we ask that the Ontario Government immediately reinstate the program so the industry can continue to build, while we figure out how the entire renewable energy industry can move ahead,” said McDonald.
“At the moment, we risk losing millions of dollars and hundreds of large and small scale solar projects, which were just starting to get off the ground. We can assure the Government that CanSIA will support measures that will improve the efficiency and effectiveness of the program.”