Ontario is Canada's leading wind province, being the first to pass the 1 GW mark for installed capacity, and it has no intention of giving up its crown easily. A new law, the Green Energy Act (GEA) passed by Ontario's Liberal government in May, is set to cement its position further making the wind sector a much bigger player in Canada's largest electricity market.
"The Green Energy Act, in terms of scope and ambition, is one of the most progressive renewable energy policies in North America. It promises a lot, and it's really attracted a lot of attention, both in Canada and, I think, globally," says Sean Whittaker, vice president of policy for the Canadian Wind Energy Association (CanWEA). "It's seen as being a really landmark piece of work."
The GEA promises a feed-in tariff offering a guaranteed purchase price for renewable energy projects, a simplified regulatory structure and quicker action on transmission system upgrades. In addition, as well as providing a solid platform from which companies can proceed with their business plans, it also opens the door to widespread participation by community organisations, First Nations and municipalities in the development of renewable energy projects (page 16). With no restriction on project size and no overall cap on how much capacity can be brought online, the legislation has the potential to take the wind power industry well beyond the 4700 MW of capacity by 2020 that the province was targeting just a year ago.
"With this feed-in tariff program, there is a big fundamental change in the development environment in Ontario," says Tim Stephure from the Massachusetts office of international market research firm Emerging Energy Research (EER). "The early feedback we've gotten is that it is a very positive program. The province has really, for a first crack at it, hit the nail on the head as far as what developers are looking for when it comes to a long-term incentive program that they can depend on." Crucially they believe it will meet their needs when it comes to going out and getting financing for their projects, he says.
David Timm, vice president of strategic affairs for Toronto's AIM Powergen, is one of those developers. "The word that gets used a lot is uncertainty. Absolutely what developers crave, and investors, is certainty in procurement and certainty in regulations," he says. "In Ontario, if you look at the last five years, it's not a lot of time, but we've gone from a focus on large-scale procurement, then a shift in policy to encourage small projects through the renewable energy standard offer program, then a return to large-scale procurement and now another shift in procurement. With each shift developers are left to rejig their projects and fit them into the new program." With this latest shift he believes the government has got it right: "I think the idea of the Green Energy Act brings a lot of certainty to the market."
The full details of Ontario's latest policy framework are likely to be known by early fall. By then, energy minister George Smitherman says he expects to have all the rules and regulations implementing the GEA finalised and "a fully functioning product available for people to start to move their projects through." Central to the program, and to its ability to attract investment, is price. The consensus seems to be that Ontario has landed in the right place. Onshore wind power projects will get C$0.135/kWh, with an extra cent added on for small-scale community projects and an additional C$0.015/kWh for First Nations projects. "In general, among industry players there's a feeling that the feed-in tariff price for wind is reasonable," says Whittaker.
The rate for offshore wind, set at C$0.19/kWh, should put Ontario at the forefront in a part of the industry that has made few inroads in North America to date, adds Stephure. "There are some companies that are looking at developing offshore in the Great Lakes and from a regulatory standpoint it looks like Canada has a bit of an advantage," he says. "From our perspective and the cost analyses we've done, nineteen cents seems to be a reasonable figure to incent these guys to make a move in that market. I think it could be enough to at least get a few players to dabble in it." But as important as price is, it is only one of the links in a chain of decisions that will ultimately determine how strong the new program will be, says Whittaker. "As you get into it you realise the devil truly is in the detail," he adds.
A case in point is the issue of turbine setbacks - the distance wind turbines must be placed from properties and roads. Setting province-wide standards is part of the government's plan to further streamline the permitting process. It wants to remove siting decisions from municipal control and move over to a "one window, one permit" approach to wind project approvals instead.
Its draft proposal requires turbines to be a minimum of 550 metres away from residences and a distance at least equal to turbine hub height plus blade length from roads and property lot lines. The industry says this could hamstring the GEA from the start. A survey of developers by CanWEA found that about three-quarters of the province's most advanced wind projects would either have to be abandoned or completely redesigned. "Simply put, with these setbacks they would have a really hard time getting projects built anytime soon," says Whittaker.
How Smitherman exercises the power the act gives him to set domestic content requirements for wind and other renewable energy projects will also be a determining factor in how well the legislation delivers on its promise. Job creation is at the heart of the GEA and, says Stephure, "from a political perspective is maybe more important than the renewable energy creation part." Economic development, agrees Whittaker, was one of the overarching factors in the government's decision to move ahead with the legislation.
"There is a very keen interest in Ontario in stimulating its manufacturing sector. The economic downturn and the crisis in the auto sector have hit the province very hard," he explains. "When the Green Energy Act was announced the government was very clear in saying they were looking to it to create 50,000 jobs over the next three years in Ontario. That's a very bold statement about the role they feel it has to play."
The basic strategy, says Smitherman, is to "have a starting point that recognises what domestic capability exists in Ontario now and incent over time the emergence of a stronger and stronger domestic supply chain." The industry is advocating a gradually increasing target for local content. But if the government sets the bar too high at the start projects may not be able to reach it, the industry warns.
Ontario also faces stiff competition from US states that are moving aggressively with offers of tax breaks and other incentives to bring the jobs to their jurisdictions. Ontario will have to do the same thing if it wants to succeed, says Whittaker. "It is not enough to set a content level. It has to actively and aggressively court manufacturing and make the case for why settling in Ontario is a good thing," he says. "If they get it right, no doubt manufacturers will be willing to give Ontario a look. It has a lot of natural assets that work in its favour."
Stephure agrees. But getting it right, he points out, is not just about developing a workable supply chain strategy. The province needs to show turbine and component manufacturers there will be a market to serve over the long term, he says. That means dealing with transmission constraints that are already starting to form roadblocks for wind project developers. "I think as long as the transmission build-outs follow the development so the wind industry in Ontario can continue to build at a good pace, it will be a market that the big players will want to be a part of," he says.
A new C$635 million, 180-kilometre high-voltage transmission line running from the Bruce area on Lake Huron to load centres in southern Ontario is progressing through the regulatory process and will open up some opportunity for wind power projects. But grid capacity remains the Achilles heel of any plan to significantly boost the role of renewables, says Timm. "We have got to get pen to paper and get action on advancing the development of transmission."
The Ontario Power Authority (OPA), responsible for the long-term planning of the province's electricity system, has proposed so-called enabler lines to tap into areas, particularly along the Great Lakes, with the greatest potential for cost-effective, large-scale wind power development. The lines are a good starting point, says Whittaker. "But it should not be limited to those. There are some fantastic resource-rich areas that need to be accessed, and if they are, then wind's potential truly can be unlocked," he adds.
The GEA gives the energy minister the power to direct transmission build and so far the indication is he plans to wholeheartedly. Smitherman says his plans will send a strong signal that Ontario is ripe for investment "not just for a year or two and not just for a thousand or two megawatts of wind projects, but for much more substantial investment over time."