Renewables policy bubbling in Ontario

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Much thought and effort is going into how to structure a long term market framework for Ontario to meet its goals for new renewables to supply 5% of provincial power within the next three years and 10% by 2010. Meantime, bids are being evaluated for an initial government tender for 300 MW


The Ontario government is now processing 39 proposals for projects with a combined capacity of 1060 MW submitted in response to its June request for proposals for 300 MW of renewable energy generation. No details are being released about the companies submitting proposals or the types of technologies bid, but the provincial government is expecting to sign 20 year power purchase contracts with the winners by the end of December or early in 2005, says the energy ministry's Ted Gruetzner.

The government is also in the process of evaluating its long term plan for bringing more renewable energy into Ontario's supply mix. Energy minister Dwight Duncan introduced legislation in June to restructure the province's electricity marketplace and close a looming gap between supply and demand. A committee of the Ontario legislature held public hearings on the legislation, known as Bill 100, over the summer.

In its submission to the committee, the Canadian Wind Energy Association (CanWEA) praises the bill, saying it finally provides the tools needed to substantially increase wind development in a province that has more than 3000 MW of wind power potential but only 15 MW of installed capacity. "Tapping Ontario's wind resources in the past has been hampered by the lack of mechanisms to do so. Bill 100 offers the potential to overcome these barriers in several ways," says CanWEA.

One of these is the creation of the Ontario Power Authority (OPA), which will have the power to enter into the kind of long term power purchase arrangements that are "essential to reducing the cost of capital" for wind energy projects. Bill 100 also allows the energy minister to set renewable energy targets for the province and order the OPA to increase its purchases to meet those goals. CanWEA urges Duncan to wield that power aggressively. "There is no shortage of renewable energy supply," it emphasises. "There has been a shortage of contracts to buy it."

Improving the process

The Ontario government has already set what Duncan describes as its "medium-term goals" for renewable energy development, saying it wants 5% of all generating capacity, about 1350 MW, to come from renewables by 2007 and 10% by 2010. How the OPA will actually procure that supply has yet to be determined, but wind producers in the province are hoping the process will be an improvement over the current 300 MW request for proposals (RFP).

Several provisions work to the detriment of wind, says Sky Generation's Glen Estill. The required bid bond of C$25,000/MW puts the technology, with its lower capacity factor, at a disadvantage. And an incentive payment system that gives dispatchable technologies credit for their ability to alter output levels in response to fluctuations in demand fails to recognise wind's higher production during winter peaks. The RFP's insurance, equity and credit requirements also make it difficult for small developers to participate.

Another concern is what Estill calls "date slippage." It will be close to a year from the time the RFP was first announced to the awarding of contracts, he says, which means that wind power's ability to add new capacity far more quickly than other generation technologies, one of its key advantages, has been substantially diminished. "It is living proof of the complexity and difficulty of doing these kinds of RFPs and how this RFP process may not be the ideal way to bring renewable energy into play. If we were to be smart about it, we'd think about a system that responds a bit quicker. And maybe they will get to that. But today the process is fairly tedious," he adds.

In fact, Bill 100 directs the OPA to develop "simpler procurement processes" for renewables capacity, a provision that could be satisfied, says CanWEA, by implementing so-called advanced renewable tariffs that would allow the OPA to offer long term, fixed price contracts to any wind developer that can obtain the necessary approvals for a project and meet the target price.

The Ontario Sustainable Energy Association has been advocating for just such a fixed tariff system for farmers, energy co-ops and other community based generators with projects less that 10 MW in size. In its critique of Bill 100, the association calls for legislation to be rewritten to "explicitly state that advanced renewable tariffs are a preferred mechanism for rapidly developing locally-owned, renewable sources of generation."

But Estill believes advanced tariffs will work equally well for large projects. "It would be a far more efficient way, both for the government and for proponents, if developers were simply given a price to shoot at and once they hit it, the project could go ahead provided they could get the permitting and zoning and environmental assessment."

Bill 100 has several provisions designed to encourage the development of a voluntary, premium priced green power market, something that has been missing in Ontario since 2002, when the previous government slapped a cap on soaring power prices in the newly deregulated marketplace -- making it virtually impossible for producers to find customers willing to commit to long term contracts.

But CanWEA warns against burdening potential green power customers with cumbersome contracts, complex billing systems and high transaction costs. "A voluntary premium market works best when it is made simple for the consumer to buy," it says. "The legislation will allow the development of voluntary wind markets, provided regulations are written and implemented to enable the process."

The bill, also known as the Electricity Restructuring Act 2004, is expected to come before the legislature this fall for final debate with passage likely by late November or early December.

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