Category Archives: Uncategorized

Toronto City Council unanimously approves residential PACE pilot project for Toronto — It’s a go!

The headline speaks for itself. For context, see earlier post.

Municipalities across Ontario will — should — be watching this pilot closely. It could become a template for deployment across Canadian municipalities once other provinces enable the approach through legislative amendments to municipal acts. Corporate Knights will be part of the push.

Toronto closer to launching Ontario’s first PACE pilot program this fall

retrofitLast November I reported that Ontario Premier Kathleen Wynne, who at the time was minister of municipal affairs and housing, approved changes to the province’s Municipal Act and City of Toronto Act, basically empowering all municipalities in Ontario to use a financing tool called a local improvement charge (LIC) to help property owners finance energy- and water-efficiency projects for their homes. This has enabled the creation of what some call Property Assessed Clean Energy (PACE) programs, or alternatively Property Assessed Payments for Energy Retrofits (PAPER). I recently wrote a large feature on such programs called “The PACE Makers” in the latest issue of Corporate Knights magazine.

Shortly after the legislative amendments took effect, a group of 22 municipalities formed the Collaboration on Home Energy Efficiency Retrofits in Ontario, or CHEERIO for short. These municipalities have pooled resources as part of a unified examination of PACE/PAPER program design, legal issues and communications challenges. The group is also doing market research to find out what homeowners across the province think about the new funding mechanism, and what lessons can be learned from early efforts in the United States. Bottom line: they don’t want to re-invent the wheel, but they want it to offer a much smoother ride.

All of that is context for what I really want to highlight in this post. Earlier this week a report from Toronto’s City Manager (as well as Deputy City Manager and Chief Financial Officer) recommended that city council create a by-law that authorizes the use of LICs to fund energy-efficiency and water conservation measure on private properties as part of a new Residential Energy Retrofit Pilot Program, which aims to be up and running this fall on a voluntary basis. It would be the first of its kind in Ontario.

Single-family homes and multi-unit residential buildings can participate — specifically, up to 1,000 houses and up to 10 multi-unit buildings. The city is making $20 million available to fund energy assessments and installation costs, which will be repaid through LICs. Owners of single-family houses will have between five and 15 years to pay back the loans through a charge on their property tax bills, while multi-unit residential building owners will get five to 20 years. “The repayment term would be geared to generally reflect the anticipated operating cost reductions (i.e. energy or water savings) and useful life of the retrofit measure(s),” according to the report. This time around, the city won’t be issuing bonds to raise money for the program. They will tap into a Working Capital Reserve, monies from which will be transferred to a Local Improvement Charge Energy Works Reserve Fund that will give out the loans and be replenished through LIC payments.

“The program is projected to stimulate job creation, increase housing affordability through operating cost savings and annually avoid 5,000 tonnes of greenhouse gas emissions,” according to the report. “The primary focus of the pilot program is to test the market receptivity to this new financing mechanism, its ability to accelerate the uptake for investment in energy efficiency and evaluate how it aligns with the city’s economic development, housing quality and affordability and environmental sustainability objectives.” The idea is to also demonstrate that such a program can be revenue-neutral for the city.

This is terrific to see, and kudos to councillor Mike Layton for leading the push within council. The program will be considered by Executive Committee on July 3, and, depending on what it decides, the full city council will consider it on July 16. Let’s hope all councillors see the huge potential and importance of such a proposal. If Toronto can get this pilot right, it can set the stage for much broader deployment across the city, with the potential to snowball across the province. It would also lend momentum to efforts at getting other Canadian provinces to create enabling legislation, as well as efforts to expand the program to commercial buildings.

In major policy shift, government lets Ontario Power Generation bid for large renewable projects

lakeviewIt’s been eight days since Ontario Energy Minister Bob Chiarelli directed the province’s power authority to eliminate large renewable-energy projects from the feed-in-tariff program and design a competitive procurement process that will get the best deal for ratepayers. We knew this was coming, as Chiarelli said as much in a speech a couple weeks earlier. What we didn’t know is that the energy minister would direct the power authority to let Ontario Power Generation bid for these large projects (see page 3, third paragraph of directive).

This is a major policy shift, and I’m surprised it hasn’t received any coverage in the mainstream Ontario media. OPG is a crown corporation. Under its 2005 agreement with the Ontario government, “OPG will not pursue investment in non-hydroelectric renewable generation projects unless specifically directed to do so by the Shareholder.” Instead, OPG’s mandate has been to maintain its fossil fuel, nuclear and hydroelectric fleet of generation, and pursue new large hydroelectric projects. The reason for this restriction was to limit OPG’s clout in the marketplace and give independent power producers a chance to establish a foothold in the generation mix. The decision to let OPG bid for all large renewables — including wind and solar — is significant for a number of reasons:

  • This is getting close to what the Ontario NDP said it will do if elected. According to the NDP’s energy policy, “We will maintain the feed-in-tariff for small and community-based projects” and “for new larger projects we will move towards public ownership” through OPG. The Liberal government isn’t proposing complete public ownership of large renewables, but it is letting OPG bid for some ownership in a competitive process. Could this be part of a compromise that won it NDP support for the provincial budget?
  • Independent power producers, I would imagine, aren’t very happy about this. They will assert that they can’t compete against a giant like OPG that just happens to have the government in its corner. Is it a fair fight? Maybe not. But will it get the best deal for ratepayers? Presumably, yes.
  • Having OPG compete for renewables will create more opportunities to develop renewable resources in remote areas, and to partner with aboriginal communities. OPG has experience in this area, and many private developers are too risk-averse to go into these markets. They prefer to go after the low-hanging fruit, even if the orchard isn’t located in the best area.
  • Letting OPG compete in renewables could turn the Power Workers’ Union into an ally over time. Right now, renewables mean competition with union jobs. The PWU doesn’t like that — the fact that jobs at coal-fired power plants are being phased out and there is a significant threat to nuclear jobs as well. Renewables could be a path to save OPG jobs.
  • On that note, could letting OPG get into large renewables also be a signal that the province under this government is going to abandon efforts at building new nuclear reactors?
  • Finally, as a crown corporation, OPG can be directed to do things that other private developers would never take on — such as experimenting on a large scale with energy storage technologies, and being a test bed for energy innovation coming out of the province. Indeed, it would be interesting if OPG was directed to set aside a certain percentage of profits for R&D and to support pilot projects.

So that’s why I think this latest government directive is significant and should get more attention. Perhaps I’m reading too much into this, but my gut tells me no. I’ve long argued that OPG should be able to compete for large renewable energy projects. It’s something the Society of Energy Professionals, a shareholder in the nuclear business of Bruce Power, has called for since at least 2007. Many will complain, and for good reason. If a giant like OPG is to compete for these projects, how do we make sure it’s a fair competition? Will the process be transparent? Reasonable questions, but not a reason to not do it.

Has North America hit “peak car”? The signs are there…

MEC-EVNavigant Consulting held Wednesday what I thought was a fascinating webinar on whether vehicle sales and use in North America have peaked — or are close to peaking. Dave Hurst, principal research analyst at Navigant, defined “peak cars” as a point of market saturation “characterized by an unprecedented deceleration in the growth of car ownership, total miles driven and annual sales.”

At the outset, he made the following points:

  • Auto sales have been relatively slow to rebound in the United States, whereas in past economic rebounds we’ve seen car sales lead the way;
  • He figures sales of light-duty vehicles peaked in 2005 and those record levels won’t be reached again until about 2020, despite the growth in population between now and then;
  • There has been significant growth in bicycle commuting — 47 per cent growth between 2000 and 2011. In more bike-friendly cities, growth has jumped 80 per cent;
  •  E-bicycle sales are growing strongly, particularly in Europe. While they aren’t necessarily displacing car sales, they are reducing the amount of miles driven in cars;
  • Influencing trends being noticed: urban planning with attention to more transit-oriented designs and streets that accommodate multiple modes of transportation; more people telecommuting; a rise in car-sharing as an alternative way to travel in cities; increased political interest in congestion pricing.

But can we say with certainty that we’ve hit “peak cars” yet? “I would argue in western Europe we’re likely there. Right now it looks like North America is going to be next,” said Hurst. “The jury is still out.”

Phineas Baxandall, senior analyst for transportation policy at the U.S. Public Interest Research Group, came across as more certain in his comments. Up until 2004, he said, there has been a steady increase in per-capita miles driven since WWII. But nine years ago it suddenly began to fall, and this happened well before the economic downturn. “What we see in 2004 is truly a break with an almost 60-year trend.” Total miles driven also began to fall in 2007, despite ongoing population growth. So what explains this? Baxandall said a big part of it has to do with younger drivers — at least that’s what the data says between 2001 and 2009. “During this period, driving among younger Americans fell much faster than the rest of the country — a breathtaking 23 per cent per person.” Young people are taking fewer vehicle trips and shorter trips. “This trend was seen with young people both with and without jobs,” he added, pointing out that younger people are embracing alternatives modes of transportation much more aggressively than their parents. “This group’s public transportation trips increased (between 2001 and 2009) by 40 per cent. Bicycle trips increased 24 per cent, and walking trips by 16 per cent. A truly big change.”

And let’s not forget driver’s license statistics. In the mid-1980s more than 80 per cent of young people between 16 and 20 years of age had a driver’s license. Today, that number is in the mid-60s. Another interesting point that Baxandall made has to do with the recent decoupling of GDP from driving miles per person. For decades driving miles per person almost shadowed the movement of GDP, but in recent years they have diverged. This likely has much to do with rising gasoline prices following a long period of relatively cheap fuel.

All of this raises the big question: Is it temporary?

Is it a blip? Will the shift we have seen be enduring? Will it grow more intense to the detriment of the auto industry? I got the sense from the call that Baxandall doesn’t think it’s temporary, which isn’t a bad thing depending on where you sit. “It’s going to mean less pollution and oil consumption, less stress on our existing roadways, and less need for new and wider highways,” he said. But there’s bad news for some. There will be more risk for public-private toll ventures, shrinking North American auto sales, and the amount of federal tax revenue collected through gasoline sales is going to fall significantly — a combination of more efficient vehicles, electric vehicles and reduced driving. “We can no longer continue to believe there will be an increase in driving,” he added. “Policy in our country has yet to catch up to these trends and still reflect old driving assumptions.”

There’s much to think about here, for auto manufacturers, urban planners, political leaders and consumers. Of course, some of the market demand issues will be offset by rising demand from Asia and elsewhere, but in North American and Europe these trends beg a much closer, careful look.

Changes to Ontario’s green energy strategy make a whole lot of sense…

sarniasolar1Ontario Energy Minister Bob Chiarelli announced on May 30 that there would be a few major changes to the way the province procures renewable energy.

Here’s what the government is saying these days:

  • The province will develop a competitive procurement process for renewable projects over 500 kilowatts, which will no longer qualify for a feed-in-tariff.
  • These same projects will have to meet a higher community standard. Developers will need to work directly with municipalities to identify appropriate locations and site requirements.
  • Projects 10 to 500 kilowatts in size (a.k.a small FIT projects) will be given priority if a municipality is a development partner or leading the project.
  • The government will work with municipalities to determine a property tax rate increase for wind turbine towers.
  • Between now and 2018, a new block of 900 megawatts will be available for small FIT and microFIT programs. Annual procurement caps will be set at 150 megawatts for Small FIT and 50 megawatts for microFIT, a much more measured approach that will create more stability in the market.
  • The World Trade Organization has ruled that the domestic content mandate attached to Ontario’s FIT program was in violation of GATT rules. As a result, the government has decided to eliminate the local content requirement.

These are all good moves for a provincial green-energy strategy that has had its fair share of controversy and setbacks. First, I have to applaud the decision to treat small and large renewable energy projects differently. I have been arguing for more than two years now that the province needs to get back to a competitive procurement process for large wind and solar projects. The whole point of the FIT program, IMHO, was to make electricity production in Ontario more accessible to communities, homeowners, schools, farmers, etc… by creating a standard, long-term contract and process for selling green electricity into the provincial grid. Fact is, it’s expensive to participate in requests for proposals. Companies can spend millions as part of their bid only to walk away with nothing. Smaller developers don’t have the deep pockets to play that game, but big developers generally do. My only reservation about the new rules is that they set the cut-off point at 500 kilowatts, and there is no distinction between solar and wind projects. For solar projects, I would require any project over 1 megawatt to go through competitive procurement. For wind, I would require it for projects over 10 megawatts. Still, what’s contemplated in the new rules is an improvement.

The phasing out of domestic content rules is also good news, as they have served their purpose. Even with the WTO challenge, most people in the industry knew that it would take a while for the matter to get resolved. From my perspective, this gave plenty of time to developers in need of local content to lure some manufacturing (and associated jobs) into the province. True, some of those jobs might go away once the rules are phased out, but many now anchored here will decide to stay given that the market for product between now and 2018 will still be healthy (and the fact that the FIT will still exist for small and micro projects). Where this gets interesting is that developers of large projects can now source from outside of the province — including China. No longer can the domestic content rule be an excuse for higher costs. When bidding for projects, they’ll have to come in at the lowest price AND have to demonstrate a positive/collaborative relationship with the community in which they would like to build. This means, presumably, that most of the megawatts of renewable power that are built under the new rules will be much less expensive than what we’ve seen under the FIT program. The cost of solar modules has plunged. Wind turbines are getting more efficient. We’re generally getting more efficient at building these projects, driving down development costs. Ontario is now going to benefit from this trend in a more pronounced way than under the FIT program, where a two-year price review (and even the new one-year review) frankly couldn’t keep up with the pace of change.

Will we lose jobs by dropping the domestic content mandate? Probably, but there is more to “green jobs” than people standing around warehouses playing assistant to machines. This industry creates opportunities for lawyers, accountants, electricians, marketers, tradespeople, engineers, environmental consultants, truck drivers, etc…  and I’m convinced those jobs far outnumber the manufacturing jobs we’ve become so obsessed with in this province. And let’s face it, most of the “manufacturing” jobs we attracted to Ontario involved assembling components and integrating equipment that was made somewhere else. Bottom line: Employment in renewable energy is going to continue to grow in Ontario, even without domestic content rules and the domestic manufacturing jobs they helped create.

Meanwhile, the new emphasis on local participation is encouraging. Again, this goes back to the original spirit of the FIT program: to actively engage the population in the operation of our electricity system through direct participation. And as Germany and other countries have shown, the greater the participation (and associated benefits) the greater the acceptance of these new technologies. Impose something on people and their natural inclination is to resist. There will always be NIMBYs that can’t be reasoned with, but give members of a community more say and more to gain from such projects and you make champions out of opponents.

Before I sign off,  I will point out one more piece of good news in these proposed rule changes. Now that the largest projects will be selected through competitive procurement, this creates more flexibility in terms of how the Ontario Power Authority prices renewables. For example, it could set different rates for peak and off-peak wind and solar power. Not only does this more accurately reflect the cost of electricity in the wholesale market, but depending on the price spread it may create an incentive for developers to use energy storage as a way to maximize revenues from every kilowatt-hour produced. This motivation simply doesn’t exist under the current FIT program, which doesn’t discriminate between the time of day kilowatt-hours are produced. One can envision third-party energy storage providers and aggregators emerging in the marketplace to offer such services to developers, in addition to the many ancillary services that energy storage can bring to the grid.

Let’s keep in mind that the government recently put out a request for information (RFI) on the  “State of Energy Storage Technology in Ontario.” It is seeking to better understand the “potential of these technologies to provide value to Ontario’s electricity system” and the “barriers to realizing this potential.” That’s a good sign, and hints at the thinking going on in the background. Here’s hoping that this new thinking is reflected in the updated Long-Term Energy Plan, which is currently under review.

With renewable energy development in Ontario put a more sustainable path, the government should now re-commit itself to energy conservation, which has been all but ignored in recent years despite talk of creating a “culture of conservation” in this province.

(NOTE: I’m still hopeful that the moratorium on offshore wind will be lifted and the government will direct the Ontario Power Authority to accept bids for a demonstration/study project of no less than 10 megawatts. This is a step we must take to know for sure, through direct study in the field, the degree to which we would should develop offshore wind and what the rules should be.)