Tag Archives: feed-in tariff

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.)

From the horse’s mouth: the Ontario PC plan to abandon green and go nuclear

mcnaughtonNot that this comes as a surprise, but in case you thought the PCs plan to be gentle on the green energy file if elected, think again. Below are comments made on Dec. 19 by Progressive Conservative MPP Monte McNaughton, representing Lambton-Kent-Middlesex. McNaughton was speaking at a municipal council meeting, during which he outlined how his party, if elected this year, plans to obliterate the province’s feed-in-tariff program, including reneging on thousands of projects in the queue. It seems the PCs don’t just want to get rid of the FIT program, but are hostile to wind and solar power altogether and plan to alter course dramatically, starting with a moratorium on all green energy development. This would include a big commitment to build new nuclear reactors at a time when there is nothing but controversy around the high cost and long-term dangers of the nuclear option. In other words, the PCs would bring Ontario’s grid back to the dark ages with a false promise that doing so would cause electricity prices to fall, which couldn’t be further from the truth. As usual, McNaughton spews mistruths about the high cost of wind and fails to mention the much higher cost of going nuclear.
But you can read for yourself where the PCs stand by reading excerpts of his comments below:

TRANSCRIPT of EXCERPTS:

On PC plans to get out of FIT contracts…

…we realize that when we make the commitment, we’re not going to build them, if they’re not built. So scrap the 50,000 projects that are in the queue.  We realize that there is going to be a cost, our lawyers have told us that there are opt-out clauses and we sure as hell are going to pay those out because it’s going to be cheaper to pay them out than to honour contracts for 20 years. So we’ve been clear that we will not going ahead with however many projects are left, if we’re fortunate enough to form the next government after the next election. But clearly there will be a cost associated with that, but it will be cheaper to buy them out than to honour them for 20 years.

Secondly, I guess we’re not going to know the entire extent of all of these contracts signed until if we form government, until we actually get in and take office. That’s why we’ve been clear that in the 24 hours after the election, we’re going to call for a moratorium. But we are going to call for a moratorium almost immediately so we can figure where the hell things are at and how deep a hole energy has gotten us into.

We have been extremely clear that we are are going to end the wind & solar projects across this province. We’re going in a completely new direction. We’re not going to continue abiding by the special interests that are at Queens Park every single day of this government. We’re taking Ontario down a completely new path and we’re not going to continue what’s been going on the last 10 years. We’ve been crystal clear about it. We’re going to really explore Hydro. We’re going to expand nuclear … which isn’t that popular in a lot of corners. But we are going in a different direction including part of our energy supply is going to be buying energy from other jurisdictions.

Clean energy technologies? No bubble bursting there. Future is growth, growth, growth

There was a clever headline in the satirical newspaper The Onionearlier this week that wouldn’t be so humorous if it wasn’t true.

“300 Million Without Electricity In India After Restoration Of Power Grid,” the headline read.

The article was referring to the massive power outage across India Tuesday that cut electricity to 670 million citizens, the equivalent of two Americas going dark. Without question, it was the largest blackout in world history.

What was so witty about the headline was how it drew attention to another problem too often overlooked in India. Even when the existing power grid is working fine, there are still 300 million people in that country lacking access to electricity, meaning no basic necessities like refrigeration, lighting, or the appliances we westerners take for granted.

Considering India has the world’s worst air pollution, as researchers at Yale and Columbia universities concluded earlier this year, The Onion’s blackout story carries two important messages: One, the third of India without electricity could benefit tremendously from community-level investments in solar, wind and other non-polluting energy sources; second, the two-thirds who are connected to the grid will now be urging their local and national governments to modernize India’s electricity system.

That usually means cleaning it up, making it smarter and more reliable, and investing in clean technologies — from Canada, perhaps — that make it more robust and efficient.

There are some commentators out there who like to point to very specific events as evidence that the clean energy and technology boom has gone bust. They point to the exaggerated Solyndra “scandal,” which saw the bankruptcy of the solar manufacturing start-up after it received — and had already burned through — funding that was secured via a $535 million (U.S.) loan guarantee from the U.S. Department of Energy.

It makes for great politics, but the reality is that companies do sometimes fail and the public does often have flesh in the game. It’s not unique to clean energy. The loan guarantee program, after all, was designed for high-risk bets. Looked at objectively, the program has actually outperformed expectations. Solyndra and a handful of others are falling stars in a galaxy of promise.

But Solyndra is just the start. Clean energy skeptics point to company closures and the collapse of many solar, wind and other cleantech-themed stocks. They cite how U.S. government stimulus spending for clean energy projects is coming to an end. They flag how several jurisdictions in Europe, which is dealing with unrelated economic problems, are reducing subsidies for renewable energy projects.

The green dream is dead — or dying. It’s the message you get when listening to those, mostly living in a North American bubble, who doubted the vision in the first place.

This cacophony ignores the incredible needs of countries like India, which is already among the top spenders in the world on clean-energy projects, having spent $10.2 billion on renewable energy in 2011. As the blackout suggests, the need to accelerate that spending has grown more urgent.

Japan, meanwhile, is embracing renewable energy in a big way in the aftermath of the nuclear disaster at Fukushima. It just launched its own feed-in-tariff program —similar to the one in Ontario —aimed at aggressively spurring solar, wind and geothermal development to help reduce the country’s dependence on nuclear power.

Bloomberg New Energy Finance reported this month that global investment in clean energy surged to $57 billion in the second quarter of 2012, up 24 per cent from the first quarter and carried largely by a stunning 92 per cent spending increase out of China. Investment is still down year-over- year —2011 wasn’t a great year generally, right? —but it’s on the upswing in 2012, hardly the sign of collapse.

That boost from China is expected to continue, particularly in solar. As part of its 12th five-year economic plan, released in 2011, China originally expected to increase solar installations 20-fold by 2020. Last month it decided to draw forward that target to 2015, when it hopes to have 21 gigawatts of solar power capacity in place —enough to supply all of Ontario on a sunny spring day.

Why is China moving in this direction? Economically, it carries long-term strategic importance. But China’s citizens are also growing fed up with unbearable air, water and soil pollution, so much so that there is a rise in violent protests breaking out across the country.

The reason why clean energy isn’t a fad or a bursting bubble is that global problems such as climate change, pollution, poverty, food scarcity, crumbling legacy infrastructure, and access to clean water aren’t going away anytime soon. Renewable energy and other clean technologies may not be the only solution, but they are a big and growing part of it.

Will nuclear help out? Maybe, but don’t count on it. Jeff Immelt, chief executive of General Electric, a big supplier of nuclear technology, told the Financial Times this week that it’s “really hard” these days to justify the cost of nuclear. “I think some combination of gas, and either wind or solar … that’s where we see most countries around the world going.”

Ontario may want to reconsider plans for new nukes at Darlington.

Fact is, renewable energy costs are falling fast, and that’s part of the reason there are layoffs, profit warnings, bankruptcies and falling share prices in the industry. Subsidies are supposed to gradually fade away, something the fossil fuel industry hasn’t learned after 100 years of handouts.

There was oversupply in clean energy equipment. Weak companies are struggling and some are failing. Those intent on surviving figure out how to innovate, adjust, enter new geographic markets and come out stronger – the cycle is not unique to clean energy.

“Any emerging market will experience growth problems and will have winners and losers. And the losers’ problems do not necessarily indicate the absence of a long-term market,” says Craig Tighe, a partner with global law firm DLA Piper. “Were that the case, the loss of Palm and Handspring would mean that the smart phone market is not sustainable, which is manifestly not the case.”

Growth in clean energy is happening. What’s changing is the pace of that growth and the players who get to benefit.

There’s no bubble bursting here.

Tyler Hamilton, author of Mad Like Tesla, writes weekly about green energy and clean technologies.

My quick review of Ontario’s much anticipated FIT Review

Snipped this map from the Ontario Power Authority’s two-year FIT program review. Here are some key takeaways from the review:

  • Solar prices are coming down, and in some cases way down. Small rooftop and ground-mount installs (under 10 kw) will see the FIT rates fall roughly 31 per cent . Large ground-mount systems of 500 kilowatts or higher will see rates fall by 21 per cent.
  • Wind of all sizes will see rates drop by about 15 per cent.
  • Other renewables, such as hydro, biomass and biogas, will remain the same.
  • Going forward, FIT prices will be set when contract is offered, not at time of application.
  • It’s being recommended that the government review supply and demand at end of 2013 and consider rising its green energy targets.
  • Up to 50 megawatts of contract capacity is being reserved for hydroelectric.
  • FIT rate reviews and adjustments will now take place annually.
  • Regulatory approvals are being streamlined in some areas.
  • Projects with a minimum of 15 per cent equity participation from aboriginal groups or communities will get extra points that give them priority in the queue. More points go to projects that have municipal or aboriginal council support.
  • 10 per cent of remaining FIT contract capacity will get set aside for projects that have a minimum of 50 per cent community or aboriginal ownership.
  • It looks like programs that offer supportive funding for community and aboriginal projects, such as the Community Power Fund, will get a boost based on recommendations from fund manager and program administrator.

A lot of coverage of this is making it seem like the government is reacting to rural protest against wind and solar farms, and unfounded public concerns about higher energy costs due to green energy. This is partly true, such as with the move to give communities more say, to encourage greater community participation, and to set aside capacity for projects with community ownership. These are all good moves. But the reduction in solar and wind prices, that was all to be expected. This is how FIT programs work — prices are supposed to come down over time. Even for solar, many in the industry seemed prepared to accept a reduction of around 25 per cent to reflect lower technology costs. The 15 per cent reduction for wind is also fair, in my view. My own opinion, however, is that large-scale solar should have seen greater reductions, and small rooftop rates should have seen lower reductions. MicroFIT solar installations, taken together, are still so small that they barely register in the overall price mix. Large solar projects benefit from economies of scale, do have a much greater impact on electricity prices, and should have taken a slightly larger rate haircut.  There’s also the fact that small rooftop projects aren’t controversial and make it possible for more citizens to participate in Ontario’s energy future.

What I didn’t see in this review was a much-needed call to accelerate transmission build-out and upgrade distribution systems with an eye to modernizing our electricity system — i.e. building a smart grid that makes the system more efficient and can accommodate more renewables. This entire area, in my view, has been neglected. There was also no talk of creating FITs for geothermal heating/cooling and solar thermal, and no talk of moving larger projects — particularly large wind projects, of say 20 megawatts or more — to the RFP model we used to use. Also, no talk of trying to work energy storage into the mix. At the moment, the FIT program discourages experimentation with solar because wind and solar producers aren’t penalized for producing energy during off-peak times when we don’t need it. The failure to come up with a FIT rate that differentiates between peak and off-peak times won’t lead to the kind of innovation we need.

One small note: It was good to see that domestic content rules are being created for concentrated solar thermal technology. The absence of these rules has made it difficult for Toronto-based Morgan Solar to participate in the FIT program.

Election outcome in Ontario doesn’t mean green energy strategy doesn’t need some fixin’

Here’s my latest Clean Break column in the Toronto Star:

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By Tyler Hamilton

Ontario’s new Energy Minister Chris Bentley has much to learn over the coming weeks about the province’s complex energy file, and hopefully with that learning will come some genuine listening.

It’s tempting to think that the Liberal win earlier this month was a vote of confidence in the government’s green energy strategy, warts and all.

But one could just as easily argue that the outcome of the election would have been very different if PC party leader Tim Hudak hadn’t taken such an extremely negative position against the Green Energy Act, the feed-in tariff (FIT) program and associated initiatives.

Voters, by and large, are supportive – and many quite proud – of Ontario’s green energy vision. They see that it’s the direction we must take. They also see economic opportunity by heading in that direction, if done properly. For this reason, it appears most voters weren’t prepared to let Hudak hit stop and press the rewind button.

At the same time, the fact that the Liberals only squeaked ahead in the popular vote seems a clear message that the approach behind the vision needs some fixing – and fast.

For one, the ball has been dropped on energy conservation. We know that the cost of programs that help us reduce energy consumption is much less than building new power supply. We know that investment in energy efficiency has a much faster payback, represents a permanent reduction in carbon emissions, and is a significant job creator.

We also know that widespread support for energy conservation is the best way to help ratepayers cope with rising electricity rates. After all, who cares if the rate goes up if the monthly bill stays the same?

Yes, the smart grid will help us take control of our energy use, and smart meters can encourage us to shift when we use electricity. All of this helps, but it doesn’t encourage us to use less electricity. It’s not true conservation. And trust me, we waste a lot of energy. There’s much to conserve.

The Liberals have also paid a lot of lip-service to helping seniors and those on fixed-income cope with rising energy bills, but what’s lacking is meaningful action. The Clean Energy Benefit temporarily slapped on everyone’s bills is not an answer, nor is an end-of-year tax credit on a bill that’s paid monthly.

Another fix is needed with the FIT program itself. The rate structure is terribly out of date, and the Ontario Power Authority is already late in launching its two-year review of rates paid out for solar, wind, small hydro and biomass projects.

The rates under the FIT program were first announced in early 2009 and designed to assure a “reasonable” return on investment – about 11 or 12 per cent—for developers. The problem is that technology costs shift over time, sometimes dramatically. Solar is a case in point.

A recent report from the U.S. Department of Energy’s Lawrence Berkeley National Laboratory concluded that the average pre-incentive cost of residential and commercial solar PV systems fell 17 per cent last year and a further 11 per cent in the first half of 2011.

“Solar cell prices around the world have gone down significantly,” Paco Caudet, general manager of solar module maker Siliken Canada, told me this summer. “We have brought down costs over the last five months alone by almost 30 per cent.”

You hear the same story over at Celestica, which is manufacturing solar panels and inverters in Ontario for other companies looking to comply with local content rules.

Mike Andrade, the company’s senior vice-president, echoed Caudet’s view. He said the original solar FIT rates were based on a price for panels and inverters that is now 30 to 40 per cent lower. “Developers can make a fine return on investment at a much lower FIT rate than we have now,” he said.

Yet we continue to wait for rate adjustments. In retrospect, the two-year review was a mistake. Rate structure reviews should be done annually so the program can more quickly adapt to a changing marketplace.

We might also want to ask: should developers of multi-megawatt solar projects and large wind farms be booted out of the FIT program entirely?

After all, the program was created so community cooperatives, small businesses, farmers and homeowners could participate more easily in an electricity system previously dominated by the big developers, who were the only ones with the resources to take part in a competitive bidding process.

The level of community participation hoped for just hasn’t happened under the FIT, and this may explain why the McGuinty government had such a poor showing in rural Ontario ridings. People in many of these ridings are feeling like big projects are being imposed on them and that they have little say in the process.

European studies show that there is less resistance to projects when those in the community feel they have part ownership and a voice that will be heard. The FIT needs to move in that direction.

Not to say we still won’t need the big projects. But developers of these should be required to bid against each other so that Ontario ratepayers are assured the best deal.

And that, in a nutshell, is the problem we have so far: a great green vision, but not necessarily the best deal.

There’s much room for improvement, but first the government has to recognize the need.

Tyler Hamilton, author of Mad Like Tesla, writes weekly about green energy and clean technologies.