I had a feature this weekend in the Toronto Star about the cap-and-trade system coming to Ontario and the likelihood an offsets market will be created a year or more before the 2012 launch of the program. The government here is working hard to align our own provincial system with the Western Climate Initiative, in which it is a member, as well as the Waxman-Markey bill under consideration in the United States (which will likely set the North American standard). The idea of allowing a carbon offsets market to emerge in advance of the cap-and-trade launch is a smart one, as it gives industry a way to prepare and it stimulates offset project development before the final cap-and-trade rules go into effect.

But here’s the problem: A good portion of offset projects are also electricity generation projects, such as wind, solar, biogas and hydroelectric. But in Ontario, if you want to sell your electricity to the power authority you sign a 20-year deal under a new feed-in tariff program. The tariffs are generous, but most developers are also hoping to keep the carbon credits they would qualify for so they can be sold as offsets.

Unfortunately for them, the Ontario Power Authority’s contract for power purchases stipulates that it — and by “it” I mean the Ontario government, which is ultimately the Ontario ratepayer — gets to keep all environmental attributes. This raises a number of issues: (more…)

Click here for release.

Highlights:

• 80.2 cents per kilowatt-hour for rooftop solar.
• 19 cents for offshore wind of any size (first jurisdiction in N.A. to set price)
• 13.5 cents for onshore wind of any size
• 14.7 for biogas under 5 MW.
• 44.3 cents for 10-MW-plus solar, sliding to 71.3 cents as projects scale down to 10 kilowatts.

The government will commence eight-week consultation process and expects to have the prices in effect this summer. More to come….

UPDATE: Here’s an article I just filed to the Toronto Star’s Web site. It contains more info regarding the proposed tariffs. Ontario introduced basic feed-in tariffs two years ago under its standard offer program, but project size was capped at 10 megawatts. The new advanced feed-in tariff program lifts the cap (though solar is still capped at 10 megawatts). It also offers higher prices for smaller projects, such as community-based wind and solar projects or residential solar. Most groups seem happy with the pricing with the exception of large solar developers, who despite getting a 2-cent increase to 44 cents per kilowatt-hour still argue it’s not enough to make projects economical (especially if you factor in poor Canadian-U.S. exchange rate and persistently tight credit markets).

Of course it remains to be seen whether this new feed-in tariff structure, despite being generous and being first on the continent, will be enough to attract investment, development, manufacturing and jobs. Curious to hear viewpoints on this.  Michigan introduced a bill last year that proposed similar advanced tariffs but it never got passed. Hawaii has proposed less ambitious tariffs, but Ontario’s will be first to go into effect and will be the most ambitious to date.