Now, there’s no doubt the province could do A LOT more to promote conservation, and the Liberals deserve a wooden spoon to the back of the head for not pushing and supporting it more and, apparently, having no significant plans to do so. I also think we can avoid the need for new nuclear in this province. Regarding the existing fleet, we have to be very careful. Nuclear currently supplies about half of the electricity in this province. If we’re going to reduce our dependence on it, it will be a weaning process that will depend on the health of other generation assets and their ability to supply the grid reliably. There may be some wiggle room, but at a time when we’re phasing out coal we’re going to need most of those nuclear assets whether we like them or not. Refurbishments will be necessary, but should certainly be scrutinized — not assumed — keeping in mind we can’t afford to put unnecessary strain on the system. We need to stay focused on getting rid of coal, and doing it right.

In other news, the Liberals have been making some clever and necessary moves to defend its green energy and green economy plan, and by association the jobs and industry it has created, should they lose an election to the PC Party in October. On Tuesday, it was revealed that Energy Minister Brad Duguid had issued a ministerial directive that alters the rules of the feed-in-tariff program, eliminating the Ontario Power Authority’s right to cancel a FIT contract if a developer does not yet have a Notice to Proceed to construction.

To obtain a Notice to Proceed, developers must have all permits and approvals, including all project impact assessments, a renewable energy approval from the Ministry of Environment, a plan that verifies that all domestic content requirements have been met, and a financing plan that demonstrates the developer has the money in place to build the project as envisioned. The PCs, if they were to form the government, have indicated they would exercise their rights under Sections 2.4 (a), (e) and (f) of FIT contracts to terminate contracts in cases where developers had not yet obtained a Notice to Proceed. Now, there would be a penalty to this — the government would have to cover any pre-construction development costs. But Hudak and crew have said they’re willing to take that hit.

This would create a huge problem for the FIT program, because more than 1,800 FIT contracts would be at risk of being cancelled and at no fault to the developers. Many, including Samsung, have a contract in hand but are waiting for grid capacity or to receive their renewable energy approval from the environment ministry. To protect this group, the Liberals tweaked the rules. Now, those developer can request a waiver that takes away the power authority’s right to terminate a project, as long as that developer can show a domestic content plan supported by a manufacturing equipment agreement. Developers must still submit a financing plan and receive all permits and approvals before they can begin construction, but the absence of these are no longer an opening for contract termination.

The end result is that it salvages whatever confidence is left in the industry since Hudak announced his intention to scrap the FIT program. Renewable energy developers and manufacturers in the province are still worried, but less so now. The Liberals also announced improvements to the renewable energy approvals (REA) process that will see applications dealt with more quickly, so that should bring some more certainty as well.

Samsung is among those less worried. In fact, it was announced yesterday that the government has given Samsung a one-year extension to fulfill certain contractual obligations. But Samsung had to give a little to get a little. In exchange for the extension, Samsung agreed to accept a lower economic adder, which is the amount it expects to received on top of normal feed-in-tariff rates for bringing jobs and manufacturing to the province. Specifically, Samsung’s adder over the 20-year life of its contract has been reduced to $110 million from $437 million. This is good for ratepayers, relatively speaking, but in my opinion the FIT rates alone should be enough to make Samsung happy — so the Korean giant is walking away with this new contractual arrangement quite satisfied. But a deal is a deal, right?

The good news in all of this is that the Liberals are starting to put up a fight, and that will increase confidence in the sector and send a message to the public that green energy in Ontario is something worth fighting for. It has been a long time coming, though decisions like killing offshore wind projects have already hurt confidence in the sector. The Liberals will have a very difficult time regaining what it lost.

For some reason, a large percentage of the population really dig getting Air Miles. There’s trophy value to them, and while they’re worth much less than cash itself, members of the Air Miles program seem to treasure these rewards more than cash. An odd phenomenon, but a good one. That’s because for government agencies and utilities and transit authorities, handing out Air Miles in exchange for good behaviour is much cheaper than handing out cash in the form of discounts and rebates. And because they’re partnered up with LoyaltyGroup, which has direct access to and detailed information on nearly three-quarters of Canadian households (i.e. about 10 million), it gives them a less expensive yet highly more targeted way to reach out to consumers — at least when compared to that relatively ineffective and expensive medium called advertising. The Ontario Power Authority, the first agency to work with Air Miles on such a program to encourage energy conservation, found that it spent two-thirds less but got seven times the results compared to its advertising- and rebates-based approach a year earlier. You’ll get more details on that if you read the column.

Since working with the OPA, Air Miles for Social Change has run with the concept and now has about 25 similar programs on the go across Canada. It’s catching on.

It’s not that issuing rewards for good behaviour is an entirely new thing. It’s what Toronto’s Lowfoot.com is doing, as well as New York City-based Efficiency 2.0 — both focused on energy management for consumers. But what Air Miles brings to the equation, at least in Canada, is unmatched reach into households. And with that comes the power to influence positive change with carrots instead of sticks — not that we don’t need both.

This project achieves many things. Jobs, for one, as well as green and efficiently used energy. It also makes St. Marys Paper more competitive, so in a way it provides some added job security for existing employees at the plant. One concern, however, is the fact that St. Marys has negotiated access to up to 400,000 tonnes of biomass annually from the area’s Crown forests for the life of the project. What this means, exactly, I don’t know. Does it mean St. Marys can harvest the forest slash or directly cut down trees for fuel? I would hope that whatever is harvested from these forests will go toward producing paper products first, and then whatever is left over can be used for energy production.

It would also be nice if the power authority disclosed exactly how much it’s paying for this electricity or any other incentives it may be offering. There’s a hint in this report that tens of millions of dollars may flow to the company from the province’s forestry sector prosperity funds, and this would be on top of the $17 million or so in financial aid that went to the struggling company after it was rescued from a bankrupty sale in 2007. The hope, one assumes, is that the CHP plant will lower energy costs for St. Marys and help it to eventually wean itself from corporate welfare.

After a brief consultation period it seems the government and Ontario Power Authority took the industry’s complaints to heart, even though my own sources told me just recently that the government was being pig-headed and planned to stick with its proposal. In the end, they caved in to pressure — a very smart face-saving move, I might add. The price reduction will still take place, but it will be reduced to 64.2 cents, not 58.8 cents, and it won’t apply to anyone who applied to the program before July 2, 2010, meaning the OPA plans to honour the original 80.2 cents for those who meet that cutoff. This decision is a big gesture, because the plan under the original proposal was to only honour the 80.2 cents for those minority of projects that had already received a contract or conditional offer. That means the more than 10,000 applications that were going to be tossed out (with project proponents forced to reapply under the new rate) will now be honoured at the 80.2 cent rate so long as they applied before July 2.

There’s a small catch, however. Commercial aggregators will no longer be allowed to participate in the microFIT program, but will still be able to participate in the larger FIT (10 kilowatts and up) program. The government didn’t like the idea of aggregators merely leasing rooftops and then building and owning the systems, saying it defied the spirit of the program, which was to get households, farmers, communities, First Nations, etc… to participate directly on their own. I have to say, I *completely* agree with them there.

The OPA also announced it will be establishing a new advisory panel that will provide advice on program evolution, including the two-year FIT review process. The advisory panel will be made up of industry, academic and other stakeholders. I should point out that an attempt will be made to accommodate commercial aggregators of smaller projects, but it will be done outside of the microFIT program using a different set of rules to be established partly by the new advisory panel.

“The OPA has received almost 19,000 microFIT applications since the program was launched less than a year ago. More than 6,100 conditional offers have been sent to applicants and almost 800 microFIT projects are now feeding clean energy into Ontario’s grid,” according to the agency’s release today. “The OPA is working to respond quickly to microFIT applicants. Most ground-mounted applications that have been submitted will be processed by the end of September.”

Kudos to the government and OPA for putting meaning back into the word “consultation.” Showing a willingness to listen and change direction restores confidence in the process and the program, and the fact an advisory body has been set up to avoid future surprises can only help.

This is one of the smartest programs, in my view, that the Ontario government has launched. It targets the 45 largest industrial companies connected directly to the transmission system. It helps these big businesses become more energy efficiency, more competitive globally, and it helps them cope with higher electricity rates as the province renews its power system. While hundreds of millions of dollars will be devoted to this program, reducing several hundred megawatts of electricity demand from the grid will be far cheaper than building new generation to accommodate an inefficient industrial base.

This is an important initiative in Ontario, even if it’s not as sexy as solar and wind.

For more information, check out this article I wrote in the Toronto Star in March. Also, for details about the Industrial Accelerator program, go here.

Ground-mounted solar represented 76 of the projects and amount to more than 600 megawatts. Northland Power, a company normally associated with building natural gas plants, has 13 solar projects totalling 130 MW. Onshore wind projects number 47 and waterpower projects number 46. The Ontario government called this the “single-largest green energy initiative of its kind in Canada,” while environmental and pro-green industry groups called the contract approvals historic. No doubt, criticism will follow from the usual suspects who continue to crap on any green-energy programs.

Significantly, 264 MW worth of projects have been identified as “community power”: projects developed, owned and operated by Ontario landowners and groups comprised of First Nations and energy co-ops — in other words, not by corporations.

The province said this latest round of projects will create 20,000 direct and indirect jobs, though I’ve always found it a mystery how they come to those numbers and take them with a grain of salt. It also estimated it will result in $9 billion in private investment, a figure that’s boosted by local content requirements.

The big surprise: a contract was issued for a 300 megawatt offshore wind project in Lake Ontario, near Kingston’s Wolfe Island. It’s sure to be a controverial project, but it represents the first time *in the world* that a power-purchase contract has been granted to an offshore wind project in the Great Lakes. It’s also the largest single approved project under this entire FIT round. Click here for a breakdown of the 184 projects.

The company behind the Wolfe Island Shoals Windfarm is a company called Windstream Energy. Don’t know much about them, but they’ve got their work cut out. They would have had to put up more than $3 million in security deposits to participate in the FIT, so I’m assuming they’ve got lots of wind data and have done the necessary studies (bird, bat, etc…) to move the project forward. But even so, they’re going to face the wrath of an angry Wolfe Island residents association, which is having a hard enough time accepting the onshore turbines there. “If they’re directly in front of Wolfe Island it’s going to be a firestorm,” said one industry observer. Got that right.

More to come later…

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:

First, by keeping the credits will this discourage green-energy development, which would be ironic given that the government’s new Green Energy and Economy Act was created — and highly touted, I should add — for the sole purpose of stimulating such development and the jobs that come with? It’s certainly possible, since it’s tough these days for developers — particularly smaller local developers — to raise capital for projects.

Second, what does the government plan to do with these credits? Will it sell them on carbon markets and throw the cash in the general treasury? Will it sell them and dedicate the revenues to a special clean energy fund aimed at stimulating further green power development? Or, will it simply retired the credits?

Personally, I think it has no choice but to retire the credits. The whole justification for having Ontario electricity consumers pay a premium for their power over the coming years is based on the idea that we must do our part to tackle climate change, and we must set an example for other jurisdictions to follow. But if the government, say, sells the credits to Ohio or Michigan so those states can go on burning coal, how is that fair to Ontario ratepayers — i.e. How can you explain to Ontario ratepayers that they’re paying a green premium so that other jurisdictions can go on polluting? Sure, the money from the sold credits would come back to ratepayers (maybe), but then what would be the sense in the end of pursuing green energy in the first place?

Finally, what carbon credits are the Ontario Power Authority justified in keeping? I can understand — and generally support — the reasoning behind keeping carbon credits related to indirect electricity displacement. That is, the amount of carbon that’s avoided when solar or wind power or any other renewable displaces fossil-fuel-based power generation. It’s here where Ontario ratepayers have the right to keep those credits and see them properly retired. But some renewable power developers, such as those collecting biogas from anaerobic digesters and landfills, have a strong argument for keeping at least a portion of the credits.

Here’s why: Biogas-based power generation both displaces fossil-fuel-based electricity and it destroys methane, a greenhouse gas that’s 21 times more potent than carbon dioxide. You can earn carbon credits from methane destruction, even if you just flare the biogas instead of burn it to produce electricity. Given this, why should the power authority have the right to those credits? The agency’s reach, one could argue, should be limited to the portion of a project that deals directly with electricity generation.

Biogas projects are important to Ontario. They can supply dispatchable renewable power that displaces fossil fuels. Anaerobic digesters can kill bad microbes from livestock manure that can contaminate water systems (remember Walkerton?). And they keep methane from slowly creeping into the atmosphere.

They should be encouraged, not discouraged. This means flexibility of policy, and a recognition that not all projects and technologies are created equal.

NOTE: If you want to keep up to date as the Ontario government develops its cap-and-trade program, visit www.carbonomics.ca (the URL is mine, which I forwarded to the government site because it had an insanely long URL. I’ll likely keep the link in tact for at least a few months)

NOTE II: I’m not a fan of cap-and-trade, because it’s complex to set up and it adds another thick layer of bureacracy to government. It also creates a new class of lawyers, accountants, etc… who take their cut of the action, and it’s so complex that there’s room for abuse — not unlike the abuses that set off the derivatives crisis that helped plunge the global economy into recession and almost led to a collapse of Wall Street. I’d much prefer to see a carbon tax, which is more efficient and transparent and less open to abuse. But cap-and-trade seems to be the way the world is going, so who am I to question it?