Recent Development in Energy (Electricity)

Indeed Ontario's election debates on the electricity file highlighted the controversial question of costs and renewable generation. Sustainability of renewable generation was a prevalent theme through much of 2011. Of course, the age old questions of reliability of supply, transmission and distribution, and supply mix are always at the top of the file, but the nature of the underlying issues circle around the centrifugal forces of renewable power.

• demand will grow about 15 per cent between 2010 and 2030;

 
• Ontario will be coal-free by 2014;

 
• nuclear power will continue to account for approximately 50 per cent of the province's electricity supply;

 
• Ontario's target for clean, renewable energy (wind, solar and bioenergy) is 10,700 MW by 2018; and

 
• conservation remains a priority with targets of 7,100 MW.

The Government also identified five priority transmission projects, two of which comprise upgrades and the remaining three of which are new lines.

• nuclear should continue to comprise 50 per cent of total capacity;

 
• the phase-out of coal will continue.

The directive instructs the OPA to prepare a plan that addresses the following:

• should be based on forecast assessments of what the system can manage, but the OPA should plan for 10,700 MW of renewable energy capacity (excluding hydroelectric) by 2018; and

 
• natural gas should plan to play a strategic role in Ontario's supply mix by complementing intermittent supply from wind and solar power and meeting local and system requirements.

• potential storage technologies;

 
• imports from other jurisdictions;

 
• customer impacts; and

 
• increases in renewables since 2007.

Several provinces are demonstrating commitment to renewable energy. British Columbia's recently enacted Clean Energy Act is focused on facilitating renewable electricity generation, conservation and a supportive regulatory framework including streamlined approval processes. British Columbia has also established a feed-in tariff program though more limited in scale than that of Ontario (solar and projects over 5MW are not eligible). New Brunswick established a feed-in tariff program exclusively available to nonprofit organizations. Nova Scotia recently announced plans to create a similarly community-based feed-in tariff program. Québec and Saskatchewan embarked on requests for proposals for wind projects. Prince Edward Island requires utilities to meet at least 15 per cent of their electricity sales from renewable sources.

In October 2011, the Government of Saskatchewan, SaskPower and the First Nations Power Authority (FNPA) announced that they are working with the Meadow Lake Tribal Council (MLTC) to develop a renewable power generation project in northern Saskatchewan. The biomass project, known as the Meadow Lake Bioenergy Centre, will use wood byproducts from the NorSask Forest Products mill near Meadow Lake to generate up to 36 megawatts of renewable, low-emissions power for the province of Saskatchewan. SaskPower cites the project as an important illustration of an investment that will help the province meet its increasing demand for power, and create economic development opportunities for First Nations.

In the far North, the double onslaught of vast geography and weather create real hurdles for efforts to replace a dependency on fossil fuels, especially diesel. The Yukon is the exception to this, however, with its substantial utilization of hydropower. Hydropower may be the most promising renewable alternative also for Nunavut and the Northwest Territories. While a feed-in tariff program is highly unlikely to be introduced for renewables any time soon, some form of Government financial support may be critical for any significant replacement of diesel.

Ontario's third year with the Green Energy Act is now complete and the statistics are staggering. Tens of thousands of applications submitted under the FIT Program have pushed Government policy makers to fine-tune and change a few rules in order to manage the implementation challenges posed by such volumes.

This fine tuning began through certain changes that were introduced over the summer of 2011, pre-dating a comprehensive FIT Program review that would take place later in the year. On August 2, 2011, the Minister of Energy announced three changes to the development processes for renewable energy projects with the goals of providing increased stability and predictability to project development.

Before granting a renewable energy approval ("REA"), it is the MOE's responsibility to ensure the Crown's Duty to Consult is fulfilled. The Guide is intended to assist project proponents to understand the aspects of consultation that are being delegated by the Crown. The Guide also describes that the MOE will monitor the proponent's efforts in this regard to help facilitate consultation, where appropriate.

The first step in the process described by the Guide is the submission by the proponent of a project description report and a request for an Aboriginal consultation list to the MOE. The MOE will provide the proponent a consultation list that includes Aboriginal communities that have, or have asserted, Aboriginal or treaty rights which may be adversely impacted by the proposed project and/or identifies a community as having an interest in any negative environmental effects of the proposed project. The Guide requirements apply to all communities identified on the Aboriginal consultation list.

The second step for the proponent is to provide a Notice of Proposal to Engage in the Project and Notices of Public Meetings. Notices have to be published in certain locations depending on the nature of the project, generally including publication in any local and/or community newspapers and on any community website.

The third step of the consultation process involves holding a minimum of two public meetings.

While the Guide provides additional detail to project proponents of renewable energy projects regarding the nature of their obligation to consult with Aboriginal communities, the precise nature of the consultation to be undertaken will need to be assessed and implemented on a case by case basis. Knowledge and experience in consultation processes will be essential in order to ensure that consultation pursuant to the REA process is undertaken and completed in as efficient manner as possible. The comment period on the draft Guide closed October 31, 2011 and comments are now being considered by the MOE.

With respect to rooftop renewable energy installations, there has been confusion as to the property tax implications of these installations. The new legislative scheme confirms that there will be no increases in a property's assessment or changes to its tax classification due to the installation of a renewable energy facility (wind or solar) on the rooftop of a building. For ground-mounted installations, the property tax treatment will vary depending on the size and location of the facility as well as the nature of the entity conducting the generation.

Anaerobic digestion facilities of any size that are located on a farm and operated by a farmer will be assessed and taxed at the farm rate.

The assessment of wind turbine towers will continue without change for the most part with exceptions for rooftop installations and ground-based installations up to 10 kW. The new scheme now clarifies the classification and valuation of land surrounding a wind turbine tower, which is dependant on the pre-existing use and classification of such land prior to installation of the tower.

The regulation provides that properties with an active solar heating or cooling system or a ground-sourced geothermal heating/cooling system will not experience an increase in their assessment.

• pricing with a view to balancing the interests of ratepayers and the continued encouragement of clean energy investment;

 
• expansion of the program to include new and emerging technology types;

 
• policy and program assessment to ensure support of manufacturing excellence and clean energy job creation in the province; and

 
• consideration of outreach techniques to complement the province's renewable energy approval ("REA") process.

The review drew approximately 3,000 responses to a survey conducted during the period October 31 to December 14, 2011. The survey responses were in addition to numerous group consultations and stakeholder sessions held by the OPA.

The review is expected to result in reduced FIT prices for future contracts. However, the specific shape these changes will take remains to be seen. Parties are also anxious to find out if any existing procedural rules will be affected, such as the general time stamp approach to connection. The results of the review are expected to be released by the end of the first quarter in 2012.

Ontario continues to be the country's largest provincial user of nuclear power, and is assessing the cost of and need for refurbishment of existing reactors and new nuclear construction.

New Brunswick and Québec are smaller, but still significant, users. British Columbia has made a policy of no nuclear power. Alberta and Saskatchewan have conducted studies for the possible future use of nuclear power. Alberta has stated plans to build one plant.

One of the five priority transmission projects identified by the Government in the LTEP is a transmission line to increase transfer capacity between the transmission system in the northwest and the rest of Ontario, the East-West tie line (the "East-West Tie"). The Government cites in the LTEP that the East-West Tie is necessary to maintain system reliability, allow more renewables and accommodate the electricity requirements of new mineral processing projects.

In March 2011, the Minister of Energy wrote to the Chair of the OEB and suggested that the designation process outlined in the Framework could be used to select the most qualified and cost-effective transmission company to develop the East-West Tie. In response, the OEB Chair requested a report from the OPA regarding its preliminary assessment of the need for an East-West Tie. The OEB has since received the OPA's report, as well as the related feasibility study from the Independent Electric System Operator.

The OPA has advised the OEB that there is a need to proceed with development work on the East-West Tie. The OPA's preliminary assessment of need serves as a basis to initiate the designation process. The OEB has indicated that final determination of need would be made as part of a future application for leave to construct, and not through the designation process. On August 22, 2011, the OEB formally announced the designation process for the East-West Tie and invited transmitters to register to participate. Seven transmitters have indicated their interest in being registered as participants.

In its report, the OPA set out a specific solution as its preferred option for the East-West Tie but acknowledged that other solutions could also satisfy East-West Tie requirements. The OEB will permit transmitters to propose alternative solutions that meet the requirements but the transmitter will bear the onus of proving that the alternative is the equivalent, in terms of performance, reliability, cost, etc., of the specific solution proposed by the OPA. As the first implementation of the Framework, the East-West Tie designation process will be watched closely by all with an interest in the province's transmission.

More than two years following the initiation of proceedings, the OEB approved the transfer of street lighting infrastructure from the municipal owner of Toronto Hydro Electric System Limited ("THESL") to the utility. The decision represents a potential opportunity for distribution utilities to add infrastructure to its rate base.

In another decision less favourable to THESL, the OEB rejected the utility's application for approval of certain CDM programs which THESL submitted were necessary for it to meet its mandatory CDM targets. The OPA was not able to support THESL's contention that the proposed programs were incremental to the centralized programs of the OPA. As the first decision rendered for an LDC CDM program, it is expected to have a chilling effect on future LDC CDM programs.

In April 2011, a proceeding was initiated by the Canadian Distributed Antenna Systems Coalition through which certain wireless telecommunication providers are seeking an amendment to distributors' licences to gain mandatory access to their poles as a result of a decision issued by the OEB in 2006 with respect to wireline attachments. The proceedings have been contentious with a number of controversial procedural orders being issued in its course.

• Smart homes: the Ontario government to conduct annual surveys to gauge consumer interest in smart technologies in the home;

 
• Electric vehicles: the provincial government (Ministry of Transportation) track electric vehicle registration to help local distribution companies identify potential areas where distribution networks may be stressed so they can plan appropriate upgrades;

 
• Storage: the OPA and the Independent Electricity System Operator, in consultation with industry and the OEB, develop a framework to promote the integration of distributed energy storage where it is cost-effective;

 
• Standards: industry follow recommendations on standards forthcoming from the Canadian National Committee of the International Electrotechnical Commission since by coordinating on standards adoption, Ontario's utilities and private sector interests will be better positioned to ensure an effective and interoperable smart grid, as well as offer Ontario-made products and services in the international marketplace;

 
• Privacy: industry adopt the "Privacy by Design" principles set out by Ontario's Information and Privacy Commissioner — which call for privacy principles to be embedded in the core design of all smart grid applications; and

 
• Information management and access to consumer data: common standards for information sharing be introduced that will enable the secure exchange and processing of data as well as testing protocols to allow utilities and third-parties to test new applications against LDC systems to ensure they are interoperable.

Ontario will also be that much closer to the phase out and possible conversion of coal-fired generation. Alongside all of this is the nuclear question as Ontario considers the best methods by which to implement its sourcing needs given Canada's impending sale of certain of its nuclear assets.

Yet as supportive as the Ontario Government is of renewable energy generation, it was not enough to prevent a moratorium on offshore wind from being called in February of 2011 on the basis that additional research is necessary to study the effects of wind farms. To date, one developer has filed a claim for damages as a result of the moratorium. In addition, the past year saw more than one appeal of Renewable Energy Approvals granted by the Ministry of the Environment, with one proceeding also attracting a judicial review application.

One thing remains certain — electricity policy is a critical component in the economic fabric of most of the country, whether as a direct economic development tool or as an important industrial input. So election or not, the sector will continue to press its elected leaders for supportive and enabling policies.