On April 5, 2016, Ontario Energy Minister Bob Chiarelli issued a ministerial directive to the Independent Electricity System Operator ("IESO") requiring the IESO to commence a second phase to procure more, new large-scale renewable (LRP) energy projects in Ontario in a competitive process. Other aspects of the directive deal with a new phase of the Feed-in Tariff (FIT) Program, known as FIT 5 and microFIT. This latest directive is intended to advance Ontario's renewable sector and assist in cutting Ontario’s greenhouse gas emissions by 80 per cent (below 1990 levels) by 2050.
For readers interested in how the new procurement process has affected energy prices, this article includes a table illustrating the decline in prices paid for solar PV, wind and waterpower from 2009 when the Green Energy FIT process began to the results of the first procurement.
Advancing the Large Renewable Procurement
The first large-scale renewable procurement was announced in Ontario’s 2013 Long-Term Energy Plan (LTEP). It is central to the Province’s plan to put 20,000 megawatts ("MW") of renewable energy online by 2025.
The first procurement had the goal of establishing competitive renewable energy procurement targets for projects larger than 500 kilowatts ("kW") in 2014, 2015 and 2016. Last month, the IESO announced that 16 contracts had been offered to successful proponents under this first phase. These contracts add a total of 455 MW of renewable energy to Ontario’s electricity capacity.
The first large-scale procurement round also introduced new green energy pricing. The table below summarizes the changes in pricing across three technologies available for this procurement since the initial 2009 green energy initiative. The table does not address bioenergy since the first procurement did not result in any new bioenergy contracts.
The “procurement” price is in all instances less than the previous FIT price. The procurement price continues the dramatic drop in the price of solar PV since 2009. The price for on-shore wind was also significantly lower than the 2009 price. On the other hand, the procurement price for hydropower was higher than the 2009 price for this energy source.
It will be important to review how prices evolve under this new procurement.
The new procurement also addresses unfinished business from the first large-scale procurement. For a variety of reasons, including the complexity of the new process and the broad level of stakeholder engagement required, the first procurement did not meet the LTEP’s targeted timelines. As a result, this second phase of this procurement includes capacity from project attrition. Ontario has also cancelled the third phase of this procurement. For all of these reasons, the new second phase is larger than the first phase. It is set to award contracts for up to 930 MW of renewable energy, including up to:
- 600 MW of wind;
- 250 MW of solar photovoltaic;
- 50 MW of hydroelectricity; and
- 30 MW of bioenergy.
The recent announcement advises that a Request for Qualifications will be issued by August 1, 2016 and that contracts will be awarded no later than May 1, 2018.
Industry stakeholders should be mindful that, similar to the first phase, preference will again be given to those projects and proposals with First Nation and Métis participation. This is especially important to consider given that, of the 16 contracts awarded under phase one of the procurement, 13 of them (a total of 320 MW) include participation from one or more Aboriginal communities.
FIT 5 Procurement Targets
The directive further provides a timeline for the FIT 5 procurement, which is geared towards renewable energy projects with a proposed capacity of between 10 kW and 500 kW. Similar to the FIT 4 procurement, FIT 5 has a 150 MW initial procurement target with additional contract capacity for project attrition. Industry stakeholders expect that this could result in an additional contract capacity of between 90 and 100 MW.
For reference, FIT 4 saw 1,968 applications (totalling 582 MW) for the 241.38 MW total procurement target. Contract offers under FIT 4 are expected to be announced in Q2 of 2016.
The FIT 5 application window will open prior to Nov. 1, 2016, while the total capacity to be assigned will be published by Dec. 31, 2016.
2017 microFIT Procurement Targets & Key Timelines for the microFIT to Net Metering Transition
The directive also provides insight into the Province’s proposed transition of the current microFIT program to a net metering initiative. An overview of the new initiative will be posted for public comment later this year, and it is expected that the Province will complete the transition in 2018.
As a result, the IESO will stop accepting applications under the microFIT program as of Dec. 31, 2017. The final year of the microFIT program will again have a procurement target of 50 MW.
The 2017 FIT & microFIT Price Schedule
Lastly, industry stakeholders should watch for the updated FIT & mircoFIT price schedule, which will be released by the IESO on Sept. 1, 2016 (effective on Jan. 1, 2017 for the microFIT program).