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Title:  Comments on July 2009 FiT Rules
Submitted By:  Consulting Engineer Observer
Date:  7/29/2009
Document Text:  As a consulting engineer for renewable energy project developers and Ontario LDCs starting prior to RESOP I like to think I have a somewhat impartial, arm's length view of the Province's renewable energy strategy. Certainly not a learned expert but a reasonably informed observer.
RESOP when introduced was a ground breaking leap forward by the Province of Ontario to get renewable energy projects into service without the need for complex and expensive RFPs. The principles of getting a site and approved system capacity prior to a contract were simple and fair. But they were flawed and it was evident that contracts had been issued and that the OPA had no idea whether and when the projects would ever be completed but the generation capacity was "on the books" and could not be ignored or reissued until such time as the status of the original project, go or no go, was clear.
Through the summer of 2008 the OPA held stakeholder sessions and introduced notions of obligations, milestones and deposits that would ensure that contracts that were issued would be built or cancelled. This made sense and with OEB DSC changes to clear the infamous CIA queue would have brought much discipline to the process.
What always seemed to be lacking was any finite quantity of renewable energy that could be absorbed into electricity rates. RESOP had no limits other than the ability of the electrical system to accept the power produced and the rate payer bills would go up to cover any incremental cost. As well there was no direction or coordination in where projects could or should be located and it was a free for all to find locations with capacity but that were often completely divorced from the electrical needs of the system or its loads.
As Fall came around to Winter 2008 the replacement for RESOP was nowhere in sight but it was said that it would be worth the wait and world class when it came. Developers continued to try and move projects forward trying to use the best judgement possible on what the final rules might be.
In the Spring of 2009 the draft FiT rules were released and there were some surprises. There were notions of legacy projects and effectively caps on certain technologies. Prices that would be paid for some technologies increased, others did not. There followed a series of well attended stakeholder sessions and finally the much awaited new version of FiT was released in July 2009.
Quite frankly everything up to that point had some reason and rationale that even if one disagreed could be understood and there was an element of fairness and equity.
The new FiT programme is a mutation that appears not to be a derivation of RESOP and its principles to simplify renewable energy contracts or the Spring 2009 FiT draft but sets a course of its own that is difficult to fathom. It appears to have been developed in a vacuum of policy creation that satisfies the needs of the creators but does not take into account the reality of those who must work with the programme.
Whereas previously there was an element of first come first served fairness this version has COD Acceleration Days as a project ranking system. Developers willing to accept a higher risk can have their projects ranked higher.
The criteria ranking is a barrier to smaller or community developer participation on a par with the RFP process. Only companies with robust balance sheets and deep pockets could satisfy these requirements. What company in their right minds would have ordered equipment with no OPA contract? It appears to me that large companies could simply buy FiT contracts by meeting all the requirements whereas smaller developers would need a FiT contract to meet the requirements - equity partners, equipment orders etc.
Rescinding CIAs and collapsing CCRAs destroys millions of dollars of good faith investments that developers have made in Ontario.
And once again the OPA includes language that says the programme can be changed or cancelled at any time.
Add to all that the set back issues for wind, Prime Ag for solar and limitation on other technologies of which I have no knowledge and the risk of continuing investment in Ontario is huge.
In my view the principle of legacy and first come, first served needs to be respected. If the Province and the OPA want to change the rules for future projects so be it.
The FiT rules need to return to the RESOP roots and include amendments that correct the flaws not mutate into a completely new direction.
If there are financial limits to the amount of renewable energy technologies that can be accepted they should be transparent and made public.
There seems to be an emphasis on shovel readiness but it's not quite clear why. It would seem more sensible to pace the introduction of these projects to extend the period over which jobs were created and make them more sustainable and to cushion the impact on rates. If they all go in at once, or should I say try to get connected at once, it is a recipe for disaster as projects compete for resources and rush to get in service to avoid penalty obligations. Then the rush is over and there are no more projects and the industry shrivels back to where it came from?
 

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