Feature: Working out the kinks in the Green Energy Act

Wednesday, November 4, 2009

Some farm generating projects have been left out of the new feed-in tariff program. Others are finding the Canadian content provisions onerous. But interest in the program is strong

by MARY BAXTER AND SARAH VAN ENGELEN

In September, the Ontario government rolled out its new Green Energy Act regulations and provisions for substantial rate increases paid to green energy producers. But these rates don't apply to the pioneers of the biodigester industry in Ontario and they are crying foul.

"We were all looking forward to it," recalls Garry Fortune, whose company, GFA Renewable Energy Consultants, helped Stanton Farms to develop a $5 million, 300-kilowatt biodigester generator on the family's dairy farm. It has the capacity to power nearby Ilderton's 800 homes.

Initially, the Stantons sold power back to the grid at the wholesale market rate, which averaged about 1.7 cents per kilowatt hour – a far cry from the 11.7 cents per kWh they would have received had they enrolled in the new program's predecessor, the renewable energy standard offer program. That program had come under review and was suspended by the time the Stanton's system powered up in December 2008.

When the province announced the new feed-in tariffs on Sept. 24, the Stantons discovered their operation would not qualify for the new rates either. The reason? The rules excluded operations that were up and running prior to March 13.

"It's mind boggling," says Fortune. He says the Stantons use the system to generate their own power but no longer sell to the grid.

The feed-in tariff programs offer long-term price guarantees for electricity generators employing green fuels such as solar, wind, biomass, water and biogas. There are two programs: the feed-in tariff program intended for small, medium and large renewable projects generating more than 10 kW of electricity; and the micro feed-in tariff program intended for very small projects that generate 10 kW or less.

Stanton Farms is among at least six Ontario farm and greenhouse operating biogas systems that have been shut out of the new programs. For most of the other operators, having signed the standard offer agreements is the reason behind the exclusion.

"We're very upset about that," says George Heinzle, who has operated his digester on his St. Eugene area dairy farm since August 2007. "We never wanted to sign the (standard offer) contract." He says he and his brother, Josef, who operates a digester on his farm nearby, "did a lot of phone calls and letter writing." 

Heinzle says the standard offer doesn't adequately account for the maintenance costs of biogas energy production. The engine he uses to generate power puts in more than 8,000 hours a year. Then there's the manure management, the pumps and agitators. "The upkeep is not cheap."

Like most other operators, Heinzle supplements the standard offer rate by charging tipping fees for off-farm organic waste. He charges $25 per tonne and up for waste obtained from restaurants and food processing plants. If the tipping fees were to disappear, it wouldn't be profitable to run the system, he says.

Nicole Foss, executive co-ordinator of the 50-member Agri-Energy Producers' Association of Ontario, says that in Europe, where biodigester facilities compete for waste (Germany alone has 4,000 on-farm biogas facilities), tipping fees have disappeared and many operators now pay for waste.

She anticipates the same thing will eventually happen here as the Ontario industry matures.

Foss says the new feed-in tariff program rates don't take into account the eventual loss of the tipping fees, but that's only part of the problem. The different rate categories need work to reflect the industry more accurately. The maintenance costs for biodigestion haven't been adequately recognized.

Also disturbing is that the contract's terms put the ownership of any related products generated from a project, such as carbon credits or byproducts, into the hands of the Ontario Power Authority (OPA). The approach "stifles development," Foss says, noting that, in Europe, incentives are given for adding value to a biogas system, such as using heat from the system, incorporating energy crops or developing related products like animal bedding. "If we don't see a financially viable framework for developing the industry, we're missing out on an unbelievable opportunity in terms of environmental benefits and economic benefits."

Then there's the issue of not extending the program to those who have pioneered the technology in Ontario and "have put hundreds and hundreds of hours of their own time for free into promoting the industry, allowing people to tour their plants, advocating for biogas – just absolutely enormous amounts of time." Without access to the same rates available to newer players, they may not be able to compete. "This is a tremendous issue of fairness," she says.

Ben Chin, an OPA spokesman, says that discussions have taken place about the rules concerning biodigesters, but he says he doesn't know "where things will land." Once a new program is started "there can be some transitional questions," which is "completely understandable," he adds.

The main principle behind the decision not to grandfather the operators was that "a contract is a contract." Says Chin: "It's like in any business, if we create a new program and offer new prices and a new contract so that new projects can happen, you can't always take those same numbers and then backdate it to previous projects that have been approved under a different plan."

Interest is strong in the feed-in-tariff programs. By Oct. 6, a week after the program's launch, the Authority had received 4,700 visitors to the main program's website and 4,300 to its micro feed-in tariff program website. There were 248 registrants, 78 applications created and 14 applications submitted in connection with the feed-in tariff program and 299 registrants, 199 applications and 130 applications submitted for the micro program. Chin predicts the volume of applications will grow significantly as the Nov. 30 application deadline approaches.

Canadian content an issue
Proponents of other green energy forms say they support the programs but have some concerns about its implementation.

In the wind sector, a setback requirement of 550 meters from buildings where people might live or work has prompted criticism from those with health concerns, who argue it's not enough and say that too many exceptions to the setback distance have been allowed. On the other hand, in a Sept. 24 news release the Canadian Wind Energy Association takes issue with the fixed distance, calling it arbitrary and arguing that setbacks should be based on sound levels.

There is also the question of Canadian content, which has earned the skepticism of some farmers. The feed-in tariff program calls for 25 per cent Canadian content in turbines and 50 per cent from 2012 onwards (there are no Canadian content requirements for wind generators under the micro program).

Organic dairy farmer Rob Minten of Middlesex County and Perth County poultry producer Rob Krijen both bought turbines from Ontario companies. Neither is happy with the product. "The problem is that we don't have the technology or infrastructure here," says Krijen. "Germany makes the Cadillac of wind turbines; nothing here is comparable."

Minten says the Canadian content requirement may limit the market and in turn, slow down turbine production. On the other hand, "maybe companies will get better at what they are doing."

Emilie Moorhouse, an advocate for small wind projects with the wind association says small wind certification, slated to come into effect by 2010 throughout North America, may alleviate quality concerns. The certification will standardize performance evaluations and power ratings so those acquiring a wind turbine "can compare different products and make the choice that's appropriate for them."

Canadian content is also posing a challenge for solar developers. Under the feed-in tariff program 50 per cent of a unit must be of Canadian origin. In 2011, the percentage will be raised to 60 per cent. Under the micro program, the percentages are 40 per cent until 2011, when it rises to 60 per cent.

Jane Story, a policy and communications advisor for the Ontario Sustainable Energy Association, says she has heard complaints from those doing solar projects that they can't meet the domestic content requirements.

The lengthy suspension of the standard offer program has compounded the situation. She explains that solar companies kept installing systems during the suspension and these units may now not comply with the domestic content requirements.

However, she hopes there will be help for those who got caught in the transition, noting that Energy and Infrastructure Minister George Smitherman and the OPA have already shown some flexibility. "I do believe the government wants this to work."

Chin points out that the Canadian content requirement was intended to stimulate the economy. "Part of their (the provincial government's) broad policy decision here was to make sure that this program creates jobs in Ontario, creates an environment for investment and manufacturing jobs."

Solar ban a sore point
Banning solar developments from Class 1 and 2 agricultural lands and capping total solar farm acreage at 6,000 on Class 3 agricultural land has also proven a sore point for developers and, they argue, for some farmers.

A Sept. 21 Canadian Solar Industries Association news release quotes David Rystenbil, identified as a Russell farmer, as asking the province and the Ontario Federation of Agriculture, which supported the ban, to rethink their positions. In the same release, Ray
Roth, only identified as an Ontario farmer, states: "I should be able to use solar panels much the same as I can to raise crops that are then made into energy."

Results of a survey commissioned by the solar association in June and July conclude that support is strong for farmers to retain the choice to develop solar farms and that these should be allowed on some agricultural land. Six hundred of the survey's 1,200 respondents were drawn from eight rural areas in the province but were not necessarily farmers; the remaining 600 were from Ontario's general population, who completed the survey online.

Don McCabe, vice-president of the Ontario Federation of Agriculture, has fielded calls from farmers upset about the solar ban and says he's aware of the solar association's survey. He recognizes that there are other problems with the feed-in tariff program, but he says the Federation is pleased "in a general sense," by the programs and pleased that the government has chosen "to find as much balance as possible within the current regs."    

Once the growing pains are ironed out, will these new feed-in-tariff programs be a recipe for profitability?

"I think so," says Story, whose organization lobbied hard for them. "The prices are quite good, some of the highest in the world." BF

Sidebar

Feed-in Tariff programs highlights

• The feed-in tariff programs are implemented by the Ontario Power Authority and offer long-term price guarantees for renewable electricity generators. They replace the renewable energy standard offer program. The tariffs are part of green energy policies intended to help the provincial government meet its long-term goal of generating 10,000 megawatts from renewable energy sources by 2015 and 25,000MW by 2025. Other initiatives include introducing a renewable energy facilitation office as a one-window access point for information and approvals, as well as a streamlined approvals process.
• Related legislation also: bans solar power generation from Class 1 and 2 agricultural lands; limits the total area for solar power developments on Class 3 agricultural land to 600 acres; and introduces Canadian content requirements for solar and wind power generation.
• Both the feed-in tariff program and the micro programs accept projects using solar PV, wind, water and bioenergy technologies. In some cases, additions to existing projects may qualify for the feed-in tariff program.
• The programs provide capacity-allocation exemptions to smaller projects (a generator of 250kW or less planning to connect to a line less than 15 kilovolts and a generator of 500kW or less if connected to a line greater than 15 kV) to facilitate speedier connections to the power grid.
• The feed-in tariff program will pay an extra amount per kWh to qualifying aboriginal and community-based programs. The amounts range from 0.4 cents for biogas to 1.5 cents for wind and solar.
• Contract terms are 20 years with the exception of 40 years for waterpower projects.
• OPA owns all related products generated from a project, such as carbon credits.
• More information can be found at http://fit.powerauthority.on.ca BF