Ontario's Green Energy Act: A Major Shift

May 2009

• The Ontario Government's stated intention of the Green Energy Act, 2009 is to encourage the development of renewable energy sources and a culture of energy conservation in the province.
• To support these objectives, the Act introduces many key initiatives. Examples are a feed-in tariff for renewable energy projects, priority connection for renewable generation, and the development of a smart grid.
• The initiatives outlined in the Act purport to move Ontario towards a greener future, however, a subject of debate will be the cost of implementing the initiatives and the true benefit to the province in net new investment and job creation.

On May 14, 2009, the Government of Ontario announced passage of Bill 150, the Green Energy Act. The stated intention of the bill is to encourage the development of renewable energy sources and a culture of energy conservation in Ontario. By promoting renewable energy development, the government anticipates billions of dollars worth of new investment flowing into Ontario and the creation of a projected 50,000 new green jobs within the first three years of the bill being in place. To support these objectives, the Act introduces a number of key initiatives. This overview highlights some of the initiatives that will have the most direct impact on Aegent's clients.

Development of a feed-in-tariff providing guaranteed prices for renewable energy projects

Under a feed-in-tariff system, utilities are required to purchase electricity at a predetermined price from qualified renewable generators. This type of tariff has been used in Europe and is seen by some as the fastest method for encouraging the development of renewable energy generation facilities. However, the price offered to generators must be high enough to encourage development. The Ontario Power Authority is currently developing a pricing structure and contract process for generators.

Distributors and transmitters to connect generation facilities to their systems

Transmitters and distributors are required to connect renewable energy generation facilities, provided the generator meets technical, economic and other regulatory requirements. The Act further clarifies that renewable generation projects are to be given priority connection access. This represents a key change from existing regulations under which generation facilities are connected to transmission and distribution systems based on economic merit and system requirements for energy.

To date, the connection of new generation facilities to transmission and distribution networks has been assessed and decided by the Ontario Energy Board on the basis of need and cost effectiveness. The new legislation also makes provision for the recovery of costs incurred by a transmitter or distributor to expand, reinforce or upgrade their system to accommodate renewable generation.

Conservation and demand management

In addition to promoting the introduction of renewable generation, the Green Energy Act strives to foster a culture of conservation. With the intent of facilitating conservation, the Act contains provisions requiring public agencies and prescribed consumers to develop plans to meet energy conservation and demand management targets. Organizations that are required to implement energy conservation and demand management plans will also be tasked with providing updates on their progress and achievements in energy conservation.

Development of a 'smart grid'

The legislation defines a 'smart grid' as advanced information exchange systems and equipment designed to improve the flexibility, security, reliability, efficiency and safety of integrated power and distribution systems.

The Ontario Government foresees the development of a smart grid as a key component for successfully migrating the province's energy system to one that supports distributed and renewable generation sources. Further, a smart grid is viewed by the government as an important enabler in the support of demand response initiatives through price information and load control opportunities for consumers. It is also thought that the smart grid will support emerging, innovative technologies to be used for system control and facilitating energy savings. It is the government's contention that the development of a smart grid represents extensive enhancement to the existing electricity infrastructure.

A policy shift

The Green Energy Act, 2009 represents a shift to an environment in which renewable generation has been attributed value beyond traditional economic measure. This represents a shift from an environment in which investments are guided by principles of economic merit towards a system that places inherent value in renewable energy and conservation. Unquestionably, this shift will lead to continuing and compelling debate. The initiatives outlined in the Act purport to move Ontario towards a greener future, however, a subject of debate will be the cost of implementing the initiatives and the true benefit to the province in net new investment and job creation.

On May 12, 2009, Bruce Sharp, a Senior Consultant at Aegent, spoke at The Canadian Institute's conference on power management. The theme of Bruce's presentation was Shining a Light on Ontario Electricity Issues. Read more»