LIFE After FIT: Ontario Quietly Pulls the Plug on its Feed-in Tariff Program

LIFE After FIT: Ontario quietly pulls the plug on its Feed-in Tariff Program

Ontario quietly shut down a key component of its renewable energy policy last month, marking the end of a largely successful - if often contested - effort to change Ontario’s energy landscape.

Tucked within a December 16 directive (PDF) from Energy Minister Glenn Thibualt was an change to the FIT schedule set in 2013, to shave off the final year of the program. The directive states that “the IESO shall cease accepting applications under the FIT Program by December 31, 2016, and any unallocated procurement target as of the end of that procurement process will remain unallocated.”

And so, without any kind send-off, ends Ontario’s seven-year experiment with building renewable energy under fixed-rate tariffs.

LIFE Co-op has been fortunate to have won a number of solar contracts under the FIT in 2014 (our FIT 2 projects), which are now generating power and revenues for the co-op and our partners. Our newest project, Moorefield Wind, received its FIT 4 contract last year, and looks on schedule to be connected within the next few months. (To learn how you can invest in this project please see our investment opportunities, and consider attending one of our upcoming investor information sessions.)

In view of the program's initial goals – reducing emissions from power generation, kick-starting a green energy economy, and harnessing private investment to build out new electricity infrastructure – the FIT has been an important and largely successful initiative, and its achievements are worthy of some celebration.

Smog alerts, once all too common in the Golden Horseshoe, are now a true rarity.  In the business sector, thousands of jobs have emerged in the renewable industry – though many have since disappeared as the program scaled back from its initial grandeur. And clean FIT-contracted wind, solar and biogas today produce a significant portion of Ontario’s electricity from privately financed facilities.

But the FIT has also seen its share of controversy, especially related to concerns over Ontario’s large wind projects, most of which are FIT contracted, and the rising costs of electricity for homeowners and businesses (only a fraction of which is due to the FIT). These issues, fanned by both political opponents and citizens' groups, have cost the Liberal Party significant voter support, in rural Ontario especially.

No doubt the starting FIT rates were very high, and contracts were eagerly grabbed up by local and international proponents; more than 4200 MW was contracted under the first round of the program (FIT 1). Sensing it may have served up too much of a good thing, and the government hit the brakes, engaging in a review process that effectively stalled the program for almost two years, and ended with the release of much slimmer program. Subsequently, from FIT 2 to FIT 5, only 750 MW of contracts were (or will be) issued (see Figure 1).

Figure 1: FIT Procurement 2010-2016

Source: IESOProgress Report on Contracted Supply (Q3 2016)

Rates paid under the FIT were also trimmed, especially for solar, which has been reduced by well over 50% across the board (prices vary depending on ground or roof mounted, and also according to the size of the project). Yet even while rates have been falling, each of those rounds has been oversubscribed; generally, applications are submitted representing 2 to 3 times the kW that would be contracted. In FIT 5, for instance, applications for almost 400 MW were received, when only 150 MW is to be contracted.

But while demand for participation in the FIT has remained strong, the need for additional generation is low. Ontario’s energy consumption has declined every year but one since 2008, and today stands at 1997 levels. The Province’s long-term commitment to nuclear, along with ample hydro resources and excess natural gas infrastructure, means that additional generation is unlikely to be needed for a few years, at least. (The scheduled shut-down of Pickering Nuclear Station in 2020 was delayed last year to 2024, which further reduces the urgency of building new renewables.)

Indeed, together with last year’s cancellation of LRP II (the second Large Renewable Procurement), it might seem the Province has all but abandoned the Green Energy file. However, a revised net metering program will continue – and may even expand into third party virtual net metering and the inclusion of storage. The Conservation First initiative remains in place, with a number of initiatives aimed at reducing demand and pilot projects testing new pricing and non-pricing mechanisms. Additional initiatives include large storage pilots, electrification of transport, and of course carbon taxing, all of which could help enable growth in the renewable sector in years to come.

LIFE will continue to monitor policy changes and seek out new opportunities for its members and investors; for now we're looking closely at prospects in the area of net metering, and considering prospects for electric vehicles, thermal energy generation, and even retailing for the behind-the-meter and off-grid market.

We look forward to hearing from members and others who want to help write the next chapter of our story: “LIFE after FIT”.