Transcript Going Green: Renewable Energy Financing

Greening Canada by Tapping
Into the “Solar Gold Rush”
By Tim Murphy
Presented to: Solar Gigawatts
Location: Munich, Germany
Date: May 28, 2009
Overview
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Solar in Canada
Federal incentives
Ontario
Incentives by other provincial and municipal
governments
– Roadblocks to solar energy in Canada
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Introduction: Solar in Canada
– Canada’s solar resources
• More solar potential than Germany (a world leader in
solar energy deployment)
• “PV hotspots” such as Regina, Saskatchewan (Yearly
PV potential of 1,361 kWh/kW)
• Cold weather increases PV efficiency
– Resources have been underdeveloped
• Criticized by groups such as Green Cross
International and the David Suzuki Foundation
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Federal Incentives
– ecoEnergy programs
• Renewable Power program
– $1.48 billion investment to increase renewable
energy sources
– Goal: produce 14.3 terrawatt hours
– Open to businesses, municipalities, and
institutions
• Renewable Heat
– $36 million investment
– Encourage industry and commercial businesses to
install solar heating systems
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Federal Incentives (cont’d)
– ecoEnergy programs
• Retrofit program
– Grants for making energy efficient upgrades to
properties
– Upgrades must be recommended by certified
adviser
– Residential: up to $5,000
– Commercial: lessor of: (a) $10/GJ of savings;
(b) 25% of cost; or (c) $50,000
– Industrial: lessor of (a) $10/GJ of savings;
(b) 25% of cost; or (c) amount to reduce net
simple payback to no less than 12 months
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Federal Incentives (cont’d)
– Tax incentives
– Accelerated Capital Cost Allowance (CCA)
• 50% deduction on cost of renewable energy generation
equipment (acquired after February 23, 2005)
• Certain intangible project start-up expenses qualify (feasibility
studies, engineering and design work)
– Canadian Renewable and Conservation Expense (CRCE)
• Deduction for certain expenses related to getting project
started (e.g. access road, clearing land, service connection,
engineering) as long as at least 50% of expenses fall within
category of qualifying equipment
• Does not include most payments to non-residents,
administrative and management expenses, land acquisition,
depreciable capital property
• Advantage of CRCE is ability to transfer benefit directly to
shareholders through flow through share structure
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Ontario
– Most populous province
– Integrated Power System Plan (“IPSP”)
• Ontario Energy Board (“OEB) approval
– Supply Mix Directive: June, 2006 directive to the
Ontario Power Authority (“OPA”)
– Conservation measures to reduce peak demand
6,300 MW by 2025, including:
• Solar heating
• Small scale (10 MW or less) customer-based electricity
generation
• Generation encouraged by net metering
– Increase renewable energy by 2,700MW by 2010
and 15,700 by 2025
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Ontario (cont’d)
– Renewable Energy Standard Offer Program
(“RESOP”)
– Launched November 2006
– First initiative of its kind in North America
– Features:
• Simplified eligibility and contracting
• Standard rates paid for grid-delivered energy
• Available only to projects under 10 MW
– Rates
• Most technologies: base rate of 11.08 cents/kWh (20% indexed to
for inflation) plus reliability premium of 3.52 cents/kWh
• Solar PV: 42 cents/kWh
– Project put on hold due to overwhelming response
• 290 contracted PV projects, but most may never come online
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Ontario (cont’d)
– Green Energy and Green Economy Act,
2009 (“GEA”)
– Introduced February 23, 2009
– Will amend 20 other Acts (including energy, real estate, planning
and environmental legislation)
– Measures include:
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Feed-in tariff (the “FIT”)
Streamlined project approval process
Right to connect
Province-wide renewable energy standards
“Smart grid”
Financial incentive (e.g. low interest loans for small scale projects)
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Ontario (cont’d)
– FIT
– Replaces RESOP
• First feed-in tariff of its kind in North America
• Expected to launch June 2009
• Renewable producers receive set price for energy fed into
grid over a 20-year contract (40 years for water power)
• Fears that program will raise electricity prices
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Ontario (cont’d)
Fit Rates
Renewable Fuels
Capacity Range
Original Proposed Price
(¢/kWh)
Original Proposed Price
(¢/kWh)
Rooftop or Ground Mounted
Solar PV
≤ 10 kW
80.2
80.2
Rooftop Solar PV
> 10 kW ≤ 250kW
71.3
71.3
Rooftop Solar PV
> 250kW ≤ 500 kW
63.5
63.5
Rooftop Solar PV
> 500 kW
53.6
53.9
Ground Mounted Solar PV
> 10 kW ≤ 10MW
44.3 (automatic degression)
44.3
On-shore Wind
Any size
13.5
13.5
Off-shore Wind
Any size
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Waterpower
≤ 10 MW
12.9
13.1
Waterpower
> 10 MW ≤ 50MW
Biomass
≤10 MW
Biomass
> 10 MW
Biogas
≤ 500 kW
Biogas
> 500 kW ≤ 10 MW
Biogas
> 10 MW
10.4
10.4
Landfill gas
≤10 MW
11.1
11.1
> 10 MW
10.3
10.3
12.2
12.2
13.8
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14.7
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14.7
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Ontario (cont’d)
– “Smart grid”
• Provisions in GEA provide for its development
• Defined as “advanced information exchange system and
equipment”
• Will allow for greater integration of renewables into energy
supply mix
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Ontario (cont’d)
– Incentives outside of the GEA
– Ontario Solar Thermal Heating Incentive
• $14.4 million program to entice industrial, commercial and
institutional sector to install qualifying solar thermal heating
equipment
– Net metering
• Credits consumers for energy they contribute to the grid; reduces
electricity bills
• Available for projects under 500 kW
• Similar to programs offered in other provinces, such as Quebec,
Saskatchewan, Manitoba, P.E.I. and Nova Scotia
– Tax incentives
• Rebate on provincial sales tax (8%) paid on solar equipment
• Similar to rebates in other provinces, such as B.C.
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Provinces and Municipalities
– Alberta
– No provincial PV incentives
– 20 municipalities in the Alberta Solar Municipal Showcase
• Provides funding for grid-connected PV installed on
municipal buildings
• Funded by the municipalities and the Federation of
Canadian Municipalities
– British Columbia (B.C.)
– Released BC Energy Plan in 2007
• Goal: achieve zero greenhouse gas emissions
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Provinces and Municipalities (cont’d)
– Programs in B.C.
– Standing offer program
• B.C. Hydro purchases energy from small projects (0.05 – 10 MW)
• Features simplified process
• Rate is lower than Ontario’s RESOP
– 100,000 Roofs
• Goal: install solar water heaters on 100,000 roofs by 2020
• Participants can receive up to 36% of the cost
• progress was slow due to lack of installers
– Innovative Clean Energy Fund
• $25 million/year levy on sales of conventional energy
• Funds provided to renewable energy projects to decrease technical
application costs
– Solar Communities
• Seven communities in B.C. selected to be SolarBC Communities
• Each receives $20,000 plus marketing, training and policy development
assistance for solar energy projects
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Provinces and Municipalities (cont’d)
– New Brunswick
– Embedded Generation tariff program
• Producers are paid 9.445 cents/kWh fed into grid
• Available for projects between 100kW to 3,000 kW
– Northwest Territories
– Alternative Energy Technologies Program
• Provides funding to develop renewable energy projects; communities (half the
cost up to $50,000/year), businesses (1/3 the cost up to $15,000/year) and
homeowners (1/3 the cost up to $5,000/year)
– Quebec
– Net metering program
– City of Toronto
– Municipal government’s Sustainable Energy Funds
• $62 million funds provide interest-free loans for renewable energy projects in the
municipal, academic, social services or health sectors
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Roadblocks
– Cost
• More financial and tax incentives required to decrease capital and
operational/management costs
– e.g. Ontario’s RESOP and FIT
– Targets
• No federal solar targets
• 88 MW target in Ontario too low considering potential
– it is hoped that the GEA and the soon to be updated IPSP
will address this problem
– Caps
• Decrease potential of incentives (e.g. Ontario’s net metering
program limited to projects under 500 kW)
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Roadblocks (cont’d)
– Connectivity
• No grid priority for solar power
• Inconsistency in connection costs and procedures
• GEA should eliminate some of these problems in Ontario by making
the following amendments to the Electricity Act, 1998:
– Priority connection
– Mandating time limit for connection assessments
– Making the connection assessment process more transparent
– Administrative Deficiencies
• Delays during the planning and zoning phase for projects
– Addressed by GEA’s amendments to the Planning Act
• Application process can be cumbersome
– Streamlined under GEA
• Some programs are difficult to access; discourages involvement for
projects under 1,000 kW
• Proposed FIT lottery
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Questions & Answers
Tim Murphy
Partner, McMillan LLP
Tel: 416-865-7908
E-mail: [email protected]
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