In the weeks since Ontario Energy Minister Glenn Thibault suspended the Large Renewable Procurement (LRP) process, we’ve received a lot of questions about what this means for CoPower and the renewables industry in Ontario.
The need to know: First off, investors, we can put your minds at ease and assure you that this does not affect CoPower, your investments, or any of the small Ontario-based projects we’ve financed.
Our purpose is to finance small to mid-size clean energy projects, those that have a tougher time accessing financing from traditional infrastructure lenders. As the name suggests, the Large Renewable Procurement is a process for large projects on the other end of the spectrum -- think football field-size solar farms -- projects usually large enough to access traditional financing and that don’t face a financing gap.
Creating cost-competitive renewable energy
Ontario’s Feed-In Tariff (FIT) program was developed in 2009 with three streams -- Large FIT, Small FIT and MicroFIT -- all designed to kickstart the province’s renewables industry.
In 2014, Large FIT was spun out into a separate process, the LRP, in part to bring large-scale renewable infrastructure projects into the mainstream and allow the market to set the price. Applications for large wind, solar and other renewable energy projects were evaluated on several criteria, with lowest cost power (¢/kWh) being the most important factor.
The first round of LRP worked. The average price for power from the procurement was 15.6c/kWh for solar and 8.5¢/kWh for wind. To put that in perspective, today’s time-of-use rate for on-peak is 18¢/kWh and 8.7¢/kWh for off-peak. In other words, the LRP program was procuring cost-competitive electricity from renewable energy sources.
Pricing for LRP II projects was expected to be even lower. So how then, do we explain the government’s choice to suspend?
Behind the headlines
Both renewables and the Wynne government have found themselves in the crosshairs over rising electricity costs and oversupply -- but like many political decisions, there is more to the story than meets the eye.
What’s driving electricity price increases?
Overall, renewables have contributed to but have not been the primary driver of rising electricity prices, despite what you may read in some media. In fact, this cancellation will only prevent $2.45/month from being added to your bill. Here are some of the major factors contributing to rising costs.
- Grid modernization. Since the 1970s, successive governments fell behind on making necessary upgrades to our provincial electricity infrastructure, to the point that Liberal governments under Premiers McGuinty and Wynne were left with no other option but to make the investment and modernize our grid. So instead of spreading these costs out over time, they have all come fairly quickly.
- Time-of-Use Rates. The government has implemented time-of-use (TOU) rates for some electricity customers in order to change behaviour. This is designed to encourage you to do things like laundry during off-peak hours and better balance supply and demand. However, if you are not able to change your behaviour you are going to pay more.
- Costly nuclear. The government has also chosen the path of extending the life of the province’s aging nuclear power reactors -- refurbishments to Darlington will cost upwards of $12.8 billion.(2) Until recently Ontarians were also paying a Debt Retirement Charge to service the debt left from the last build out of Ontario’s nuclear power plants.
- Tackling climate change isn’t free, but it is necessary. The McGuinty and Wynne governments made an important decision to tackle climate change, and that involved phasing out coal. This was one of the most significant climate change actions in North America, and it didn’t come free. That electricity capacity was replaced with an increase in gas powered generation and new renewable energy, both of which were more expensive per kWh than coal.
Why are we “over-supplied”?
In addition to rising electricity rates, the government cited an oversupply of electricity as another key reason for suspending the LRP program. It’s true that the province is currently in oversupply. A downturn in the economy post-recession, mixed with successes in government driven energy efficiency and conservation measures have significantly reduced energy demand.
We currently have a diverse supply mix with approximately 13,000 MW of nuclear,10,000 MW of natural gas, 8,400 MW of hydro, 500 MW of biofuel, and approximately 7000 MW of solar and wind combined.(3) Nuclear is currently providing a critical service called baseload power -- electricity that is always on night and day. Baseload needs to be addressed, but in a shifting electricity landscape, the government should be asking if nuclear is the right answer.
While nuclear is a source of zero-emission electricity, it is also a long term-commitment that lacks resiliency and flexibility. It claims to be “fail-safe”, but what we should be demanding are safe-to-fail technologies. And of course, there is no long-term solution to the nuclear waste issue. This is why nations around the world are moving away from nuclear power. (4)
Meanwhile, technologies that allow grids to rely on renewable energy to provide baseload power are developing rapidly, which further calls into question the path dependency of Ontario’s nuclear decision. Take the example of Portugal whose electric grid ran on renewables alone for 4 days straight in May of this year.(5)
Looking forward to the low carbon transition
Renewable energy in Ontario is a success story that we and the government should be proud of. We’re reducing emissions. Thousand of jobs involving the manufacturing, construction, installation and operation of renewables have been created. We’re home to cutting-edge clean technology companies. However the LRP’s suspension will lead to the loss of clean energy firms, jobs and talent to the international market.
We’ve invested and it has been good for Ontario. It hasn’t been perfect, but few things are.
Perhaps more importantly, Ontario was in-step with the global trend of transitioning to a low-carbon, renewable energy-based electricity system.(6) The decision to suspend the LRP program is counter to this accelerating trend.
The government is currently revising the Long Term Energy Plan. Now is the time to choose what kind of electricity future we want and get back on track. How can we accelerate the transition to a truly modern, flexible electricity system that involves a mix of large renewable energy projects alongside more distributed smaller-scale projects, as well as other technologies like energy storage, energy efficiency and other smart grid technologies?
At CoPower we’re pleased to see the continuation of the Small and Micro FIT programs. These, in addition to the fast-falling cost of solar and exciting changes coming to net metering, offer municipalities, homeowners and building owners/managers multiple pathways to reduce their carbon footprint.
Despite the suspension’s setback for large-scale renewables in Ontario, there is a lot we can do to build the clean energy future we want. CoPower is here to help you do that.
Jonathan Frank is CoPower’s Director of Projects. During his seven years working in the renewables industry, Jonathan has participated in multiple Government of Ontario renewable energy procurements, including successful Feed in Tariff, LRP I and energy storage applications.