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Renewable energy and the green economy: Green Energy and Green Economy Act, 2009

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Ontario's Green Energy and Green Economy Act, 2009 (the 'Act') received Royal Assent on May 14, 2009. The Act's aim is to foster the growth of renewable energy projects, promote a green economy and energy conservation and to encourage the efficient use of energy. Its scope equals its intended impact on Ontario's energy sector: both are substantial. To realize its objects, the Act creates the Green Energy Act, 2009 and amends twenty current laws. Beyond providing a comprehensive legislative framework to encourage renewable energy and green investment, the Act fundamentally alters how Ontario manages energy supply and demand.

To begin, the Act forces a market adjustment that is contingent on the method used to generate energy. The established economic model for considering energy generation (and for that matter transmission and distribution undertakings) valued economic efficiency and cost effectiveness.

Under the Act, this measure is set aside in favour of a paradigm employed in some European countries, namely providing guaranteed prices for renewable energy generation through a feed-in tariff program. Renewable energy sources are promoted by ensuring that these sources do not have to compete in terms of economic efficiency and cost effectiveness with other energy generation sources that Ontario has historically relied upon, such as nuclear or carbon-based sources. By following this model the Act moves away from weighing the economic efficiency and cost effectiveness of an energy generation project to a gauge based on the project's environmental impact, making essentially all renewable energy generation feasible.

Next, the Act requires that transmitters and distributors provide priority access to their systems for renewable energy generation facilities, reversing in part the historic guarantee of non-discriminatory access to transmission and distribution systems. Priority access is limited only by regulations, market rules and licence conditions. However, this preference is taken a step further: the Act also allows the circumstances under which the transmitter or distributor will bear the costs of the connection to a renewable energy source to be prescribed by regulation. In that event, these costs will be borne by all consumers, rather than by the renewable energy generation facility connecting to the grid.

Finally, consistent with its purposes, the Act places a strong emphasis on facilitating the development of renewable energy generation. Perhaps not unexpectedly for a reorganization of the breadth intended by the Act, this function has been extended to a party whose role has traditionally been that of the economic regulator, the Ontario Energy Board ('OEB'). The OEB now includes in its objects the promotion of renewable energy sources and associated transmission and distribution systems. To further this objective, the OEB can require transmitters and distributors to file plans for the improvement of the transmission or distribution systems to accommodate the connection of renewable energy generation facilities. Similarly, the Ontario Power Authority's ('OPA') role as the province's procurement arm is expanded to include the task of facilitating renewable energy generation and associated transmission and distribution systems, although this function is not inconsistent with its traditional role. The Act also creates a Renewable Energy Facilitation Office under the Ministry of Energy and Infrastructure to help smooth the progress of renewable energy development in the province.

The Act enables the Minister of Energy and Infrastructure to make regulations to support the broader goals of the Act. For example, regulations may be made to assist in removing barriers and promoting opportunities for the use of renewable energy sources and advancing access to transmission and distribution systems. The Act also allows regulations to be made governing the generating capacity, connections to transmission and distribution systems, the start-up dates and the location of renewable energy generation facilities. The latter element is outlined below.

The Act also provides the Minister with broad directive-issuing authority. For instance, the OPA is subject to Ministerial direction on matters relating to the procurement of renewable energy, reductions in electricity demand and conservation and the management of electricity demand, as well as supply pricing factors, the use of a competitive or non-completive procurement process, aboriginal consultation and reimbursing municipalities for the development of renewable energy generation facilities.

The jurisdiction of the OEB is equally impacted. Ministerial directives can be issued to the OEB regarding licence conditions for transmitters and distributors, contracting with the OPA, the smart grid system and conservation and demand management targets. The Act also deems existing and future transmission and distribution licences to contain conditions related to the expansion or reinforcement of transmission and distribution systems for the development of the smart grid system and, as mentioned earlier, the filing of plans for the improvement of the transmission or distribution system to accommodate connections to renewable energy sources and granting priority connection access to renewable energy sources.

To avoid the delay and uncertainty inherent in satisfying planning and environmental requirements, the Act simplifies the approvals process. The Act exempts renewable energy undertakings from most provincial plans and municipal Official Plans, zoning by-laws, site plan control by-laws, demolition control by-laws and other Planning Act requirements. Further, an interest in or right to use land for a period of not more than 50 years granted for the purpose of a renewable energy project is not subject to Subdivision Control and will not require a municipal severance consent. This will facilitate long-term investments and financial arrangements and power purchase agreements.

A Renewable Energy Approval ('REA') under the Environmental Protection Act ('EPA') will be required for renewable energy projects that involve specified activities. However, the Act consolidates into one permit application the process of obtaining permits that would otherwise be applied for and issued separately under the EPA and the Ontario Water Resources Act.

The province has also recently proposed standardized requirements for renewable energy projects, harking back to the Permit-by-Rule program initiated by the Ministry of the Environment ('MOE') in the 1990s. On June 9, 2009, the MOE posted a Regulation Proposal Notice on the Environmental Registry of Environmental Bill of Rights proposing standardized, mandatory setback requirements for a variety of renewable energy projects from the nearest dwelling or from natural heritage features, unless an environmental impact study demonstrated the ability to mitigate negative impacts. In the case of wind turbines, lower power output units will not require a REA. However, the province has proposed mandatory minimum setback requirements for all wind turbine projects based on a matrix that weighs the number of turbines against sound power levels produced. Larger or noisier wind turbine projects will still require a noise study. A site-specific noise study may justify a reduction in the setback requirements, but the MOE proposes a mandatory minimum setback distance that will not be reduced in any circumstance.

Both the MOE's Regulation Proposal Notice and the Ministry of Natural Resources' Policy Proposal Notice on the Environmental Registry contain commitments to coordinate their approval processes in order to integrate the requirements for the review and approval of renewable energy projects.

An appeal as of right for third parties to the Environmental Review Tribunal under the EPA for a proposal to issue, amend or revoke a REA has replaced the leave to appeal procedures under the Environmental Bill of Rights, 1993. However, the Tribunal must render its decision within nine months of the request for a hearing, otherwise the MOE's decision in regards to the REA will be deemed to be confirmed by the Tribunal. The grounds for an appeal are limited to serious harm to human health or serious and irreversible harm to plant or animal life or the natural environment.

The Act repeals the requirement to establish a Conservation Bureau under the OPA and amends the Environmental Bill of Rights, 1993 to require the Environmental Commissioner to report annually on energy conservation and greenhouse gas ('GHG') emissions. Otherwise, the Act is silent on the issue of GHG emissions trading and credits (the government has tabled Bill 185 'An Act to amend the Environmental Protection Act with respect to greenhouse gas emissions trading and other economic and financial instruments and market based approaches,' which received First Reading on May 27, 2009). The province's support for the Act has been based in part on its promise to phase out coal-fired generating facilities by 2014 and to help meet its emissions targets. Clearly, the Act was drafted to help the province meet these objectives. Therefore, it is possible that those renewable energy generating facilities that benefit from a feed-in tariff agreement with the OPA will be required to surrender all or part of their emissions credits. If so, the province would be following an historic precedent. If this does come to pass, only renewable energy generators who do not sell power through the OPA will be permitted to retain their emissions credits.

As a final point, energy conservation is a central and recurring theme under the Act. Some provisions dealing with conservation have been mentioned but have not been detailed. This should not be taken to indicate that energy conservation is not an important concern under the Act.

The customary caution with new legislation is that 'the devil is in the details,' so it is from the yet to come regulations that the full consequences of the Act will be felt. However, the Act documents a change in approach to energy supply and demand that unmistakably heralds Ontario's notion of where the province wants to be in regards to green investment and clean energy. Nonetheless, the province is not rejecting the security of traditional energy sources such as nuclear and gas-fired, although the life expectancy of existing coal-fired generating facilities is clearly limited.

Henry Krupa is counsel in the Commercial Real Estate Group and the Environment, Energy & Emissions Trading Group in Toronto. Contact him directly at 416-307-4163 or

This article appeared in Lang Michener's Environment, Energy & Emissions Trading Brief Summer 2009. To subscribe to this publication, please visit our Publications Request page.

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