March 27, 2006

Ontario's Standard Offer program will set fixed purchase prices for renewable energy

Ontario has introduced a new Standard Offer program, through which the government will set a fixed price for small renewable energy projects. Under the plan, the Ontario Power Authority will purchase electricity produced by wind, biomass or small hydroelectric at a base price of 11 cents per kilowatt-hour (kWh). The fixed price for solar will be 42 cents per kWh.

This will make it easier and less costly for small, renewable power producers - such as farmers, rural landowners, community groups, First Nations, business owners or municipalities - to sell their energy to the grid, said Premier Dalton McGuinty, who announced the initiative at Photowatt Technologies in Cambridge, Ont. Over the next ten years, the government says the program will help add up to 1,000 megawatts of renewable energy to Ontario's electricity supply, easing the strain on the province's electricity system while reducing air pollution and promoting reliability.

The initiative will be implemented jointly by the Ontario Energy Board (OEB) and the Ontario Power Authority (OPA), based on terms and conditions outlined in their just-released report, Recommendations on a Standard Offer Program for Small Generators Connected to a Distribution System. The OEB and OPA will continue working with stakeholders to develop the details of the program in the coming months.

The recommendations in the Report address program eligibility, pricing, contract terms and conditions and changes to the OEB's electricity codes and licensing requirements aimed at facilitating the connection of small generation projects to the electricity distribution system.

The OPA recommendations include:

- Opening the program to any renewable resource type that qualifies as a renewable resource in the Renewable Energy Supply II request for proposals (RFP) including wind, small hydro-electric, solar and some biomass.

- Limiting the maximum project size to 10 megawatts (MW), with no restriction on minimum project size.

- Establishing connection voltage at 50 kV or less with no restrictions on location, other than those determined by the technical limitations of the local distribution and transmission system.

- Requiring a written contract that documents the obligations of the parties under the Standard Offer program. Contract terms will typically be for 20 years.

- Establishing value-based pricing for the program. For the first year of commercial operation, all eligible renewable resource-type projects (except solar photovoltaic) will be paid a base rate of 11 cents per kWh for all kilowatt hours delivered. Projects that can demonstrate generation control will be eligible for an additional 3.52 cents per kWh for all electricity delivered during on-peak hours.

- Establishing a price of 42 cents per kWh for solar photovoltaic projects in order to conduct price discovery on this technology.

- Reviewing program pricing periodically and, if required, developing new contract prices in response to changing program and market conditions.

- Recommending no maximum capacity limit for the program.

The OEB recommends that:

-distributors be required to make certain system information publicly available and to designate a contact person for distributed generation.

-recognized, consensus-based, technical standards be set for interconnection, applicable to all distribution systems in Ontario.

-regulatory information be provided for generators and made available on the OEB Web site. Levels of licensing fees for small generators should be re-examined, and modular, mandatory connection agreement standards should be developed for use by all distributors, the Board adds.

The guiding principles underlining the report were to "keep the program simple, remove barriers to participation by smaller projects and balance the needs between the Ontario government's renewable generation targets and the value of the electricity to Ontario ratepayers". The OEB and the OPA consulted extensively with industry stakeholders throughout the process of drafting their recommendations.

The report may be viewed on the OEB or OPA Web sites, www.oeb.gov.on.ca or www.powerauthority.on.ca. More information is also available from Vanda Wall at the OEB, 416/440-8149, or Tim Taylor at the OPA, 416/969-6353.

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