Greening Canada by TappingInto the “Solar Gold Rush”

By Tim MurphyPresented to: Solar Gigawatts

Location: Munich, Germany

Date: May 28, 2009

2

Overview

– Solar in Canada– Federal incentives– Ontario – Incentives by other provincial and municipal

governments– Roadblocks to solar energy in Canada

3

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

4

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

5

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

6

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

7

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

8

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

9

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:

• 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)

10

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

11

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 19 19

Waterpower ≤ 10 MW 12.9 13.1

Waterpower > 10 MW ≤ 50MW 12.2

Biomass ≤10 MW 12.2 13.8

Biomass > 10 MW 13

Biogas ≤ 500 kW 14.7 16

Biogas > 500 kW ≤ 10 MW 14.7

Biogas > 10 MW 10.4 10.4

Landfill gas ≤10 MW 11.1 11.1

> 10 MW 10.3 10.3

12

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

13

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.

14

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

15

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

16

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

17

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)

18

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

194364786

Questions & Answers

Tim Murphy

Partner, McMillan LLP

Tel: 416-865-7908

E-mail: tim.murphy@mcmillan.ca