2. Renewable Energy Development Process

Municipalities have many opportunities for involvement in the renewable energy development process. Therefore, it is useful for them to have a clear understanding of the overall renewable energy project development process.

This section explains how the introduction of the Green Energy Act, 2009 impacted the operation of the Planning Act, 1990 with respect to municipalities and renewable energy development. It also highlights some of the key roles municipalities can play in renewable energy development and provides an overview of the development process.


2.1. MUNICIPALITIES IN VARIOUS ROLES

When it comes to the development of renewable energy projects, municipalities can play a number of different roles. For instance, municipalities can develop projects, partner with developers as project co-owners and participate as project site owners.

As well, municipalities can play an important role providing feedback as part of the environmental approval process for large wind, solar and bioenergy projects. The FIT and LRP application rules also provide incentives for developers to obtain formal municipal council support before applying for a contract.

The chart below highlights the different roles municipalities can assume in the development process and sets out some of the considerations applicable to each role.

The term “developer” is used to mean the person, company, partnership, or group that is planning and/or undertaking a renewable energy project. For instance, rather than referring to a person or group that submits a FIT application as the applicant or proponent of a project, they are simply referred to as the developer. Developers may also be referred to as “Qualified Applicants” in the context of the LRP program.

ROLE CONSIDERATIONS
Municipality as a Developer Municipalities that develop their own projects can benefit from project revenues.When deciding whether to develop a renewable energy project, municipalities should consider whether they have available land or building(s) they can use or whether they would need to lease/rent property. As well, they should determine whether they have the financial resources to develop a project on their own, and consider the approval and permitting requirements the project will entail.
Municipality as a Partner Municipalities that partner with developers can benefit from project revenues. Before municipalities partner with a developer on a renewable energy project, they should consider:

  • How much electricity would this type of project generate?
  • What revenue would this system generate?
  • What ownership structure might be best?
  • Will the project ownership be transferred to the municipality at the end of the contract term?

In addition to developers, municipalities can partner with co-operatives, Aboriginal communities and public sector entities to develop projects.

Municipality as a Project Site Owner Municipalities may choose to allow renewable energy projects to be located on municipally-owned properties in return for lease payments or other benefits from developers. The funds municipalities earn from these projects can be reinvested in other local projects.Municipalities may negotiate agreements with developers to benefit their communities, such as upgrading the roof of a municipal building for a solar installation or enhancing parks and sports fields. Municipalities need to consider what each side stands to gain from an agreement and clarify key terms up front.For example, a municipality that is asked about hosting solar panels on the roof of a municipal building, may want to know:

  • How much electricity would this system generate?
  • What revenue would this system generate for the developer and what are the revenue-sharing opportunities for the municipality?
  • Would this system be owned by the municipality or the developer?
  • What is the expected life of this system?
  • What structural requirements and impacts would there be to the roof?
  • Will ongoing maintenance be required for this system? If so, who will carry it out?
  • Are there insurance or tax implications for this system?
  • Will this system be transferred to the municipality at the end of the contract term?
Municipality as a Reviewer As a reviewer, a municipality’s role can include:

  • Confirming the zoning of lands proposed for ground-mounted solar projects through the completion of a prescribed form developed by the IESO.
  • Considering requests from project developers to provide municipal council support in the form of the appropriate template for specific projects (or blanket support under the FIT program for certain types of projects – e.g., rooftop solar), which developers can use to obtain FIT priority points or help improve the ranking of their applications.
  • Choosing to have municipal meetings with developers to discuss LRP proposals.
  • Providing comments on the project during the public consultation process.
  • Reviewing the Renewable Energy Approval (REA) reports prior to the developer submitting them to the Ministry of the Environment and Climate Change (MOECC).
  • Completing the REA Municipal Consultation Form.
  • Working with the developer to determine how the municipality may benefit from the project.

2.2. AN OVERVIEW OF THE DEVELOPMENT PROCESS

Renewable energy projects are complex, and there are many important steps a developer must complete to bring a project to commercial operation. While obtaining an electricity contract from the IESO is a key goal for developers, the contract is only one part of the overall development process. There are a number of planning steps that the developer must complete before proceeding to construction.

Timeframes associated with these steps depend on the procurement program and the type of renewable energy employed.

For example, under the FIT program, the standard timeline to reach commercial operation for rooftop solar projects is 18 months from the initial signing of the contract and 24 months for rooftop solar facilities on unconstructed buildings. The FIT program also provides standard timelines of three years for wind, ground-mounted solar and bioenergy projects, and eight years for waterpower projects to reach commercial operation.

Under the LRP program, the development timelines are three years for rooftop and ground-mounted solar projects, three years for biogas, renewable biomass and landfill gas projects, four years for wind projects, and eight years for waterpower projects to reach commercial operation.

The following figure depicts the typical steps involved in developing a large renewable energy project. Please note, the figure represents a general overview of the process and does not provide an exhaustive list of all development requirements.

Typical steps in developing a large renewable energy project (follow link for description)

1. Feasibility Analysis

Before developers submit applications to the IESO or consider developing a project, they must investigate the feasibility of the project.

At a minimum, this involves the developer identifying a site of sufficient size that is suitable for the type of renewable energy project that is being proposed (e.g., wind, ground-mounted solar or rooftop solar, etc.) and whether the project can connect to the grid from this location. Developers may investigate several sites, paying particular attention to the factors noted below, before coming to a decision. They should also investigate the cost of the development and their financing needs.

During the feasibility analysis, developers should not only consider whether a project is possible, but whether the siting is optimal. At a minimum, the following siting factors should be considered:

  • municipal input regarding the proposed site
  • community and Aboriginal support for the proposed site
  • access to the resource (for example, determining the average wind speed on the property, the patterns of sunlight or the available sources of bio-fuel)
  • natural and heritage features in the area
  • agricultural zoning designations in the area
  • proximity of the site to other renewable energy projects
  • proximity of the site to residential homes
  • access to the electricity grid (includes reviewing the IESO’s Transmission Availability Test (TAT) and Distribution Availability Test (DAT) tables to see if room is available on the grid)

2. Community Engagement

Developers typically lease, option or purchase land for renewable energy projects from private landowners, First Nations or municipalities. As they work to secure land, developers often meet with landowners or other members of the community about their projects. These meetings may provide municipalities with the opportunity to engage developers at the early stages of projects. If municipalities become involved early in the process, they will have more opportunities to have their concerns addressed.

Under the LRP program, developers seeking to participate must be selected as Qualified Applicants. To qualify, developers must demonstrate that they possess satisfactory development experience and financial capability through the LRP’s Request for Qualifications (RFQ) phase. If selected as Qualified Applicants, developers must work directly with municipalities to satisfy community engagement requirements to be eligible for contracts. This includes hosting municipal and public meetings. Please refer to Section 3 (Large Renewable Procurement) for more information.

3. Application for Electricity Contract

The IESO procures power by signing contracts with developers, who sell electricity to the Ontario grid. Projects can be large or small, and may be proposed by municipalities, companies, co-operatives, Aboriginal communities, as well as homeowners and farmers.

Under these contracts, also known as power purchase agreements, the IESO agrees to pay for the electricity produced at a set price over a set period. Developers are responsible for the upfront costs to bring a project online, including planning, environmental approvals and permits, public, Aboriginal and municipal consultation, financing, engineering, legal services, purchase of equipment and project construction. Receiving a contract does not guarantee that a project will be developed.

Ontario’s FIT program has evolved from a “first-come, first-served” application process to one where applications are prioritized based on a number of criteria, including municipal support. Learning from the FIT program experience, the LRP program has been designed to require up front municipal engagement and prioritize applications that receive municipal support.

4. Environmental Approvals and Other Regulatory Processes

Developers can begin to consider some of the regulatory approval processes prior to contracts being signed. Once contracts are awarded, all approval processes must be fulfilled as a condition of the contracts.

Wind, solar and bioenergy projects may be subject to the Renewable Energy Approval (REA), as per Ontario Regulation 359/09. This regulation requires minimum setback distances for certain large wind energy projects, environmental studies as well as Aboriginal, public and municipal consultation. The REA is administered by the Ministry of the Environment and Climate Change (MOECC) and is further described in Section 6. These projects are also subject to the Ministry of Natural Resources and Forestry’s (MNRF) requirements, which are outlined in the Approval and Permitting Requirements Document (APRD). Waterpower projects are subject to an individual Environmental Assessment or the Waterpower Class Environmental Assessment (Class EA) process.

Developers are also responsible for ensuring that a project can connect safely and reliably to Ontario’s electricity grid. This involves working with local utilities, transmission companies and the Electrical Safety Authority (ESA).

Developers must obtain the necessary building and road permits from municipalities for project construction.

5. Construction

In order to begin building a project under the FIT program, developers are required to obtain a Notice to Proceed (NTP) from the IESO. In order to be eligible for NTP, the developer must have obtained the required regulatory approvals and necessary permits, and have made any necessary financial arrangements.

Notice to Proceed (NTP) is a contractual milestone that demonstrates that the developer has made significant progress on their project and is nearing a point where they can begin construction.

Under the LRP program, a similar process is followed whereby developers must demonstrate they have met Key Development Milestones before they can proceed to construction.

When construction of the project is completed, the developer will make the final arrangements with the local distribution company (LDC), the IESO, Ontario Energy Board (OEB) and others to connect the project to the electricity grid. Payments to the developer begin when the project has reached “commercial operation,” which is when the project is connected and providing electricity to the grid.

6. Operations

Under various procurement programs, the IESO offers 20-year contracts for wind, solar and bioenergy projects, and 40-year contracts for new waterpower projects.

During the operational period of the project, developers carry out a number of ongoing activities including:

  • maintaining and replacing equipment and keeping the project in proper working order
  • site maintenance
  • maintaining an active presence in the community responding to any concerns or complaints

At the end of a contact term, developers may elect to:

  • negotiate a new contract for provision of electricity to the grid and continue operating the facility
  • continue delivering power to the grid at market rates or convert to a net-metering arrangement
  • sell the project
  • decommission the project

7. Decommissioning

When a project has reached the end of its useful life, the project is decommissioned. The following table addresses some of the common questions municipalities may have about the process for decommissioning renewable energy projects. Municipalities are also encouraged to discuss any questions or potential concerns with developers.

QUESTIONS ABOUT DECOMMISSIONING
Who is responsible for decommissioning?
  • Decommissioning is the sole responsibility of the project developer.
In what condition will the developer leave the project’s location?
  • Proper decommissioning must restore a project’s location to a clean and safe condition suitable for the future use of the land.
  • Where projects are located on agricultural land, the property must be restored to its pre-development agricultural capability or better.
Who pays for the installations to be taken down at the end of the contract?
  • The developer is responsible for paying for and conducting decommissioning activities.
What if the developer goes bankrupt?
  • Many of the materials used in a renewable energy project can be salvaged or reclaimed. For wind and solar projects, it is expected that the monetary value of the recovered equipment would be sufficient to cover the cost of decommissioning, even in the case where the developer goes bankrupt.
Are developers required to set funds aside in case decommissioning is not done properly?
  • Funds are not required to be set aside for wind and solar projects, as the equipment is salvageable and the monetary value of the recovered equipment would be sufficient to cover the cost of decommissioning and restoring the project land.
  • Funds are required to be set aside for biomass/biogas systems.
What about decommissioning requirements for hydroelectric projects?
  • There may be regulatory requirements for decommissioning hydroelectric facilities. Project developers are required to further investigate any such requirements.
  • Waterpower projects are expected to last up to 100 years, and the related dam infrastructure may last even longer.

REA’s Decommissioning Plan Report

Under the REA process, developers (other than small scale Class 2 wind project developers) must submit to MOECC a Decommissioning Plan Report describing how they propose to restore the project location to a clean and safe condition that is suitable for the likely future use of the land. This includes retiring the elements of the renewable energy generation facility, restoring the land and water, and managing the excess materials and waste.

The requirement for a Decommissioning Plan Report is outlined in the REA regulation (Ontario Regulation 359/09) and described in MOECC’s REA Technical Guide, Chapter 7 – Guidance for Preparing the Decommissioning Plan Report.

If a project is located on agricultural land, the project location should be returned to the same – or better – agricultural capability it had before the project started. This could involve repurposing facilities to other agricultural uses (for example, nutrient storage tanks from biogas systems) and removing obstacles (for example, concrete bases or laneways) that could impede farm equipment operation. Any removed topsoil, altered drainage systems, or compacted soil resulting from construction, operation, or decommissioning of the renewable energy facility should be mitigated.

Financial Assurance for Decommissioning

MOECC retains the authority under Section 132 of the Environmental Protection Act, 1990 to require financial assurance on a project-specific basis on any project issued a REA.

Financial assurance acts as a guarantee of financing and may be required to ensure that funds are available for future clean-up and remediation of sites which require long-term care and monitoring. The definition of financial assurance that is applied to the decommissioning of renewable energy projects is found in Section 131 of Part XII of the Environmental Protection Act, 1990.

While well-planned and well-managed renewable energy facilities are not expected to pose environmental risks at the time of decommissioning, MOECC will use its powers of compliance, enforcement and the requirement for financial assurance, as appropriate, to ensure risks are managed.

Currently, MOECC does not require financial assurance for wind and solar projects because it has been determined that the monetary value of the recovered equipment would be sufficient to cover the cost of decommissioning and restoring the project land.

MOECC does require financial assurance for Class 2 and 3 anaerobic digestion (AD) facilities and Class 2 and 3 thermal treatment facilities that are managing waste as identified in Section 49, 50 and 52 of Ontario Regulation 359/09. Developers of these projects are required to provide an estimated financial assurance amount that is calculated based on the amount of waste that will be managed in such facilities.

Further details about financial assurance are provided in MOECC’s Financial Assurance Guideline (Guideline F-15, PIBS 0226e04)

Municipalities and Decommissioning

Municipalities may raise concerns about decommissioning with developers directly. This can occur as part of discussions with developers under the LRP program and also as part of municipal consultation under the REA process.

2.3. CHANGES TO ONTARIO’S PROCUREMENT PROCESSES

The following table provides an overview of the key aspects of the contracting process and how they have evolved under Ontario’s procurement programs.

ONTARIO’S EVOLVING RENEWABLE ENERGY PROGRAMS
FIT 1
2009 – 2011
FIT 2, FIT 3, FIT 4
2012 – Present
LRP Phase I
2015
Maximum Contract Capacity
  • 10 MW for solar
  • 50 MW for waterpower
  • 0.5 MW (500 kW)
  • Procurement target for each renewable fuel
Procurement Type Standard Offer

  • Fixed contract with price set by IESO
  • Priority determined by time of application
Standard Offer

  • Fixed contract with price set by IESO
  • Priority determined by support or participation in project (see below)
Competitive Procurement

  • Price proposed by applicant
  • Proposals evaluated against a set of criteria (refer to Section 3.2 for more information on LRP I evaluation)
Regulatory Approvals
(See Section 6)
  • Wind, solar, biomass, landfill gas: REA
  • Biogas: REA or Nutrient Management Act
  • Waterpower: Class EA
  • Wind and biomass, landfill gas: REA
  • Biogas: REA or Nutrient Management Act
  • Solar: Environmental Activity and Sector Registry (EASR) or REA
  • Waterpower: Class EA
  • Wind, solar, bioenergy: REA
  • Waterpower: Class EA
BEFORE CONTRACTS ARE OFFERED
FIT 1
2009 – 2011
FIT 2, FIT 3, FIT 4
2012 – Present
LRP Phase I
2015
Municipal/ Aboriginal Engagement Consultation
(See Section 2.1 for more information on the municipal role)
  • Engagement recommended but not required.
  • Engagement recommended but not required.
  • Priority given to projects with
    • Municipal or Aboriginal support or participation
    • Public sector entity participation (FIT 3 & 4)
Mandatory Requirements*

  • Meeting with Project Communities (Municipal Meeting or First Nation meeting)
    Rated Criteria (optional)
  • Points earned if projects have municipal / First Nation support, a municipal / First Nation agreement, or Aboriginal participation
Public Engagement
  • Engagement recommended but not required
  • Engagement recommended, but not required
  • Applications with Community Participation are prioritized
Mandatory Requirements*

  • Community Engagement Plan
  • At least one public community meeting

Rated Criteria (optional)*

  • Points earned if projects have the support of abutting property owners’ properties
Contract Siting Restrictions for Solar Projects
  • Original FIT land-use rules
  • Projects not allowed on prime agricultural lands (Classes 1 and 2, and above a set limit for Class 3)
  • Updated FIT land-use rules
  • Projects not allowed on prime agricultural lands (Classes 1 to 3)
  • May include residential, commercial and industrial restrictions – exemptions are available in FIT 4
  • Projects not allowed on Prime Agricultural Areas, as designated in Official Plans
  • If Prime Agricultural Area designation process is not complete, projects not allowed on prime agricultural lands (Classes 1 to 3)
AFTER CONTRACTS ARE OFFERED
Municipal and Public Consultation Consultation required by regulation may include:

  • Municipal consultation required if project subject to REA or Class EA process
  • Public consultation if project subject to REA or Class EA process

Additional public comment period if an REA application is deemed complete

*The Mandatory and Rated Criteria in the LRP I Request for Proposals (RFP) are specific to the type of land (municipal, First Nation or Crown) on which the project is proposed. Please consult the LRP documents for details.