FIT 2.0 draft rules released

Following the issuance of the Minister’s Directive to the Ontario Power Authority on April 5, the OPA released drafts of version 2.0 of the FIT Rules.  All interested parties are encouraged to review the proposed changes and submit comments. Comments will be accepted by the OPA until April 27, 2012.   See here for a copy of the draft FIT Rules and for more information on how to provide feedback.

The draft FIT Rules take a much more prescriptive approach to applications and application requirements, with multiple opportunities for the OPA to terminate applications at an early stage. A brief summary of certain proposed changes to the Rules follows.

 Small FIT Projects and Large FIT Projects

The Rules now differentiate between "Small FIT Projects" and "Large FIT Projects." A "Small FIT Project" is defined as a capacity allocation exempt small embedded distribution generation facility. A Small FIT Contract must be no more than 250 kW where the facility is connected to a line of less than 15 kV or no more than 500 kW where the facility is connected to a line of 15 kV or greater. A "Large FIT Project" is defined as a project that is not a Small FIT Project.

Evaluation of Applications

Under the revised FIT Rules, it is proposed that evaluation of applications will now occur in four stages:

Stage 1 - Application Completeness Requirements - this is a pass/fail stage based on the application requirements specified in the Rules.

Stage 2 - Eligibility Requirements - this is a pass/fail stage based on the eligibility requirements specified in the Rules.

Stage 3 - Ranking by Prioritization and Time Stamp - applications will be ranked based on the number of "Priority Points" and their time stamp, as discussed below.

Stage 4 - Connection Availability and Procurement Limits - contracts will be awarded to applications, based on their ranking pursuant to stage 3, which are able to pass the TAT and, if applicable, the DAT, and subject to any applicable procurement limits.

The following is a brief summary of certain proposed changes to the Rules:

Application Prioritization and Ranking

Applications can be awarded "Priority Points" based on specified criteria. Every application must obtain at least one Priority Point in order to be eligible for a FIT Contract. Priority Points are awarded based on "Project Type" or "Non-Project Type" criteria.

Project Type Priority Points:

  • Community Participation Projects (3 points): To qualify, a Co-op (with at least 50 Co-op members for a Large FIT Project and 35 Co-Op members for a Small FIT Project) must have a direct economic interest in the Project.   The Co-op members must be “Property Owners” (defined as natural persons that are and were, as of the date two years prior to the application, a registered owner of real property in the municipality in which the Project is to be located, in whole or part).  Any economic interest in the Co-op by any entity or any affiliate of an entity whose primary business is, or of any person whose employment is in, the development of non-community based electricity projects will be discounted from the calculation of the Community Participation Level in the Project.
  • Aboriginal Participation Projects (3 points): An Aboriginal Community must have at least a 15% economic interest in the applicant or supplier to qualify for these points.
  • Education or Health Participation Projects (2 points): Projects where a university, school, college, hospital or long-term care has at least a 15% economic interest in the applicant or supplier qualify for these points.

Non-Project Type Priority Points:

  • Municipal Council Support Resolution and Aboriginal Support Resolution (2 points): These points will be awarded to a project that has received a Municipal Council Support Resolution or an Aboriginal Support Resolution, in the form provided by the OPA.
  • Project Readiness (2 points): These points will be awarded to projects which are able to evidence that they have title to, or a legally enforceable lease or option to lease for, the project site.
  • Education or Health Host (2 points): These points will be awarded to projects located on a site which they have been granted access to by a university, school, college, hospital or long-term care centre.
  • System Benefit (1 point): One point is available for a project which uses waterpower, renewable biomass, landfill gas or biogas, as its renewable fuel, or an on-farm biogas facility.

Project Type Priority Points cannot be combined with each other, but can be combined with Non-Project Type Priority Points. Non-Project Type Priority Points are cumulative. It is unclear whether the OPA can award partial points. Projects will be ranked according first to the number of Priority Points they achieve and then based on their time stamp. The time stamp assigned to pre-existing applications will be that assigned to it under the prior versions of the FIT Rules.

Project Siting

While it is still sufficient to evidence Access Rights through a lease, option to lease, letter of intent, memorandum of understanding or other grant, in order to be eligible for “Project Readiness” Priority Points under the new ranking system (as described above), it will be necessary to evidence a greater degree of site control.

For rooftop solar projects, the applicant must represent in the application that it has obtained written certification from an independent engineer (and provide the certificate) that the subject rooftop has sufficient useable surface area for the project and that it is either suitable to support the project or that it will be following improvements (the particulars of which must be described in the certification).

The rules for siting of ground-mount solar projects have become much more stringent. Projects cannot be located on a site that is comprised (in whole or in part) of CLI Class 1, 2 or 3 Lands, Specialty Crop Areas, or CLI Organic Lands. In addition, ground-mount solar projects cannot be located on a property (i) which is or includes residential property or abuts another property that is a residential property - unless the property is agricultural and residential use is ancillary to agricultural use; or (ii) on which commercial uses and/or industrial uses are permitted and one or more ground-mount solar projects would constitute the main or primary use of the property.  In an application for a ground-mount solar project, the applicant must provide a map showing the grid cell number and site where the project is to be located and a written opinion of a Land Use Planner or written certification of a chief building official, municipal chief administration officer, municipal clerk, or equivalent, opining or certifying that the project satisfies the land use restrictions on non-rooftop solar projects set out in the Rules.

Connection Availability and Procurement Limits

Following the ranking, applications will be assessed, in order of rank, as to availability of, and impact on, the applicable transmission system and/or distribution system for the project, based on the transmission availability test and distribution availability test. Applications will also be assessed in light of any applicable "Procurement Limits". The OPA has reserved the right to specify limits on the procurement of renewable energy, based on fuel type, within each specified Application Period.

Domestic Content

On-shore wind projects will continue to be required to achieve 50% domestic content and solar PV projects will continue to be required to achieve 60% domestic content.

Pricing

As discussed in our earlier blog post, the price schedule has been revised and the Rules indicate that pricing will be reviewed every year. The contract price will be the price in effect at the time a contract award is made, not the time that the application was submitted. Aboriginal and community projects will continue to be eligible for price adders, however, unlike the existing FIT Program, for all projects other than rooftop solar, the price adders will be available for all project sizes and technologies and will be based on the level of equity participation (namely, between 15% and 50% or above 50%). The Settlement Provisions have not changed.

Multiple Projects on the Same Property

The Rules have provided the following guidance on whether multiple projects can be located on a single property:

  • An application cannot be made in respect of a proposed project located on the same property as (i) a project developed under the microFIT Program that uses the same renewable fuel; (ii) a project that has been the subject of any previous application unless that project has achieved commercial operation; or (iii) another project that is the subject of an application submitted during the same application period that is the same as or substantially similar to the proposed project;
  • Co-Located Projects cannot exceed 10 MW for solar PV projects and 50 MW for waterpower projects; and
  •  In general, project splitting will not be permitted by the OPA, as discussed further below.

Project Splitting

The Rules specifically prohibit the splitting of a project in order to obtain a higher contract price, to circumvent the eligibility requirements, or to obtain any other benefit under the FIT Contract.

If the OPA determines that a project has been split, it may (i) terminate all applications in respect of the split projects; (ii) apply the contract price to such split projects which would have applied had the project been assessed as a whole, or (iii) take such other action as it may determine. In making the determination of whether a project has been split, the OPA may consider, among other factors, whether the applicants are the same person or related persons, the relative locations of the projects and the renewable fuel(s) used by such projects.

Assignment

An applicant may not assign its application to another person or permit a change of control of the applicant, failing which the OPA may terminate the application and draw on the application security as liquidated damages.

Existing Applications

Applications that were submitted prior to April 5, 2012 may be resubmitted under FIT 2.0 provided that the proposed project is located on the same Site and that the applicant is the same person and has the same name (other than name changes made for the purpose of the project qualifying as a Participation Project).

Pre-existing applications must be resubmitted (1) during the first application period for Small FIT Projects, in respect of existing Small FIT Projects or Large FIT Projects (provided that the Large FIT Project is restructured such that the resubmitted application is for a Small FIT Project); or (2) during the first application period for Large FIT Projects, in respect of Large FIT Projects. No information or supporting evidence in the corresponding pre-existing application will be considered in reviewing the resubmitted application.  The OPA will return or cancel any existing application fee and security, and the applicant will be expected to submit a new application fee and application security with the resubmitted application.

If such pre-existing applications are not resubmitted during these initial application periods, the OPA may terminate the pre-existing application and will return or cancel the application fee and application security submitted to the OPA in connection with such existing application. 

The OPA is proposing a non-refundable application fee of at least $500 and minimum application security of at least $1,000.00. The OPA has also expressly stated that an applicant will not be permitted to correct its application, including by providing the correct application fee or security following submission. Applications must also include specific representations and warranties from the applicant, including with respect to the requirements of the Renewable Energy Approval. The OPA may terminate any application it determines is incomplete, ineligible or which does not include satisfactory information.

Applications will only be accepted during specified application periods, to be announced by the OPA.

Stikeman Elliott's Energy Group will be discussing the changes to the Feed-in Tariff Program and the operational and commercial implications it may have on renewable power generators and others at a seminar on Wednesday, April 18 (8:00 am – 9:30 am). For further details or to receive an invitation, please contact Lyne Montpetit

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