Chiarelli on municipalities: no veto. “We can’t work that way”
Here from the international energy industry magazine Recharge, is an interview with Ontario Energy Minister Bob Chiarelli. Note the timetable for the large-scale procurement process, the fact that the government plans to continue with wind and solar, and there is no chance whatsoever of returning local land use planning power to Ontario’s communities.
IN DEPTH: Ontario versus the world
Canada appealed on Ontario’s behalf, but in early May, lost the case. The policy, which the Liberals say attracted about C$37bn ($35.9bn) of investment, created 30,000 jobs and contracted almost 8GW of renewable energy, would have to be changed.
To avoid trade sanctions, Canada agreed to a 24 March 2014 deadline for the province to end discrimination against foreign suppliers for procurement of goods and services.
The ruling, which is not retroactive, came at a politically delicate time for Ontario’s first female premier, Kathleen Wynne, who had formed a minority government only three months earlier, following the resignation of fellow-Liberal Dalton McGuinty. He had been the driving force behind the 2009 Green Energy and Green Economy Act, which linked feed-in-tariff (FIT) eligibility to local production of equipment — at least 60% local content for solar projects and 25% for wind.
Already struggling to address economic, healthcare and other problems inherited from McGuinty, she now had to come up with a new strategy to advance her party’s green-energy ambitions while staying on the right side of international law. Meanwhile, critics were up in arms, demanding to know why the Liberals could not copy the likes of the EU and Japan, which — despite making the successful WTO complaint against Ontario — managed to create policies favouring local industries that did not get them into trouble.
Wynne asked her energy minister, Bob Chiarelli, the former mayor of Ottawa, to spearhead the government’s response and chart a path forward. He wasted little time.
Soon after the WTO decision, the government announced it would replace the FIT for wind and solar projects over 500kW with a competitive procurement process that FIT administrator, the Ontario Power Authority (OPA), would devise. It also slashed domestic content criteria to a maximum of 25% for large renewables projects as an interim step towards WTO compliance.
At his constituency office in west Ottawa, Chiarelli tells Recharge that the OPA has submitted interim recommendations to him and that final guidelines are likely to be released in late October or early November. “We will then open procurement for large wind and large solar,” he says. (Separately, the province has also agreed to procure 800MW from small projects over the next four years.)
The timing will also hinge on his ministry completing a review of the Long-Term Energy Plan adopted in 2010, which envisaged a need for 10.7GW of renewable-energy capacity by 2018. If all projects now awarded under the FIT’s 20-year contracts are completed, they commit the province to purchasing just under 5.8GW of wind and almost 2GW of solar power.
“I don’t want to pre-empt the review, but it’s highly unlikely that solar and wind will not be continued in the system,” says Chiarelli. “It’s a question of how much and when.” Wynne’s cabinet must sign off on any proposed changes, which may include several new nuclear plants.
“The big question is to what extent the WTO ruling will impact job creation? We’re assessing that,” Chiarelli says. The Liberals estimate their green polices created 31,000 jobs. McGuinty had promised 50,000 by 2012.
Chiarelli acknowledges that the local renewable-energy supply chain will now be under pressure. “Some manufacturers will need to sharpen their pencil and become more competitive,” he says. That includes the many foreign companies lured to the fast-growing Ontario market amid expectations they would receive preferential treatment for the foreseeable future.
The WTO action will also accelerate the current trend of lower green-energy prices in the province. Since 2010, cheaper component imports have helped reduce average prices for wind and solar projects by 15% and 50% respectively. The political opposition blames sector subsidies for the perceived high costs of Ontario’s electricity, which have been rising steadily since 2008.
Jacob Andersen, who heads Siemens’ wind operations in Canada, is unperturbed by whatever new rules for procurement may emerge. “Any manufacturer will need to be competitive regardless of what the political structure is,” he says. “We will be.”
Earlier this year, Siemens opened a plant near the quaint town of Tillsonburg, Ontario, that produces 49-metre rotor blades for 2.3MW wind turbines and 55-metre ones for 3MW direct-drive machines. Both are produced using its proprietary one-piece casting process, which utilises fibreglass-reinforced epoxy. “Given the size of these components, the fact you have local manufacturing is a sure cost benefit,” Andersen adds.
The bustling industrial facility looks out of place in a surrounding rural landscape of cornfields, wooded countryside and small homes. Formerly an automotive parts plant that had been vacant since 2008, it now employs 250 people, with more being hired.
About 133km to the east, near the city of Welland, REpower recently brought a blade plant on line, its first in North America. For now, the 150 or so workers will fabricate 45-metre blades for the 2.05MW MM92 turbine. Plans call for equipping it to produce 59.8-metre blades for the 3MW M122 low-wind-speed turbine.
“We are now fast-tracking to bring it to North America and will launch it in Ontario,” Helmut Herold, chief executive for Canada, tells Recharge. Canada has become a core market for REpower, which has won initial orders in Ontario after huge success in Quebec.
The company invested more than C$10m in the plant because it thought the Ontario wind market would develop favourably in the future. Herold believes that remains the case and that the government is committed to supporting a robust wind sector.
Nevertheless, he is concerned that challenges could result if the market is completely open to competition. That would allow companies to be aggressive with pricing if they use a supply chain outside Ontario. “At the same time, I hope there will be some kind of appreciation for companies who have invested so far in employing people in this province,” he adds.
Another big change for the industry is that wind developers will now be required to engage aboriginal communities, stakeholders and municipalities to identify appropriate locations for projects, with siting requirements taking local needs and considerations into account. Developers cannot qualify to bid for a project without a “significant arrangement” with a host municipality.
“We’re not looking at the world with rose-coloured glasses,” says Chiarelli. “The Green Energy Act was a tremendous success story, but there were things that needed adjusting. One of those was siting of some renewable energy.”
Under the FIT, developers were given contracts without pre-arranged sites. They were required to consult with municipalities, but many communities complained they were given little input. “It was not a strong regime, if I can put it that way,” Chiarelli comments.
However, the rule change does not constitute a veto over projects, which is what municipalities that oppose wind development are demanding. “We can’t have an electricity generation and transmission system that way,” says Chiarelli.
The McGuinty government’s decision to wrest land-use planning power for large renewable-energy projects from Ontario’s 444 municipalities helped galvanise what is now the largest rural anti-wind movement in North America. At least 62 municipalities have passed resolutions declaring that they are not willing hosts for wind farms. “It’s a strong minority, but a minority,” says Chiarelli. “There is still a lot of tremendous support for wind and solar.”
Jane Wilson, president of Wind Concerns Ontario, a non-profit coalition based in east Toronto, says the Liberals wanted to quickly bypass the patchwork of municipal regulations in the province, viewing them as an obstacle to wind development.
Wilson says some groups in her non-profit coalition don’t oppose renewable energy. “It’s the way it was done. No local cost-benefit analysis. The impact of large-scale industrial wind development was never studied in any way,” she alleges. There are more than 1,200 turbines in Ontario.
Opponents link turbines to sleep deprivation, and assert they have destroyed house prices or made property difficult to sell. In an ugly turn, so-called “wind wars” have erupted in several regions — rural landowners filing lawsuits against their neighbours who agree to accept turbines, fraying the traditionally close social fabric in farming communities.
To ease hostilities, the ministry is retroactively changing property tax rules to give municipalities that have or will host wind turbines a larger slice of the fiscal pie. It will also give special consideration to projects where developers work in partnership with districts, municipalities, hospitals, schools or universities. This would help broaden their tax base.
Despite the ups and downs of green-energy politics, Chiarelli remains optimistic about wind and solar. “It’s exciting,” he says. “The stakeholders from these sectors are reasonably happy with what we have been able to create so far.”
Ontario’s installed capacity
Nuclear 2002: 8.74GW | 2012: 12.998GW
Hydro 7.615GW | 7.939GW
Coal 7.564GW | 3.293GW
Oil/gas 3.780GW| 9.987GW (gas only)
Biomass/landfill gas 66MW | 122MW
Wind zero | 1.511GW
Note: Data omits generators that operate within local distribution service areas, except for those that participate in the Independent Electricity System Operator-administered market