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October 01, 2011

How Fit is it? A Review of the Green Energy Act and the Feed-in Tariff Program for Water and Wastewater Projects

The Green Energy Act was enacted on May 14, 2009. Over the months that followed, a number of new regulations and amendments were drafted and declared in force. On October 1, 2009, the Ontario Power Authority began accepting applications under the Feed-In Tariff (FIT) program. The FIT program was the most highly anticipated component under the Green Energy Act.

In the fall of 2009, we wrote in this publication about the potential that the FIT program could hold for the water and wastewater industry. Now, two years later, the FIT program is set to undergo a comprehensive review by the OPA. In this update article, we assess the growing pains and the impact of the Green Energy Act and the FIT program on the water and wastewater industry.

The Green Energy Act1 and its associated regulations contemplated a number of sources of renewable energy. These include wind, solar, biomass, biogas and water. This article will focus on renewable energy projects that use biomass and water to generate electricity.

Definitions, rates and contract lengths

Biomass is defined in regulations under the Electricity Act and incorporated by reference in the FIT contract as “organic matter, other than source separated organics, that is derived from a plant or animal and is available on a natural renewable basis.” This definition includes sewage biosolids and waste from the operation of a sewage works, subject to the Ontario Water Resources Act. However, the sewage must be available on a natural, renewable basis.

Biomass also includes a number of other materials, such as waste from harvesting or processing agricultural products and forestry products; organic waste from a greenhouse, nursery, garden centre or flower shop; pulp and paper biosolids; and waste from food processing.

Biofuel is defined as “a liquid fuel made solely from biomass.” 2 Since the definition of biomass includes sewage biosolids and waste from a sewage works, biofuel generated from these sources is eligible for the FIT program.

During the initial introduction of the FIT program and the regulations under the Green Energy Act, there was much discussion and uncertainty about whether sewage biosolids and residual sludge from wastewater treatment plants would be included within the definition of ‘biomass’ and, as an extension, biogas. While the regulations are clear that sewage biosolids are within the definition of biomass, it is noteworthy that the Ontario Power Authority website for the FIT program describes bioenergy as “residual materials from forestry operations..., waste matter from agricultural production and animal livestock activities, and by-products of food-processing operations.”

Using sewage biosolids from wastewater treatment plants to generate renewable energy could turn a form of waste into a source of revenue for resource challenged wastewater treatment plants. However, uptake of the FIT program for biomass and biogas projects has been slow.

Biomass projects available under the FIT program can range from less than 10 MW to greater than 10 MW. Rates for projects range from 13.0 cents/ kWh to 13.8 cents/kWh, based on the size of the project, with an additional 0.4 cents/kWh for community projects and 0.6 cents/kWh for projects with Aboriginal participation. Contracts are for a period of 20 years.

Biogas projects under the FIT program can range from less than 500 kW to over 10 MW. Rates range from 10.4 cents/kWh to 16.0 cents/ kWh, based on the size of the project. Biogas projects are also eligible for the same rate increase as biomass projects, where there is community or Aboriginal participation. As with biomass, biogas projects are for a period of 20 years.

Sizes of waterpower projects under the FIT program can range from less than 10 MW to a maximum of 50 MW. Smaller ‘run of the river’ or ‘very low head turbines’ water power projects have little impact on the environment. However, larger projects on greenfield sites may have more significant environmental impacts. Rates range from 12.2 cents/kWh to 13.1 cents/kWh, with an increase of up to 0.6 cents/kWh for community projects and 0.9 cents/kWh for projects with Aboriginal participation. Contracts are for a period of 40 years.

Waterpower, biogas and biomass projects are eligible for increased rates for production during peak periods. Projects are subject to a peak performance factor of 1.35 for peak hours and 0.90 for off-peak hours. This creates an incentive for biomass, biogas and waterpower projects to produce the largest amount of electricity during peak hours, while avoiding or limiting electricity production during off-peak hours.

Applications made and contracts granted

To date, the vast majority of both applications and FIT contracts are for solar and wind power projects. Out of a total of 8,076 applications at the time of writing, only 26 have been for biomass projects. Of these 26, five were rejected or withdrawn. To date, three biomass projects, totalling 18 MW, are under development. Biogas projects have received more attention, with 44 applications for biogas projects. To date, there are four biogas projects in operation, totalling 2 MW, with 16 projects, totalling 17 MW, under development. One wastewater to energy project has been in commercial operation since 2006 – the 1.6 MW Hamilton Digester Gas Cogeneration Plant, under a 20-year Renewable Energy Supply I (RES I) contract with the OPA.

Water projects are faring better – 100 applications out of 8,076 have been for waterpower projects. From the 100 applications, 49 waterpower projects are currently under development. These 49 projects will add a total of 188 MW to the grid. In comparison, there have been over 7,500 applications for solar projects, totalling 7,449 MW. Wind projects have received greater attention and publicity, with 281 applications, totalling 11,561 MW. There are 57 wind projects under development, totalling 2,124 MW.3

It is unclear why there has been such a low uptake of biomass, biogas and waterpower projects compared to solar and wind. Mark Powell, CEO of the WaterPower Group has a straightforward answer, “It is harder – water power projects are more capital intensive and take longer to construct.” While water power provides for a high rate of return after the pay-back period, the contracts are not well understood. In the case of biomass and biogas, a lack of projects initiated by wastewater treatment plants may be the result of a lack of clarity in the definition of biomass and, by extension, biogas.

Regulatory approvals

Regulatory approvals Biomass and biogas projects require a Renewable Energy Approval (REA). REAs were introduced as a “streamlined approvals process” for renewable energy projects. The REA has been controversial since its introduction because it removes municipal planning powers. REAs have been challenged in front of the Environmental Review Tribunal and the civil courts, primarily related to the citing of wind power projects. To date, REAs have withstood these challenges.

Water power projects remain under the previous approval system and are required to undergo a provincial and, possibly, a federal Environmental Assessment, no matter whether they are large or small. This is a more difficult and time consuming process. In some cases, such as for very low head turbines, it is unclear why a simplified approvals process is not available. Projects utilizing very low head turbines are generally installed on existing dams and have minimal impact on water flow, water levels and biological species. “Community-based low head water power projects actually have a positive carbon footprint,” says Powell. Nevertheless, these projects must undergo the longer, more arduous approval process.

FIT evaluation

So, at the two-year mark, how is the FIT program doing?

The FIT Program and its associated regulatory approvals have suffered from numerous growing pains across all renewable energy sources, including complaints and concerns about grid capacity, connection delays and moving projects from the application stage to commercial operation. There have been challenges to the Renewable Energy Approvals, particularly as they relate to wind turbines. There has also been a lot of discussion around rates – too high or too low – that resulted in the Ontario Power Authority reducing rates for ground mounted solar projects outside of the review period. Additionally, in May 2010, the Ontario Power Authority decided to no longer allow behind-the-meter facilities under the FIT program. This change applied across all energy sources, however, behind-the-meter facilities would be particularly beneficial, where electricity would be used within the facility, such as for a wastewater treatment plants. This change may have deterred some potential applicants.

Of interest to readers of this publication however, is the comparatively small number of biomass and waterpower projects. This may be a missed opportunity. “Sustainable and responsible use of water is imperative for any business strategy,” says Powell.

OPA’s FIT review will be a good opportunity for those parties interested in generating renewable energy from wastewater treatment plants and existing dams to argue for conditions to encourage the development of these sustainable energy sources.

End notes 
1 O. Reg. 328/09, published in the Ontario Gazette on September 26, 2009. 
2 Ibid
3 Bi-weekly FIT and microFIT Report Data, as of July 22, 2011.


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