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October 22, 2009

Ontario's small-scale renewables

Peter Gorrie

Solar Panel"Ontario’s Renewable Energy Standard Offer Program,” according to the Ontario Power Authority, the Crown corporation that administers it, “has exceeded all expectations – achieving an excess of 1,000 megawatts of contracted projects – surpassing the 10-year target for renewable energy in the first year of the program!”

Renewable energy, proponents argue, could generate much more electricity than it does now.

They say that we’re just beginning to tap the potential of wind, solar and biomass, as well as hydro projects previously considered too insignificant for development.

Combined with aggressive conservation and efficiency measures, these sources could meet a large part of Canada’s demand, thereby reducing greenhouse gas emissions and the need to handle radioactive fuel and waste.

There are two visions, though, for renewable energy.

One involves large wind and solar installations sending torrents of electricity to distant consumers through long-distance, high-voltage transmission lines – much like our current system, but with renewable energy replacing coal- or nuclear-fuelled generation.

The other calls for a large number and variety of smaller generators – some stand-alone, others in industrial sites, businesses or homes – each close to where the power is needed and delivered through local networks.

These visions aren’t mutually exclusive; each has pros and cons. But opinions differ on whether small-scale, widely distributed power projects could ever fill more than a niche market.

While several European countries offer support for small-scale renewables and a few states in the United States are considering it, only Ontario reserves a program explicitly for them, so it has something to add to the discourse.

There is, in fact, plenty of scope for such projects. But they face limits too, mainly because they’re expensive, and many of their advantages are peripheral to their contribution to the energy supply.

There are three types of small-scale renewables:

1. Off-grid or stand-alone systems produce electricity for the generator’s home or office, and are a tiny element.

2. Net metering involves homes and businesses that produce electricity from renewables such as wind or solar.

If they require more than the power they produce, these generators can buy it from the grid.

If they produce a surplus, their meters reverse and they are billed for the amount they consume minus what they put into the grid.

While allowed in much of North America and Europe, net metering has not been widely adopted.  When used, electricity is usually generated from micro-sources.

3. Feed-in tariffs are paid to generators for the electricity they “feed in” to the grid, independent of what they consume. These tariffs can be applied to projects of any size.

Ontario’s policy that promotes small-scale generation, the Renewable Energy Standard Offer Program, is a feed-in tariff scheme.

Announced in 2005 as part of a government commitment to double the province’s renewable energy supply by 2025, it pays a premium price, guaranteed for 20 years, to “small” projects, defined as those that have a generating capacity of less than 10 megawatts.

Such solar installations receive 42 cents for each kilowatt-hour – nearly seven times what consumers now pay, while wind, biomass and other renewables, which are less costly options, get almost twice the going rate.

In a separate program, all projects above 10 megawatts must go through bidding processes in which proponents offering the lowest price get access to the grid.

Ontario’s peak generating capacity is nearly 30,000 megawatts. Renewable sources, developed through these programs, and conservation are intended to at least fill the 9,000-megawatt shortfall that will be created by the government’s promised closing of its coal-fired generating stations within the next six years.

The Standard Offer Program, often referred to as RESOP, can support no more than 3,000 megawatts, says Jim MacDougall, the Power Authority’s manager of distributed generation.

That’s only 10 per cent of peak demand and one-third of the shortfall. Since the limit is based on maximum generating capacity, and wind and solar operate at less than one-third of their rated maximums, actual production would average closer to five per cent.

While there is little opposition to the policy, experts dispute whether small projects should – or could – get a larger share.

The Power Authority says the target is based on inherent limits of small-scale renewable generation.

Critics insist it could be much higher if regulatory bodies increased the payment rates, and removed unreasonable costs and rules that threaten projects, some of which have already been approved.

Most significant is a charge for transmission system upgrades and connections – a fee that is unheard of in Europe.

It might cost a household $10,000 to hook up to the grid.

For example, a biomass project near London, Ontario, which involves converting manure from 2,000 cattle into 1.3 megawatts of electricity, is faced with a “ludicrous” hookup charge of $500,000, according to Gary Fortune, a consultant involved with the project.

Despite widespread agreement on the benefits of small-scale renewables, Ontario regulators “don’t seem keen on dealing with small generators,” says Doug Fyfe, head of a Southwestern Ontario co-operative that for three years has fought for approval of a 10-megawatt wind farm.

Unlike their more traditional cousins, renewables produce minimal pollution and greenhouse gases.

Their use avoids the massive costs, as well as the real and perceived dangers, of nuclear stations, and when renewables are located close to consumers, their use cuts transmission costs and losses.

Moreover, their use can reduce the need to build new, costly, large-scale transmission lines while increasing the efficiency of local grids, since they fill up under-used capacity.

A network of small, widely distributed generators is also less prone to major blackouts than one dominated by a few large sources.

Renewables create more local jobs than large projects, many of which are operated by companies from outside the province, and present struggling farmers with a potential source of income. (This feature is recognized by Ontario’s agriculture ministry, which offers special grants to farmers, touting them as a way to “promote rural development.”)

Numerous and visible, small-scale energy projects help to make people more conscious of electricity consumption and renewable alternatives, and some biomass plants also produce liquid fertilizer, heat, biodiesel and even bedding for stalls. The impediments, though, are substantial. One is cost.

Advocates of renewables correctly argue that fossil-fuel and nuclear generation enjoy substantial hidden subsidies while major expenses, such as pollution impacts and safe storage of spent radioactive waste, aren’t included.

As a result, it’s difficult to compare the cost of renewables with that of conventional energy.

Nonetheless, among renewables, a kilowatt of electricity from most small projects costs more than a kilowatt from large ones. The balance is only partially offset by lower transmission costs.

At present, the premiums paid through the Standard Offer Program don’t add up to much because they apply to only a tiny portion of the electricity supply.

If the Ontario Power Authority were to expand the program, however, the expense would increase as well.

Moreover, developers of small renewables say they need bigger payments.

Proponents of wind energy want 13 to 14 cents per kilowatt-hour. Biomass needs at least 20 cents, says Fortune. Germany, he notes, pays 30 cents.

Solar developers would like close to the 80 cents paid in Germany and Denmark.

The Power Authority must keep prices in line, and it’s for government to decide whether support should be more generous, MacDougall says.

Side benefits make small-scale power “a policy value rather than a cost-effectiveness value or impact-on-ratepayer value,” he adds.

Another constraint is Ontario’s concentrated population. Whereas in Europe, the electricity load is widely distributed, in Ontario, about two-thirds of demand is packed into the Greater Toronto Area, says Amir Shalaby, the Power Authority’s vice-president of system planning.

There’s potential to install renewables in the Toronto area, but, at least according to him, there isn’t nearly enough.

Meanwhile, many small projects are situated in areas with abundant electricity. Finally, the Power Authority says capacity and technical issues with local transmission systems further limit small-scale renewables.

Even Germany faces constraints on small-scale generation. Most of its renewable projects are large. Its experience suggests that the main potential for small-scale projects is in indirect generation – solar water heating and geothermal temperature control – that could displace both electricity and fossil-fuel consumption.

Starting next year, Germany will require that all new homes incorporate renewable energy for some space and water heating.

None of this puts small-scale renewables at a standstill though.

With nearly 1,600 megawatts still up for grabs under Standard Offer, there are hundreds of mini-opportunities and a good chance for Ontario to shed some light on how big they can become.

Peter Gorrie is a Toronto-based freelance writer specializing in environment and energy issues.

Reprinted from Peter Gorrie, "Renewable Ontario," Alternatives, 35:1 (2009). Used with permission from Alternatives Journal.

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