A proposal being considered by the Ministry of Energy could give access to the province's electricity grid to numerous small electricity generators including farmers, municipalities, individual homeowners, community co-operatives and private businesses.

If the program is implemented as proposed in a report the Ontario government commissioned from the Ontario Sustainable Energy Association (OSEA), it will mean that anyone can set up a wind turbine or put photovoltaic panels on their roof and be paid a premium to feed that electricity into the grid, making it not only financially possible to promote green energy, but profitable, too.

In August 2005, then minister of energy Dwight Duncan directed the Ontario Energy Board (OEB) and the Ontario Power Authority (OPA) to develop the terms and conditions for a program of standard offer contracts (SOC) based on the OSEA report.

Standard offer contracts - sometimes called feed-in tariffs or advanced renewable tariffs - allow renewable electricity producers to hook into the grid and be paid a fixed premium per kilowatt hour (kWh) generated.

Paul Henderson, Business Edge
Solar photovoltaic panels on the Kortright Centre are one source of alternative power production.

This is aimed at small producers, generally less than 10 megawatts (MW), and depending on the technology and the resources, rates would vary. If adopted the way OSEA envisions it, this would make Ontario the first province in Canada and the largest jurisdiction in North America to open up the grid and pay a premium for small producers' renewable electricity generation.

Energy Minister Donna Cansfield was expecting the OPA to report back by Dec. 31 with its recommendations as directed by Duncan in August. A spokesperson in the minister's office told Business Edge they would prefer to comment after they have received the OPA's recommendations, which had not happened by press-time.

The OEB regulates the electricity and natural gas sectors in Ontario while the OPA is responsible for ensuring an adequate long-term supply of electricity in the province.

"A business with a large roof capacity would be able to put a solar power system in that would be financially viable," says Melinda Zytaruk, OSEA general manager. "The point is for it to be financially viable for these systems; to have a reasonable profitability."

William Kemp, author of $mart Power: An Urban Guide to Renewable Energy and Efficiency, said: "The government has been under enormous pressure from industry and private individuals for a good long time to get access to the electricity grid. All the stars are aligning for them to actually pull it off and do this thing right."

The way things are looking, even if they don't do it "right" - that is, the way proponents are hoping - there still may be some interesting business opportunities.

In the OSEA recommendation, wind power would receive about 13 cents per kWh and photovoltaic panels about 50 cents. The cost is then borne by all ratepayers.

While that sounds frightening to electricity consumers who believe they are already paying enough, the result "will be like a fly landing on the back of an elephant," Kemp says.

Toronto Hydro customers currently pay five cents per kWh for the first 1,000 kWh used in a month and 5.8 cents per kWh for any additional electricity used.

The OSEA report says: "The maximum cost to Ontario ratepayers is expected to be $.0005 (approximately five one hundredths of a cent) per kilowatt hour from 1,000 MW of wind generating capacity in year 20."

When Duncan first announced the plan, he said that he was sure that people "are prepared to pay a higher price for cleaner energy.”

The reality, according to Kemp and the OSEA report, is that electricity prices are heading up no matter what, and 20-year SOCs with small electricity producers will actually help stabilize prices.

The OSEA is concerned, however, that the OPA recommendations to the government will be a watered-down version of its recommendations and will not look at the long-term price picture, or value-added benefits of such things as distributed generation, lower line losses, rural jobs, rural investment and local technological development and investment.

The association is hoping that the government will hear from businesses and community groups who want to participate in the SOCs.

"The big fear is that there is going to be a flood to the grid," OSEA executive director Deborah Doncaster says. "That the government is going to end up with 20-year contracts with 5,000 different developers all getting 13 cents a kilowatt hour.

"That's a worst-case scenario, but from a lot of people's perspectives that's a great thing. If we can get 5,000 megawatts of green power on the grid at 13 cents, that's looking pretty good compared to what nuclear and gas are going to go to."

There were similar fears about a flood to the grid in Germany when an SOC-type system was introduced in that country, but they proved to be unfounded. Germany now has 16,000 MW of installed wind capacity.

"Germany is one-third the size of Ontario," Doncaster says.

"They have the largest installed capacity in the world and 55 per cent of those projects are owned by local communities and individuals, and are under 10 megawatts. And Germany doesn't have substantially better wind regimes than Ontario."

Potential revisions to the OSEA recommendations could include a cap on production or participation, eligibility restrictions on participation or price limits.

"In limiting the price you are really talking about limiting it to the private sector who may have capital assets and financial resources to capitalize on these kinds of resources," Doncaster says.

OSEA estimates that currently any utility grade project, using wind as an example, costs from $500,000 to $600,000 to do the complicated development and legal work.

A turbine costs approximately $1.5 million. With payment between 10 and 13 cents per kWh and a 20-year SOC, the investor would need 10 years to recoup costs, and then have 10 years of profit. They estimate $120,000 of gross revenue per MW of production.

OSEA sees substantial opportunities for the business sector if SOCs are implemented, such as the possibility of developing a wind turbine and photovoltaic panel industry in the province, and gaining a foothold in what could become an emerging North American market.

In Germany, 45,000 people are directly employed in the wind industry and that number is expected to increase to 110,000 by 2010.

Overall, Doncaster is hopeful, but a little pessimistic about what the government will decide.

"The whole point is to make distributed generation viable, but to not gouge the ratepayer," she says. "What it all boils down to is how concerned the government is to promote renewables. And I don't see from the supply mix study that they're serious about renewables."

(Paul Henderson can be reached at henderson@businessedge.ca)