Ontario heading for a troubling investor-confidence tipping point

Recent actions are making Ontario a less attractive destination for investment in renewable generation

If you asked people to name a recent energy “tipping point”, many would cite how declining costs have stimulated massive growth in cost-competitive renewable energy sources like wind energy. Ontario, however, is hurtling toward a tipping point of a very different kind. A series of actions taken by the Ford government since coming to power have created enough uncertainty to seriously destabilize both investor confidence and the province’s ability to properly leverage the compelling benefits of its wind energy resource.

The latest action occurred last month, when Ontario’s environment minister revoked the Renewable Energy Approval – which had been fully reviewed and approved in an appeal to the Environmental Review Tribunal – of the Nation Rise wind project in Eastern Ontario. This came just three months before the competitively procured project was due to go into operation, and with more than half of its 29 turbines fully or partially built.

Both CanWEA and the member company involved were quick to object, and the project proponent is challenging the decision in court in an effort to resume construction. CanWEA has sought to participate as an intervenor in that process. Our interest is ensuring that wind energy projects can count on fair, transparent, science-based, and rules-based decision making with respect to renewable energy projects in Ontario. We believe that this decision was inconsistent with those principles.

Latest decision part of a troubling trend

Troubling as it is, the revocation of the Nation Rise Renewable Energy Approval is only the latest in a series of actions negatively impacting wind-energy investment stretching back to the current government’s election. This includes its cancellation of 758 renewable energy contracts, including the contract of the already under-construction White Pines wind project in Prince Edward County, in July 2018. The government has also now directed the electricity system operator to review generation contracts, with a focus on those expiring within the next 10 years, for cost-saving opportunities. CanWEA has made it clear that there are more than 95 operating wind projects in Ontario, which are owned by a multitude of investors, each with different financial models, Community Benefit Programs, land-owner agreements etc., demonstrating there is no simple one-size-fits-all approach to realize cost savings. Recognition of this fact is critical because any decisions taken here have the potential to create significant negative repercussions throughout Ontario communities, and the broader private equity and investment communities.

The Ford government is clearly hoping the decisions they’ve made will play well with price-sensitive consumers and has made several misleading and inaccurate statements about renewable energy to justify them. For example, they have regularly attempted to pin electricity cost increases on wind and other renewables, when the increases, in fact, reflect the build-out of all forms of generation, along with the much-needed reversal of long-term under-investment in transmission infrastructure.

And while Ontario currently has an over-supply of electricity, that too is a product of investment in all forms of electricity generation. It will also change within just a few years, in part due to the massive refurbishment of the province’s nuclear fleet that is upcoming and the retirement of the Pickering nuclear generation station. Other Canadian governments, particularly in the Prairies, have been planning to meet future supply needs and transform their electricity grids through a significant build out of new, affordable wind energy. In doing so, they are leveraging what is now the lowest-cost source of new electricity generation on a levelized cost of energy basis and benefitting from the valuable grid-management flexibility it can provide.

Consumers will pay a higher risk premium

Ontario, in contrast, has taken actions that will deter wind energy investment. The types of actions taken have made Ontario a less attractive destination for investment and are likely to result in higher costs for new renewable energy in Ontario as investors seek to protect themselves from the fact that investments in Ontario are perceived as being higher risk than in other jurisdictions.

If Ontario wants to continue to join in the fight against climate change, and to demonstrate that it is truly open for business, we urgently need a re-stabilization of this government’s treatment of renewable energy investments. CanWEA remains eager to help build a clear and stable policy and market framework, in which all energy technologies can compete on an equal footing and based on the value they deliver to the electricity grid. But that will mean little unless we also see renewed respect from the Ontario Government for existing approvals and contractual commitments.

Background

• Read feature media coverage of the government’s Nation Rise revocation and its implications for Ontario.
• Read the full commentary by Conservation Biologist and University of Northern British Columbia Assistant Professor Erin Baerwald, and by Environmental Defence Executive Director Tim Gray.
• Read the statement of the company that is building the Nation Rise project, responding to the revocation.
• Ontario has been Canada’s leading wind energy market place, with more than 5,000 MW of installed capacity as of December 2018, meeting approximately eight per cent of electricity demand. It is also at the heart of a growing wind turbine operations and maintenance business serving the national industry.
• The projected economic benefits of wind energy investments in Ontario between 2006 and 2030 include a $6.2 billion contribution (direct and indirect) to provincial GDP and a range of more specific benefits, the scope of which is jeopardized by decisions such as the Nation Rise revocation.
• Annual analyses continue to track a remarkable and ongoing decline in the cost of wind energy, which is already the lowest-cost source of new generation on a levelized cost basis.

Photo: Michael Houston

Robert Hornung

President of the Canadian Wind Energy Association