Municipalities, school boards, others hit by Ontario cancellation of renewable energy contracts

Thestar.com
July 17, 2018
Shawn McCarthy

The Ontario government’s move to cancel renewable energy contracts will hit municipalities, farmers, school boards and First Nations who were developing small-scale electricity projects to generate additional revenue for their operations.

The cancellation of 758 renewable projects that had not yet received final approval will nonetheless cost provincial taxpayers millions of dollars, as owners who are spread throughout the province invoke compensation clauses in the contracts to recover money they have already spent.

Energy Minister Greg Rickford defended the terminations in the provincial legislature this week, saying they represented an end to “wasteful spending” by the previous Liberal government.

“This is not about anything more than a savings of $790-million to the taxpayers,” he said, referring to the 20-year cost of the 440 megawatts of renewable energy that was being shelved.

Contracts for the projects cancelled last Friday have clauses that allowed the Independent Electricity System Operator to terminate them prior to final regulatory approvals, energy lawyer Jake Sadikman, a partner with Osler Hoskin & Harcourt LLP, said Tuesday.

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However, there are also also compensation clauses that leave Ontario power customers on the hook to cover at least some of the development costs. Mr. Rickford indicated Tuesday those costs could range up to $200-million in total.

That’s on top of whatever liability the province has incurred by killing the White Pines wind project in Prince Edward County that had received final regulatory approval and is nearly completed. The project’s German owner, wpd AG, said it will seek $100-million in damages from the government.

The cancelled projects fall into two categories: larger-scale renewable generation where developers had to demonstrate local support and partnership with Indigenous communities, and smaller solar and bio-energy contracts that were often owned by farm co-ops, municipalities, school boards and local utilities.

Mr. Sadikman said there was some relief in the industry that Premier Doug Ford did not go after the contracts of existing renewable energy providers.

Project owners range from the City of Toronto to the rural municipality of Minto in southwestern Ontario, both of which were planning solar rooftop projects. They include school boards such as the Sudbury Catholic District board and the Waterloo Catholic District board, which planned to mount solar panels on schools in order to generate some additional revenue. And they include farms and farmers’ co-ops that were installing bio-energy projects in which electricity would be generated from animal and food waste.

The government cancelled four planned hydro dams along the Trent-Severn Waterway – including three being developed by municipally owned utilities from Peterbough and Orillia. The dams are part of Parks Canada’s restoration of the historic canal system that links Lake Ontario to Georgian Bay.

Peterborough Utilities – which pays more than $5.6-million in dividends to the city – lost two hydro projects as well as contracts for 11 small-scale, ground-mounted solar developments.

“The two hydro projects represented an investment of between $50-million and $60-million here in the Peterborough region,” John Windsma, the utility’s vice-president for generation, said in an interview. The solar projects would represent another $22-million in capital costs if they were to go ahead, although the utility had not fully committed to them, he said.

Mr. Windsma expects to be able to recoup more than $1.1-million in costs, but said the utility will still lose $500,000 as a result of the cancellation. He said the loss will not be passed on electricity customers, but will reduce the dividends the utility pays to the City of Peterborough.

Koskamps Family Farms in Stratford, Ont., lost a contract to produce 250 kilowatts per hour of power from a bio-energy digester that would run on manure and food waste from local sources. In addition to the power, the operation would also produce a dry fertilizer that would eliminate the need for commercial products.

The farm – which has dairy cows and cash crops – saw the renewable electricity contract as a way to generate revenue while disposing of waste and avoiding other costs, family member Chris Huizinga said Tuesday.

“We had the capacity to do this and give a sustainable source of power 24 hours a day,” Mr. Huizinga said. “To lose out on that opportunity, it hurts.”

Project owners are still working out what options there are for recouping losses. Otter Creek wind farm is a 50-megawatt project in the municipality of Chatham-Kent that is owned by Boralex Inc. of Montreal, Renewable Energy System Group, and the Walpole Island First Nations.

In a statement, Boralex – which trades on the Toronto Stock Exchange – said it will “evaluate its options in regards to this project.”