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Giving alternative energy a leg up

TheStar.com: Peter Gorrie - January 10, 2009

In about a month, Energy and Infrastructure Minister George Smitherman will unveil his plan for Ontario's renewable energy future.

Here's hoping he'll unshackle the program that's most likely to increase our supply of electricity from wind, solar, biomass and other alternative sources.

It's the Standard Offer Program - a first for North America when it was introduced in 2006.

The program is a feed-in tariff, a policy that requires utilities to buy any electricity generated from renewable sources at a guaranteed premium rate, usually for 20 years. The aim is to cover the higher up-front cost of these alternatives so they can become an increasing portion of the electricity supply - in the process reducing greenhouse gas emissions and creating jobs.

Germany has shown that a feed-in tariff can work brilliantly. It's a major reason that country has booming wind and solar industries, despite having relatively little wind and sunlight, and leads in the development of other renewable energy sources.

Unfortunately, Ontario's version is so crude and timid, so hobbled with restrictions and red tape, that it's like a horse trying to run with its legs tied. It creates the impression Queen's Park is two-faced - appearing to support green energy while making sure it never threatens the province's main focus, nuclear power.

Standard Offer seems generous: It pays about 42 cents a kilowatt-hour for electricity from solar cells, and 11 cents for any other renewable. Both amounts are well above the stated costs for coal, nuclear or natural gas generation - although those receive substantial hidden subsidies.

Germany and others with successful feed-in tariffs offer not only generally higher rates but also a more sophisticated rate structure, setting a price for each type of renewable power reflecting its actual costs. Since, for example, offshore wind farms are more expensive to install than those on land, they get a bigger payment. That makes more sense than Ontario's one-rate-fits-all scheme for everything but solar. Each source is unique: Why pay too much or too little?

Ontario has also hamstrung Standard Offer by applying it only to relatively small projects - those with a capacity of 10 megawatts or less. Last spring, after some companies manoeuvred bigger projects into the program, the Ontario Power Authority changed the rules to make the size limit iron-clad.

Other jurisdictions, seeking as much renewable energy as possible, don't fret over size. Since big projects enjoy economies of scale, they simply get lower rates. Applied here, a similar system would let large-scale and small, community-based projects co-exist.

An unfettered Standard Offer would also give all forms of renewable energy an equal chance to grow. Ontario now requires proponents of large projects to compete for contracts to supply limited amounts of electricity to the grid. Since the lowest bid wins, and wind power is for now the cheapest renewable, the process shuts out every other source. That's short-sighted: Overreliance on wind power can create problems for the grid; renewable energy works best when the electricity comes from a variety of sources. Besides, the alternatives will, given a chance, grow more competitive.

As well, roadblocks and high costs for tying into the grid mock the requirement for utilities to buy all the electricity Standard Offer participants produce. In fact, they threaten many projects already approved. The result: As now configured, the program can't make more than a tiny dent in Ontario's electricity supply.

Smitherman, apparently impressed by a September visit to Germany (and still Minister of Health when Standard Offer was introduced), should emulate those who say, essentially: Produce what you can; we'll buy it.

If he wants a truly green economy, he'll let Standard Offer run as hard and fast as it can.

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