November 24, 2010 / 8:24 PM / in 7 years

Ontario expects rates to drop for green power

OTTAWA (Reuters) - The Canadian province of Ontario is expected to reduce the rich rates it pays for green energy next year, but the government will introduce changes in a way that continues to support investment in clean power sources, the minister of energy told Reuters on Wednesday.

"I think most in the industry would expect that the rates will likely go down, but we're confident we'll do that in a way that maintains confidence in the investment climate in Ontario," Brad Duguid said in an interview.

Canada's most populous province launched an incentive program for renewable energy producers last year, aiming to create jobs and eliminate coal-fired power generators.

On Tuesday it expanded on its green energy program by outlining a 20-year plan that will emphasize nuclear power, renewable energy, and conservation, but will also see a doubling of electricity rates over that period.

Feed-in tariffs introduced in October 2009 offer above-market prices to producers of energy from renewable sources like the sun and wind. They are the richest and most comprehensive in North America and follow similar programs in Europe.

It is expected that any rate changes would be discussed and made in consultation with an industry group, similar to a group formed this summer when the province said it wanted to cut the rate for small ground-mounted solar projects, Duguid's spokesman said.

Tariff rates are reviewed every two years by the province, a process that starts in 2011 and will conclude by the autumn, Duguid said.

Japan complained to the World Trade Organization in September that Ontario's Green Energy Act and its local procurement requirements represent a "prohibited subsidy."

Duguid said WTO talks are currently under way, so he could not comment on progress or provide any details.

NUCLEAR "CLOUDS TO CLEAR"

Under the 20-year plan announced on Tuesday, Ontario committed C$87 billion ($86.1 billion) to meet its future energy needs and lower greenhouse gas emissions.

It plans to buy two nuclear reactors and refurbish 10 others, while investing in new wind, solar, hydroelectric, and biomass power. Coal power will be eliminated by 2014.

Critics say Ontario is significantly underestimating nuclear expansion costs, throwing into doubt the province's forecast of a 3.5 percent annual electricity rate increase over the next 20 years.

The federal government's plan to sell its troubled nuclear technology agency, Atomic Energy of Canada Ltd, from which Ontario planned to buy the two reactors, raises further questions.

"There's no question that the federal government's decision to put AECL up for sale was problematic for us in the middle of our procurement process," said Duguid.

"We're eagerly awaiting for the clouds to clear around AECL. We expect that will be soon, and when that takes place we will determine where we go from there in our efforts to purchase two new units, and ensure that we do so at a fair price."

The province will spend about C$33 billion on nuclear power, which represents the "best possible estimates" currently available, Duguid said.

Nuclear power will continue to make up around half the province's power supply, while renewable energy sources will increase to about 13 percent in 2018 from 3 percent today.

"The 10,700 megawatts of renewable energy that we plan to have online by 2018 is a target; we could ultimately end up with more," Duguid said.

($1=$1.01 Canadian)

Reporting by Susan Taylor; editing by Rob Wilson

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