(February 24, 2012) Where you live in Ontario will have a bearing on what constitutes a “green” energy project by the Ontario Power Authority (OPA) under their program(s) and what they will pay per kilowatt hour (kWh) – as the town of Bancroft discovered.

The Swedish retail giant IKEA installed solar turbines on their roof and are paid 70.3 cents a kWh ($703.00 per MWh) and the City of Markham installed solar panels on the roof of their Civic Centre with the help of a $2.4 million grant from the province and received the same 70.3 cents per kWh.

If you are the town of Bancroft, in the County of Hastings, however, you must borrow the money needed to refresh an old hydro dam on the York River, a Madawaska River tributary.  The hydro dam opened at the turn of the 19^th century and operated until 2003 producing hydroelectric power but shut down because the turbines had reached the end of their useful life.  In 2001 the dam ownership was transferred from the public utility commission to a new town owned corporation, Bancroft Light & Power Corporation (BLPC) as mandated under the Electricity Act, 1998.  BLPC decided to pursue refurbishment of the dam, commenced the process and hired a contractor to execute the work.  The contractor set about refurbishing the dam and installing two 300 kW turbines which could potentially produce enough electricity to power 500 homes. This is more then double the installed combined capacity of the aforementioned solar panels on the roof of IKEA’s retail outlets and the Markham Civic Centre and would operate at a far higher output of rated capacity then the 13/15% of the solar panels.

As things progressed the installation of the turbines and the small adjustments to the dam created a number of delays and the start-up became a series of testing and adjusting the automated systems, etc. In all the dam operated for over 500 hours as those stop and start events occurred.  As the project moved along BLPC applied for a contract with the OPA, anticipating that they would receive 11 cents a kWh, via the RESOP program, for the hydroelectric power they would deliver to the grid.  The RESOP program was cancelled when the Green Energy Act was passed and the feed-in-tariff (FIT) program developed by the OPA promised 13 cents a kWh for hydro so the application was made to gain access to this higher pricing.

Concurrent with the application to the OPA,  BLPC arranged to borrow $2 million from Infrastructure Ontario to pay for the refurbishment of the dam.

Infrastructure Ontario (IO) is “a crown corporation wholly owned by the Province of Ontario and established by the Ontario Infrastructure and Lands Corporation Act, 2011.” So one of the McGuinty governments creations, IO, agreed to lend money to finance a project and they found it to be an acceptable risk while another McGuinty creation, the OPA, was expected to bless the project.  The monies paid by Ontario ratepayers via the FIT contract would be used to retire the loan.  Sounds ideal, and hydroelectricity, (unlike wind or solar generated power) can be ramped up or down to meet demand and isn’t subject to the wind blowing or the sun shining.

Unfortunately for BLPC, whose Board of Directors have been operating the plant (without pay), the OPA decided that because the dam had operated more then 500 hours (prior to the FIT application) it did not qualify under the FIT program and the town has been forced to sell the power generated via the Independent Electricity System Operator’s (IESO) hourly Ontario energy price (HOEP) market. The  HOEP during 2011 averaged 3.15 cents per kWh ($31.50 per MW).  The net result  is revenue generated is insufficient to maintain the facility and service the debt to IO and may impact Bancroft’s municipal taxes as the town guaranteed a separate Community Futures Development Corporation loan.

Leona Dombrowsky, the Liberal incumbent lost her seat in the Ontario Legislature last fall and this may have had some bearing on that. The Liberals should have breached the rules on this one at minimal cost as compared to cancellation costs of the two gas generation plants in Oakville and Mississauga to retain those two seats.