Greening Canada by Tapping Into the “Solar Gold Rush”

1. Greening Canada by TappingInto the “Solar Gold Rush” • By Tim Murphy • Presented to: Solar Gigawatts • Location: Munich, Germany • Date: May 28, 2009

2. Overview • Solar in Canada • Federal incentives • Ontario • Incentives by other provincial and municipal governments • Roadblocks to solar energy in Canada

3. Introduction: Solar in Canada • Canada’s solar resources • More solar potential than Germany (a world leader in solar energy deployment) • “PV hotspots” such as Regina, Saskatchewan (Yearly PV potential of 1,361 kWh/kW) • Cold weather increases PV efficiency • Resources have been underdeveloped • Criticized by groups such as Green Cross International and the David Suzuki Foundation

4. Federal Incentives • ecoEnergy programs • Renewable Power program • $1.48 billion investment to increase renewable energy sources • Goal: produce 14.3 terrawatt hours • Open to businesses, municipalities, and institutions • Renewable Heat • $36 million investment • Encourage industry and commercial businesses to install solar heating systems

5. Federal Incentives (cont’d) • ecoEnergy programs • Retrofit program • Grants for making energy efficient upgrades to properties • Upgrades must be recommended by certified adviser • Residential: up to $5,000 • Commercial: lessor of: (a) $10/GJ of savings; (b) 25% of cost; or (c) $50,000 • Industrial: lessor of (a) $10/GJ of savings; (b) 25% of cost; or (c) amount to reduce net simple payback to no less than 12 months

6. Federal Incentives (cont’d) • Tax incentives • Accelerated Capital Cost Allowance (CCA) • 50% deduction on cost of renewable energy generation equipment (acquired after February 23, 2005) • Certain intangible project start-up expenses qualify (feasibility studies, engineering and design work) • Canadian Renewable and Conservation Expense (CRCE) • Deduction for certain expenses related to getting project started (e.g. access road, clearing land, service connection, engineering) as long as at least 50% of expenses fall within category of qualifying equipment • Does not include most payments to non-residents, administrative and management expenses, land acquisition, depreciable capital property • Advantage of CRCE is ability to transfer benefit directly to shareholders through flow through share structure

7. Ontario • Most populous province • Integrated Power System Plan (“IPSP”) • Ontario Energy Board (“OEB) approval • Supply Mix Directive: June, 2006 directive to the Ontario Power Authority (“OPA”) • Conservation measures to reduce peak demand 6,300 MW by 2025, including: • Solar heating • Small scale (10 MW or less) customer-based electricity generation • Generation encouraged by net metering • Increase renewable energy by 2,700MW by 2010 and 15,700 by 2025

8. Ontario (cont’d) • Renewable Energy Standard Offer Program (“RESOP”) • Launched November 2006 • First initiative of its kind in North America • Features: • Simplified eligibility and contracting • Standard rates paid for grid-delivered energy • Available only to projects under 10 MW • Rates • Most technologies: base rate of 11.08 cents/kWh (20% indexed to for inflation) plus reliability premium of 3.52 cents/kWh • Solar PV: 42 cents/kWh • Project put on hold due to overwhelming response • 290 contracted PV projects, but most may never come online

9. Ontario (cont’d) • Green Energy and Green Economy Act, 2009 (“GEA”) • Introduced February 23, 2009 • Will amend 20 other Acts (including energy, real estate, planning and environmental legislation) • Measures include: • Feed-in tariff (the “FIT”) • Streamlined project approval process • Right to connect • Province-wide renewable energy standards • “Smart grid” • Financial incentive (e.g. low interest loans for small scale projects)

10. Ontario (cont’d) • FIT • Replaces RESOP • First feed-in tariff of its kind in North America • Expected to launch June 2009 • Renewable producers receive set price for energy fed into grid over a 20-year contract (40 years for water power) • Fears that program will raise electricity prices

11. Ontario(cont’d)Fit Rates

12. Ontario (cont’d) • “Smart grid” • Provisions in GEA provide for its development • Defined as “advanced information exchange system and equipment” • Will allow for greater integration of renewables into energy supply mix

13. Ontario (cont’d) • Incentives outside of the GEA • Ontario Solar Thermal Heating Incentive • $14.4 million program to entice industrial, commercial and institutional sector to install qualifying solar thermal heating equipment • Net metering • Credits consumers for energy they contribute to the grid; reduces electricity bills • Available for projects under 500 kW • Similar to programs offered in other provinces, such as Quebec, Saskatchewan, Manitoba, P.E.I. and Nova Scotia • Tax incentives • Rebate on provincial sales tax (8%) paid on solar equipment • Similar to rebates in other provinces, such as B.C.

14. Provinces and Municipalities • Alberta • No provincial PV incentives • 20 municipalities in the Alberta Solar Municipal Showcase • Provides funding for grid-connected PV installed on municipal buildings • Funded by the municipalities and the Federation of Canadian Municipalities • British Columbia (B.C.) • Released BC Energy Plan in 2007 • Goal: achieve zero greenhouse gas emissions

15. Provinces and Municipalities (cont’d) • Programs in B.C. • Standing offer program • B.C. Hydro purchases energy from small projects (0.05 – 10 MW) • Features simplified process • Rate is lower than Ontario’s RESOP • 100,000 Roofs • Goal: install solar water heaters on 100,000 roofs by 2020 • Participants can receive up to 36% of the cost • progress was slow due to lack of installers • Innovative Clean Energy Fund • $25 million/year levy on sales of conventional energy • Funds provided to renewable energy projects to decrease technical application costs • Solar Communities • Seven communities in B.C. selected to be SolarBC Communities • Each receives $20,000 plus marketing, training and policy development assistance for solar energy projects

16. Provinces and Municipalities (cont’d) • New Brunswick • Embedded Generation tariff program • Producers are paid 9.445 cents/kWh fed into grid • Available for projects between 100kW to 3,000 kW • Northwest Territories • Alternative Energy Technologies Program • Provides funding to develop renewable energy projects; communities (half the cost up to $50,000/year), businesses (1/3 the cost up to $15,000/year) and homeowners (1/3 the cost up to $5,000/year) • Quebec • Net metering program • City of Toronto • Municipal government’s Sustainable Energy Funds • $62 million funds provide interest-free loans for renewable energy projects in the municipal, academic, social services or health sectors

17. Roadblocks • Cost • More financial and tax incentives required to decrease capital and operational/management costs • e.g. Ontario’s RESOP and FIT • Targets • No federal solar targets • 88 MW target in Ontario too low considering potential • it is hoped that the GEA and the soon to be updated IPSP will address this problem • Caps • Decrease potential of incentives (e.g. Ontario’s net metering program limited to projects under 500 kW)

18. Roadblocks (cont’d) • Connectivity • No grid priority for solar power • Inconsistency in connection costs and procedures • GEA should eliminate some of these problems in Ontario by making the following amendments to the Electricity Act, 1998: • Priority connection • Mandating time limit for connection assessments • Making the connection assessment process more transparent • Administrative Deficiencies • Delays during the planning and zoning phase for projects • Addressed by GEA’s amendments to the Planning Act • Application process can be cumbersome • Streamlined under GEA • Some programs are difficult to access; discourages involvement for projects under 1,000 kW • Proposed FIT lottery

19. Questions & Answers • Tim Murphy • Partner, McMillan LLP • Tel: 416-865-7908 • E-mail: tim.murphy@mcmillan.ca 4364786