-----

Resources



Market News

 October 29, 2009
Green Energy Act could create $4.5 billion in value

 A detailed analysis of the business case for power generators, transmitters and local distribution companies following the introduction and enactment of Ontario’s Green Energy Act, finds the act has the potential to create significant value.

Mississauga, Canada - The report on the Green Energy Act’s short and long-term impact is the outcome of an independent study conducted over the last year, while the Act was working its way through the legislature, say the study authors, Hatch Management Consulting.

The study, using technically viable and conservative parameters, scenarios and assumptions, simulates the returns, the value created, the productivity impact and the financial cash-flow-at-risk flowing directly from the Act, and subsequently, from the provincial government’s active support of the Act’s objectives.

Some of the barriers identified and analysed included:

  • environmental permit delays,

  • uncertainty of technology choices,

  • the unknowns of Ontario’s manufacturing sector,

  • significant grid integration challenges,

  • construction challenges if several new renewable projects rush to pools of specialists at the same time,

  • locating appropriate project sites,

  • ensuring adherence to codes and standards still under development, and

  • probable responses to the changing roles and mandates of government agencies that regulate the electricity sector.

The study concludes that the Act can create tremendous value for renewable generators and delivery entities, while reshaping the energy landscape in Ontario, provided the uncertainties around the sustainability of the program, and barriers to project development are addressed.

In addition to the above central conclusion, five observations will be relevant to a provincial debate about how best to unlock the value from the Act and sustain the momentum for Ontario to become a leader in renewable generation. Specifically, an overarching strategy would need to consider:

  • That renewables technologies under the proposed regulation can generate significant value while the province concurrently develops energy-efficiency strategies and messages to lower demand.

  • That the $4.5 billion NPV-positive business case (2009 dollars) remains a target for the province. Decisions taken by the provincial government, energy regulators and energy participants should aim to enhance this target.

  • That the domestic content requirement regulations present an opportunity, and risk, for Ontario. The regulation could turn Ontario into a renewable technology centre with an ecosystem of businesses operating across the energy value chain.

  • That a provincial office should be created to invest in and research an integrated portfolio of proven and emerging renewable technologies and planning tools.

  • That an integrated renewables implementation strategy would aim to coordinate all stakeholders and their resources to ensure the value identified is in fact captured.

Hatch Management Consulting is a global consulting firm with principal offices in Beijing, Johannesburg, Santiago, Pittsburgh, Sao Paulo, New Delhi, Mississauga, Brisbane and London (UK).

View "Unlocking Value from the Feed-in Tariff in the Ontario Green Energy Act" [pdf]

For More Information: Hatch