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TRCA Pearson Eco-Business Zone District Energy Feasibility Study 10 April 2012 The regulatory rules were favourable for investment If any existing DES will have the option of being grand-fathered out Private investment should not be discouraged by regulation because a utility rate of return is only what should be expected for DE anyway. Enbridge, Corix Utilities and others accustomed to working in regulated environments might be encouraged to commit substantial up-front investment in DE development, resulting in an overall positive economic impact in the Pearson Eco-Business Zone. So this possibility should not be discouraged but neither should it be relied on. 7 Risk, Regulatory & Financing Issues 7.1 Risk Management Plan 7.1.1 Introduction The following sections of the report outline risks involved in development of District Energy (DE) and recommend mitigation strategies. Certain risks with respect to planning, safety and the environment can be mitigated simply through compliance with By-Laws or regulations. Others related to CHP depend on a detailed understanding of regulations as well as market rules. Therefore, understanding of applicable regulations is an integral part of the overall risk management plan which is an essential component of the business plan for DE development. The various risks and related regulations are discussed below generally in the sequence in which they are commonly encountered during the course of DE project development: Planning Marketing Contracts and Pricing Safety Certificate of Approval Environmental Assessments – Provincial and Federal Other CHP Related Approvals and Issues Design Construction Operations 7.1.2 Planning DE developers need to know that they will be able to obtain planning approvals required to implement a proposed project, and the expected timeline. The following discussion highlights the key items that should be understood. Zoning The zoning By-Law dictates land use. For any location, an Energy Centre (EC) may or may not be permitted and there may be restrictions, such as on the height of a stack or on outside storage (which could impact a biomass project). Whether an EC is regarded as an “industrial use” can depend on local practice or decisions. Industrial uses are sometimes not permitted in areas that include the type of buildings that are good candidates for DE service, i.e. multi-storey office and multi-unit residential buildings. 35
TRCA Pearson Eco-Business Zone District Energy Feasibility Study 10 April 2012 Conversely, industrially zoned areas often consist mainly of buildings that are not good DE prospects, such as single-storey warehouse type buildings and big-box stores. When the technical concept for the EC has been developed advice from local planning experts will be needed to determine whether zoning would permit the type of planned DE facility. If not permitted, the next issue would be the least cost and shortest route to secure compliance, e.g. request for a change to the zoning By-Law, a minor variance, find a different site or modify the technical concept. Clearly, this is a strategic issue that needs to be addressed in the feasibility study, soon after the technical concept has been developed sufficiently to allow drafting a high-level description of the proposed EC. Development Permit and Building Permit The municipal planning process usually includes site control in the form of a Development Permit and a Building Permit. Obtaining a Development Permit usually requires a site layout showing the locations of buildings and their use, access to the site and the entry points for utilities. Application for a Development Permit can and should be made soon after engineering has proceeded to the point where a reasonably stable site layout can be produced. A Building Permit would be required before construction can proceed on a new EC. This will typically require more detail on the design of the building than was required for the Development Permit. Application for a Building Permit should be made sometime during the detail design process. Effective project scheduling requires understanding the time-lines to obtain a Building Permit, as it may well be on the critical path. Municipal Consent/Right of Way Agreement The distribution systems of DES are most conveniently located in municipal rights-of-way and other government controlled land, thereby minimizing the extent of easements from private land owners. An Access Agreement is required with the municipality. The municipality has the right to approve the installation of piping, its location and the method of construction. Procedures for approval, maintenance procedures and contacts are usually spelled out in a Municipal Access Agreement. The municipality may also levy an annual fee on the DES for use of the right-ofway. This fee is usually minimal, but sometimes there is a provision that it can be increased (e.g. if the City sees an opportunity to garner more revenue). The economics of DES cannot usually afford providing a significant revenue source for the municipality via a municipal access fee. Any pipe routing not on municipal road allowance would require easements or other similar property agreement with the private landowner, which could introduce additional cost and delays. Consultation with municipal planning staff is recommended to ensure full understanding of the process, timelines and potential cost of obtaining a Municipal Access Agreement for the contemplated route of the thermal distribution system. 36
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