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Solar industry lauds Ontario incentives

Tuesday, December 8, 2009

Government incentives such as Ontario's new "feed-in tariff" are crucial to attracting investment to the renewable energy business, solar power executives say, but only if the subsidies remain stable over the long term.

At the Canadian Solar Industries Association annual conference in Toronto Tuesday, top executives of several Canadian solar energy firms praised Ontario's program which pays high prices for renewable power - more than 10 times the normal electricity price for certain solar projects.

The new rules in the Green Energy Act, which require some solar equipment in a project to be made in Ontario in order to earn the subsidy, has prompted several manufacturers to set up shop in the province.

Essentially, feed-in tariffs "attract private capital to the business of creating solar energy, because you can make money doing this," said John MacDonald, chief executive officer of Day4 Energy Inc., a Vancouver-based solar cell maker.

(A feed-in tariff refers to a premium price paid by utilities to electricity producers who generate certain kinds of renewable power that is fed into the grid.)

No only does the new price structure get investors' attention, he said, but it encourages equipment manufacturers to be innovative so they can generate more power for the same dollars they spend - generating even more profits.

But it is crucial that Ontario leave the program in place for the long term, and not change the rules abruptly, Mr. MacDonald added. He said his advice to the government is: "Keep it stable. Don't fiddle with it. Once you've started it, keep stability in the system."

It is inevitable that the government will eventually trim what pays for renewables as costs come down, Mr. MacDonald said, but companies can deal with that if they are given enough notice.

The wrong approach was taken in Spain, he said, where a feed-in tariff was so lucrative that the government suspended it in 2007 and then brought it back with huge changes, almost killing off the booming domestic solar industry in the process.

"There's nothing an investor hates worse than instability," Mr. Macdonald said. "They had instability in Spain and `the solar industry` basically collapsed."

Ted Lattimore, president of Victoria-based solar equipment company Carmanah Technologies Corp., said that while none of his firm's business currently gets government support, "in Ontario there is the opportunity for a massive industry, which for some period of time will be subsidized."

He, too, called for stability, so there is time for the domestic content requirements to encourage the creation of a large-scale solar industry in the province.

The province needs to "be bold about what it is they are trying to do, and then keep those rules in place so that we in industry can respond to it," he said. "If I can figure out a way to make money, I'll go after it with everything I've got."

He said he would consider shifting some of Carmanah's manufacturing to Ontario if it allowed the company to meet the content requirements and get more business under the Green Energy Act.

Michael Carten, executive chairman of Calgary-based inverter maker Sustainable Energy Technologies Ltd., said the biggest market for solar power systems in Canada will likely be for rooftop systems on large commercial buildings.

Solar panels on individual homes will be the next-biggest market, with large, ground-level "solar farms" pumping power into the electrical grid likely to be the smallest segment, he said.

Big profits will come when buying a solar power system is akin to purchasing any other kind of appliance, with reasonable installation costs, he said.

In the meantime, Ontario's feed-in tariff "is very intelligent fiscal policy," Mr. Carten said. "I think this is going to be a very successful experiment."

Kerry Adler, CEO of large-scale solar farm developer SkyPower Corp., said he is concerned that Ontario may change its renewable energy policies because of the departure of energy minister George Smitherman, who spearheaded the Green Energy Act. Mr. Smitherman is leaving the provincial government to run for mayor of Toronto.

Mr. Adler criticized the federal government for its failure to set a firm mandate for the amount of renewable power that Canada will generate in the coming years.