Alternative Energy: Carmanah Turns Focus on Ontario Solar Sector

B.C.-based company betting incentives will spark increasing market demand

Tuesday, April 17, 2007

VANCOUVER - Carmanah Technologies Corp. first made its name with solar-powered marine lights so tough they stood up to use on buoys in a torpedo testing range.

Eleven years on, the Victoria-based manufacturer is turning its high beams on another market: grid-tied solar power installations in Ontario, where provincial subsidies are drawing interest from rival U.S. suppliers.

"The `provincial` incentives that went live in November of 2006 were intended to really stimulate the demand for solar in Ontario," says Ron Mantay, Carmanah's recently hired business development manager for commercial grid-tie solar power. "And we're starting to see that happen."

Carmanah is betting that the financial carrot will go a long way toward persuading potential clients to pony up for costly solar systems.
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Others have the same idea. SunEdison LLC of Beltsville, Md., which describes itself as the biggest solar energy provider in North America, "is extremely excited about the opportunity" represented by the Ontario market, says chief executive officer Jigar Shah. Other players, ranging from full-service companies such as Carmanah and SunEdison to solar panel makers, are expected to go after their own pieces of an expanding pie.

Ontario's "Standard Offer Program," launched last year, makes small energy producers eligible for 20-year, fixed-price contracts for approved wind, solar, biomass or other green projects. Approved solar projects will be paid a fixed price of 42 cents a kilowatt-hour, compared with 11 cents for wind and biomass projects and roughly seven times the average cost of energy in Ontario. The higher rate for solar reflects the fact that it is less commercially advanced than other green technologies, says Paul Shervill, a vice-president with the Ontario Power Authority.

So far, the agency has awarded 14 solar contracts for a total 40 megawatts of capacity, Mr. Shervill says.

A couple of those are 10-megawatt installations, which would make them among the world's largest photovoltaic projects, he adds.

A 10-megawatt installation is relatively puny compared with dams or coal-fired plants that have generating capacity of 800 megawatts or more. Similarly, solar power installations account for a tiny slice of global energy demand -- less than 0.01 per cent, according to Solarbuzz LLC, a California consulting firm.

But solar energy demand has been growing by about 25 per cent a year over the past 15 years, Solarbuzz says.

Mr. Mantay, an MBA-toting engineer, believes the solar sector is poised for the same type of growth that defined the semiconductor business over the past decade.

Technological advances are making solar installations less expensive and more efficient than in the past, he says. Worries about global warming and reliable energy have prompted government efforts to boost the percentage of renewable energy in their portfolios. And new financing options are emerging that can ease the sting of big, upfront payments.

Ontario's push for more solar power comes as Carmanah positions itself as a comprehensive

solar provider with three technology groups: the solar-powered LED (light-emitting diode) lighting that gave the company its start, solar power systems of the type that Mr. Mantay is selling and LED-illuminated signs.

Since 1999, the company has increased sales by an average 70 per cent a year, but profits remain meagre; it broke even last year on sales of $62.4-million, compared with a share profit of 2 cents on sales of $38.7-million in 2005.

And the company's move into solar systems through a 2005 acquisition took it into a lower-margin business than its traditional lighting business, Fraser Mackenzie analyst James Muir wrote in a 2006 report on the company.

"Whereas the company had historically been able to earn gross margins above 50 per cent, it will now be hard pressed to do better than the mid-30s," Mr. Muir said.

Carmanah, however, believes grid-tied solar systems are poised for exponential growth and wants to stake its claim on that market before others move in on its turf.