When Ontario’s Minister of Energy Chris Bentley boasted that the recent review of the province’s clean energy program was completed “in record time,” many in the packed room at the May 2012 Canadian Solar Industry Conference could not help but scoff.
To those who have been waiting six to nine months to have their renewable energy generation contracts green-lighted it was an insensitive statement. The Ontario Power Authority has been unable to keep up with the unexpected volume of applications since 2009, and members of Ontario’s solar industry feel that most of their frustrations would disappear if only Mr. Bentley could get a handle on this bureaucratic nightmare.
Since the collapse of the Ontario auto sector the province’s Liberal Government has been betting on green energy to bring back manufacturing jobs. In 2009 they introduced the Feed-In Tariff (FIT), a program that pays generous rates for renewable energy generated in the province. The promise of lucrative 20-year contracts has attracted dozens of manufacturers to the province, but some have come to regret their decision to set up shop here and have already fled the market.
Faced with uncertainty about the next round of government contracts, many firms have been forced to lay off employees, and are having trouble raising capital. Investors are starting to question whether they will ever see returns. And while industry members are willing to swallow a proposed 20% cut to FIT rates, in return they expect the government to make good on its promise to streamline the regulatory approval process—quickly.
Paradoxically, those who have been pleading with the Energy Minister to get his house in order acknowledge that his Government’s backing of renewable energy is the reason many of the 1,000 delegates at the conference are in business today. Green legislation and policy have already created 20,000 jobs in Ontario, a number expected to rise to 50,000 over the next several years. Most at the conference predict that they will have trouble keeping up with demand once the next round of FIT contracts are announced later this year. But that is little consolation to firms that are presently hemorrhaging money.
Despite the expected boom, the industry’s concern over its long-term stability grows. How drastically will the rules change after the next FIT review, or the one after that, they wonder? A ‘teething phase’ is unavoidable in any new and ambitious program like the FIT, but until the government creates stability in its own domestic market, manufacturers and installers will continue to exit the province, taking newly created jobs with them.
There is a sense among industry members that they are doing God’s work—saving the planet and the Canadian economy at the same time, and they have a hard time understanding why the government is not doing more to slash red tape. Ontario Liberals, however, believe they are moving as fast as possible on renewable energy. Tim Hudak, Leader of Ontario’s Opposition Progressive Conservative Party, has promised to axe the entire Green Energy Act and with it the FIT, a move that would kill Ontario’s fledgling renewable energy sector. As Jonathan Cheszes of Navigant Consulting put it, “The industry is one confidence vote [in the Ontario Legislature] away from collapsing entirely.”
Many voters believe renewable energy has cost them money, even though its role in rising energy prices has been wildly overstated for political gain. As such, Ontario’s minority Liberal Government cannot afford to do too much on clean energy lest it risk losing an election over hydro bills. Mr. Hudak knows this, and has worked diligently to convince the public that Mr. McGuinty and Mr. Bentley are pushing us too quickly toward clean energy.
If the solar industry can avoid its death knell—the election of a PC government in Ontario—it will still face serious challenges. Ontario is a growing player in the global market for solar electricity, but remains insignificant. The US and German industries, already orders of magnitude larger than Canada’s, are in the fight of their lives with their Chinese competitors. While few in the business will say this out loud, it is hard to believe that Ontario manufacturers will be able to compete with China, a country with much lower wages, lax labour laws, and greater economies of scale.
Economic success may lie in Canada’s highly educated and skilled workforce. Rather than exporting physical products, Nic Morgan of Morgan Solar proposes that Ontario sell intellectual property. The argument is hard to reject. Globally, manufacturing capacity for solar modules is twice that of demand, which has created fierce competition and bitter accusations that China is ‘dumping’ its products into markets below cost. It is a harsh environment for Canada’s fledgling solar manufacturing sector. The key, then, to competing with discount Chinese products may be to offer more technologically advanced systems that deliver power at a cheaper per-Kilowatt-hour rate.
As the battle rages, Ontario’s solar industry continues its rapid growth. It will become an increasingly important player in the global energy market, but only if the provincial government can get out of its own way, which it seems committed to doing. Ontario manufacturers’ costs will then continue to fall to where their products are globally competitive, and when that happens, expect a new renaissance for Ontario exports.