Industry Insight
Part One: Ontario’s feed-in tariffs attract solar investment
19 April 2010
As feed-in tariffs (FIT) are finally introduced in Britain for wind and solar, the province of Ontario in Canada may provide an indication of what can be expected on the renewables front as a result.
By Elizabeth Block
Ontario upgraded its tariffs in October 2009 as part of its new Green Energy Act, and in April 2010 approved a total of C$8bn in contracts for a range of larger renewable energy projects, above 500KW, slated to generate about 2,421 MW in capacity.
FITs ensure that anyone generating electricity from a renewable energy source, including homeowners, small businesses, or large electric utilities, can sell that electricity into the grid and receive long-term payments for each kilowatt-hour produced. Payments are set at pre-established rates, often higher than what the market would ordinarily pay, to boost the prospects of renewable energy developers.
In Ontario, the rates for solar vary for rooftop and ground mounted, but are considered especially generous: up to 80.2 cents (Canadian) per KWhr for small solar power up to 10KW, ranging down to 44.3 cents for ground mounted.
This is well above the market price of 3.44 cents per KWhr for electricity in Ontario and will be financed by higher hydro bills for consumers.
Special measures favour First Nations projects, also called “Aboriginal”, and community projects, depending on level of equity ownership.
In comparison, a typical 2.5kW PV system for an existing home in the UK would attract 41.3p per KWh, whether that electricity is exported or used by the householder.
A further payment of 3p per kWh is to be made for each unit exported to the grid. New-build properties with solar panels will get a lower tariff of 36.1p per kWh. In Germany, projects at less than 30kW get 57.4 euro cents per kWh.
Ontario inspiring other provinces
Following the introduction of FIT in October 2009, thousands of applications were filed.
The Ontario Power Authority ´s announcement to award just over C$8bn in larger renewable energy projects to dozens of companies, mainly solar, is the largest investment of its kind in Canadian history with other provinces considering similar legislation.
The OPA approved a total of 184 projects larger than 500 KW, about 2,421 MW of green-energy capacity, assuming the projects are completed.
The OPA had earlier approved 510 micro and small/medium sized FIT contracts totalling 112 MW.
Overall, about C $9bn in private sector investment is projected. "These projects are the latest accomplishments of the Green Energy Act, which is making Ontario a place of destination for green energy development, manufacturing, and expertise." said Ontario’s Energy & Infrastructure Minister Brad Duguid.
"The investments generated by FIT will not only create a projected 50,000 green jobs in three years, but will also build a coal-free legacy for future generations." Ontario plans to close down its coal-fired plants by 2014.
Ground-mounted solar accounts for 76 of the larger solar projects, amounting to more than 600 MW, about a quarter of the total capacity expected.
Why FIT revised
Ontario, which has been hit hard in parts by the auto slowdown and many plant closings, had an earlier FIT, introduced in 2006, but the payment regime was viewed as too small to encourage development.
It was revised in 2009 as part of the Green Energy Act.
Among other highlights, a “green lighting” regime ensures that applications for facilities up to 500 KW can be connected to the grid without the detailed impact assessments required for larger projects.
Investment from South Korea
The largest single investment in renewable energy in Ontario to date came earlier this year from South Korea’s Samsung: C $7bn for a Samsung-led consortium to build 2GW of wind and 500MW of solar generation in Ontario.
The OPA has agreed to purchase the output under the province’s new renewable energy tariffs with power is to be provided by 2016.
All the foreign companies investing in Ontario have to follow strict local content rules to ensure that the province’s goods and labour are used.
Again, these rules could serve as a model for the rest of the world.
In the next part of this two part series, we look at some of the solar companies moving into Ontario and the solar technologies that are gaining the most momentum and why.
