Analysis: Ontario Green Energy Plan Feels The Heat
Author: Nicole Mordant
An ambitious plan to feed renewable energy into the power grid of Canada's economic heartland is under fire and could flame out altogether in the autumn, just two years after its launch.
Ontario's opposition Progressive Conservative party, who are leading in the polls ahead of an October 6 election, has vowed to scrap a provincial program that pays above-market rates to producers of energy from sources such as the sun and wind.
The goal is to generate 13 percent of Ontario's energy from renewable sources by 2018 and zero from coal by late 2014. The government says the clean energy sector has created more than 13,000 jobs and is on track to reach 50,000 by end-2012.
Critics say the ratepayer-funded program is an expensive experiment that is increasing costs for consumers.
Even if the so-called feed-in tariff, or FIT, program dodges the political ax, it remains riddled with problems. Its roll-out has sputtered under the weight of bureaucracy, too few staffers to manage the crush of applications and legal challenges, industry players say.
"It is like opening up a great restaurant and just having one waiter and then blaming it on the people wanting to come and eat there," said Paco Caudet, general manager of Siliken Canada, a unit of Spanish solar panel manufacturer Siliken.
"We did expect some hiccups and uncertainties. But it is just way beyond what we expected. ... It is a great lack of planning," Caudet told Reuters.
Siliken opened an Ontario factory in May, two years after the provincial government led by the Liberal Party unveiled the Green Energy Act, intended to create thousands of clean energy jobs while the province shuts down coal-fired power stations.
Five months later, in October 2009, it launched the FIT program, modeled on programs in Germany, Spain and Italy that turned those nations into big producers of renewable energy.
Over the past two years, the province has signed or offered 21,000 FIT contracts to small, medium and large clean energy projects and lured investment commitments of C$20 billion ($21.2 billion).
POLITICAL UNCERTAINTY JUST ONE WORRY
The Conservative threat to scrap the program and the biggest investment commitment made under it -- a C$7 billion pledge by South Korea's Samsung C&T -- has rattled the industry even though the party has said it will honor existing contracts.
"Had the policies been certain and there'd been years to run on them, we would have spent more time developing in Ontario than we did," said Jeff Jenner, chief executive of Sprott Power Corp, a small renewable power producer.
For others political uncertainty is less of a worry than practical issues such as the delays in hooking renewable energy systems to the grid. The longer it takes systems to hook up, the slower manufacturers' sales.
Hydro One, the utility that manages Ontario's transmission network, earlier this year asked the energy regulator for a six-month exemption from the time requirements for connect small systems to the grid. It said the volume of requests had been "well beyond its expectations".
Since launching the microFIT program, an adjunct to the FIT scheme for small renewable projects, the Ontario Power Authority, the province's electricity planning agency, has received 27,000 applications as of the end of March.
At the end of the first quarter, it had 220 megawatts worth of applications waiting for connection.
"The resources allocated within Hydro One and the OPA to implement this program are totally insufficient. They are saying the program is over-subscribed, and I am saying it is under-implemented," said Caudet.
The OPA said it was working hard to sign up new supply and ensure Ontario has reliable and sustainable electricity.
"In the last two months alone, we've announced contract offers for over 800 mid-sized FIT projects, and 25 large-scale projects. All told, these project announcements represent over 2,000 MW of clean, renewable energy potential," it said in an emailed statement.
Hydro One was not immediately available for comment.
A series of unexpected rule changes to the FIT and microFIT programs have also drawn anger from the industry. These include a deep rate cut for small ground-mounted solar systems and a moratorium on the development of offshore wind power in February.
FULL SPEED AHEAD
A central element of the Canadian-born FIT scheme is a "made-in-Ontario" clause. It stipulates that between 25 percent and 60 percent of the equipment used to set up wind and solar projects must be made in the province.
The provision is aimed at boosting jobs in a province whose manufacturing sector took a beating during the North American auto sector's collapse in 2008-2009 and is slowly recovering.
It's under attack on several fronts. Japan, for one, has complained to the World Trade Organization that the measure is protectionist. A wind energy company owned by U.S. oil tycoon T. Boone Pickens is also threatening legal action under the North American Free Trade Agreement.
Despite the challenges, the Ontario government is pressing ahead with its green energy plans, announcing new ventures and jobs almost weekly, partly as it enters electioneering mode.
The biggest threat to the success of clean energy in Ontario and the creation of thousands of jobs is the "ill-conceived pledges" by opposition politicians, Ontario Energy Minister Brad Duguid said in an emailed statement.
Some companies remain hopeful about the future of the industry not least because the Conservatives have said they want renewable energy to be part of Ontario's electricity mix, just not through the award of overly generous contracts.
"We will replace the FIT program with a competitive and transparent process that gets energy for Ontario families at a price they can afford," Conservative Party energy critic John Yakabuski said in an email.
(Editing by Frank McGurty)