Ontario: The next solar hotbed?

Oct , 2009 - Michael Bates - Solar Industry Magazine

A little more than a week ago, the government of Ontario revealed the missing pieces of its Green Energy Act and the associated "Ten Steps to Green Energy." One of those steps - a feed-in tariff - has the potential to dramatically change the solar photovoltaic market in the province.

Originally announced in May, the act had been touted as groundbreaking legislation for the small but fast-growing Ontario renewable energy sector. Now, with the emergence of an aggressive feed-in tariff, some industry observers believe Ontario could be solar's next Germany.

Indeed, the province's feed-in tariff appears comprehensive in scope and bold in vision. The tariff guarantees specific rates for renewable energy delivered onto the grid, and participation can come from just about everywhere in Ontario - from farmers and factories to homeowners and large-scale power producers.

The contract term for the solar tariff, 20 years, is a measure designed to entice investors and, hopefully, open up a robust financing market for solar projects large and small. The certainty that long-term contracts bring to bear has historically propped up solar financing markets in jurisdictions around the world, particularly in Germany and Spain.

Moreover, pricing for the measure is generous, by almost any measure. Small PV systems (equal to or less than 10 kW) fall under what the Ontario Power Authority has dubbed the microFIT program. For these rooftop or ground-mounted systems, the feed-in tariff is set at C$0.802/kWh.

The tariff offers owners of other systems various pricing structures. For instance, rooftop PV installations ranging from 10 kW to 250 kW will garner C$0.713/kWh, while those between 250 kW and 500 kW earn C$0.635/kWh. The tariff for rooftop PV systems exceeding 500 kW is set at C$0.539/kWh. Ground-mounted PV systems greater than 10 kW but not exceeding 10 MW earn C$0.443/kWh.

When Aboriginal bodies and communities undertake such ground-mounted PV projects, an "adder" kicks in. These adders, which are capped at an additional C$0.015/kWh for Aboriginal projects and C$0.01/kWh for community projects, are intended to entice communities and Aboriginal bodies into the Ontario solar market.

The actual adder amount per kilowatt-hour is determined by a participant's equity stake in a project. For instance, if a community provides more than 50% equity in a system installation, that community receives 100% of the price adder. Lower levels of equity participation result in lower payments (e.g., 25% equity yields 50% of the price adder). Participants must have at least a 10% equity stake to qualify for the adder.

"New resources for the community power sector mean that individuals and communities will directly benefit from the government's plans," said Deb Doncaster, executive director of the Community Power Fund, in a recent statement.

Kristopher Stevens, executive director of the Ontario Sustainable Energy Association, also issued remarks following the government's announcement, noting that the feed-in tariff and new administrative improvements will be beneficial to community-based renewable energy initiatives.

"Streamlined regulations should remove many of the barriers that have been preventing communities from developing green energy projects," he said. "We will be closely monitoring how effective the programs and regulations are, and we welcome the opportunity to review them in two years."

For all its potential, some observers believe the final rendering of the Green Energy Act did fall short in some areas, mainly in terms of siting larger-scale solar projects.

"The government's decision to impose new obstacles to the development of solar represents a lost opportunity for the solar industry, Ontario's economy [and] environment, and farmers," said Elizabeth McDonald, president of the Canadian Solar Industry Association (CanSIA), in a statement.

In particular, McDonald expressed the organization's dissatisfaction with land-use restrictions. For instance, ground-mounted PV systems exceeding 100 kW are prohibited on Class 1 and 2 lands (prime agricultural acreage), as well as in "specialty crop areas." On Class 3 lands, ground-mounted PV installations will be limited to a total of 500 MW.

CanSIA says more than 2 GW of solar projects located on Class 1, 2 and 3 lands are already in the pipeline, and these projects collectively consume just over 0.1% of such land. Some argue that now limiting PV installations in these areas to 500 MW is simply counterintuitive. Others further maintain that the restrictions are detrimental not only to the Ontario solar industry, but also to local farmers looking to leverage solar leases to hedge against uncertain crop yields and prices.