Ontario's latest energy policy will make the province a North American leader in renewable energy and put it on the path of such world leaders as Germany and Japan, renewable energy experts say.
Given worldwide problems with solar panel and wind turbine supply keeping up with demand, just how much of an impact on the provincial economy it will have is hard to gauge. But experts agree the new policy will be a boost for the industry, particularly in Ontario.
The path is the result of an announcement in March by Premier Dalton McGuinty and Energy Minister Donna Cansfield of a standard offer contract (SOC) program, which will set a fixed price for 20-year contracts for small renewable energy projects that are less than 10 megawatts (MW).
The Ontario Power Authority (OPA) will pay 11 cents per kilowatt hour (kWh) for biomass, wind or micro-hydro projects and 42 cents for photovoltaic solar.
Consumers currently pay 5.8 or 6.7 cents per kWh for electricity, depending on their consumption level and the time of year.
The Ontario Sustainable Energy Association (OSEA), whose report the SOC is based upon, had been concerned that the government would adopt a watered-down version of the plan.
But OSEA general manager Melinda Zytaruk says the plan is "a bold step that puts Ontario at the forefront of renewable energy development in North America."
Other renewable energy leaders echo Zytaruk's sentiments.
Robert Hornung, president of the Canadian Wind Energy Association (CanWEA) says the SOC program is a positive step to diversify the industry and create a "complementary procurement mechanism designed to bring small projects online."
This will allow a broad number of players into the market, including communities, co-operatives, small businesses, farmers and homeowners, he says, as well as helping Ontario make more efficient use of its distribution networks.
"Smaller projects have not been able to participate in the existing procurement process in Ontario - the large RFP (request for proposals) process," Hornung says. "We believe these processes need to continue because there is ample scope still for large projects. But this will certainly help to diversify the industry because one of the strengths of wind is that it can be built at a variety of sizes and scales."
In that respect, solar photovoltaic (PV) panels are even better. Their modular design means a rooftop can have one or 100 panels depending on the south-facing roof space.
Canadian Solar Industries Association (CanSIA) executive director Rob McMonagle estimates Ontario's SOC program will spur the installation of as many as 15,000 solar panel systems by homeowners in the next five years, amounting to about 40 MWs.
He adds that Germany - a nation whose renewable energy commitment is about 15 years ahead of Canada's - is installing about 40 MWs of capacity every week.
"Putting it in that perspective, it's a small drop in the bucket. But most of the international companies are noticing this has tremendous opportunities, so they are willing to support us," McMonagle says. "The small size of the Canadian PV market is primarily due to the lack of support offered by governments in Canada for the use of solar electricity."
That is now changing in Ontario.
"There have been a tremendous number of inquiries from large international firms about solar in Canada once this announcement took place. Previously there was no interest whatsoever in any of these large firms," McMonagle says.
EPOD International of Reno, Nev., has already announced its intention to set up a solar panel-manufacturing facility in Canada as a result of Ontario's SOC program, although the facility will be in Kelowna, B.C. "EPOD intends to aggressively pursue solar system sales in the Ontario market, effective immediately," the company said in a news release last month.
Other companies also have contacted CanSIA about setting up manufacturing or at least sales branches in Ontario.
Vancouver-based Xantrex Technology Inc., which manufactures inverters for renewable energy systems, applauded Ontario for adopting the SOC program, and said it believes it "is ideally positioned to take advantage of the increased demand for solar products created by this Ontario incentive."
The SOCs - which are elsewhere called feed-in tariffs or advanced renewable energy tariffs - will increase the economic viability of putting up solar panels or a small wind turbine.
This is the most popular mechanism by which renewable energy has been supported elsewhere in the world. Germany is the world leader in renewable energy with more than 50,000 people employed directly in the solar-panel industry compared to about 800 jobs in Canada's solar industry.
"Germany has been growing 30 to 40 per cent a year and last year it grew 87 per cent," McMonagle says. "Fifteen years ago, they were in the same place we are now. Their support started 15 years ago and it's not as if they have more solar resources because their solar resources are actually worse than ours."
That means solar could have a bright future if Ontario and other provinces follow the path already blazed by the Germans.
"The main issue comes down to looking at the future of energy resources," McMonagle says. "Germany has had a very progressive long-term view. It took us 70 years to build up the electricity grid. You won't see a change of supplies overnight, but in that respect Ontario should be applauded for starting to look at the long-term picture."
While the SOCs will encourage those people the industry refers to as "early adopters" to invest, solar panels will still not be totally economically viable.
At 42 cents per kWh someone looking for a 10- or 15-year investment will be disappointed. Over the life of a solar panel - which can easily be 40 years - the investment will make money, but not in the short to medium term.
Add to the long-term investment benefits the fact that it has been proven internationally that installing a solar system is not an expense, but an asset; houses with solar panels increase in value, making the SOC program a good first step.
In fact, this is just what CanSIA wanted because the solar industry couldn't keep up if the rates were set higher, as they are in Germany, where they are more than double the 42 cents Ontario is offering.
"If we suddenly plunked down a program like in Europe, the industry wouldn't be able to handle it," McMonagle says. "There are very few installers, very few inspectors, very few electricians who know anything about solar. So to try to all of a sudden pop through a huge increase in demand without having that infrastructure in place is an opportunity for chaos."
The wind industry is also facing a major supply problem causing a global wind turbine shortage.
"In fact if you were looking for a turbine today in Ontario and you go to all of the major wind turbine manufacturers right now, they are taking orders for 2008," Hornung says.
There is tremendous pressure for the turbine industry to increase production, and Ontario's SOC program could provide the lure needed for companies to set up shop here.
"Does the SOC program guarantee that manufacturing will come to Ontario?" Hornung says, "No. But Ontario has certainly made itself more competitive in that regard by moving forward with standard- offer contracts because that does provide some certainty to the marketplace."
See also: Income fund plugs into clean electricity.
(Paul Henderson can be reached at henderson@businessedge.ca)