The Canadian province accounts for nearly all of the country’s solar market. A recent challenge may trigger a reset for the industry.
In the aftermath of wide-reaching clean energy contract cancellations, Ontario’s renewables industry has found itself in a moment of “wait-and-see.”
Earlier this month, the new Conservative government led by Premier Doug Ford pulled out of 758 early-stage clean energy contracts and pledged the decision would save the province’s ratepayers $790 million.
The decision has created waves of uncertainty — and some hope — in a clean energy market already coping with slowdown.
Ontario claims over 90 percent of Canada’s solar capacity. According to GTM Research solar analyst Manan Parikh, Canada’s 2.31 gigawatts of capacity in 2016 grew to just 2.44 gigawatts by the first half of this year with about 350 megawatts of both distributed and utility-scale solar generation expected in the coming 18 months.
“We already expected a steep decline in registered interest for DG solar in Ontario after the feed-in tariff and micro-FIT expired,” said Parikh in reference to programs to boost utility-scale and distributed rooftop installations. “This [decision] is only going to exacerbate uncertainty regarding PV development in Canada.”
Ontario created its FIT program in 2009, and last year the province’s energy minister admitted it had achieved “sub-optimal outcomes,” a nod to criticisms of the above-market prices offered to wind and solar projects in initial iterations. The government’s last version of FIT stopped accepting applications in 2016.
“FITs can lead to boom-and-bust type cycles,” said Parikh. “This was a hallmark in some European markets — Spain and Italy come to mind —and it appears to be the case in Ontario, cancellations or not.”
Now, developers and trade groups are looking to a future with fewer incentives and a government with unclear views toward the industry.
Concerns about the long term
Chris Jodhan, general counsel and corporate development with Canada-based developer Grasshopper, said the company emerged from the cancellations largely unscathed. Though the 758 contracts included over 30 of its projects, adding to 15 megawatts of capacity, its costs will be covered by the government. Because the canceled projects were in early stages of development, most developers will recoup funds and won’t feel too much impact.
“We’re more concerned about the future and where things are going to be going with energy policy, rather than this specific micro-decision,” said Jodhan.
Grasshopper is taking a “wait-and-see” approach with respect to the current climate for renewables in Ontario, according to Jodhan. Prior to the cancellations, the company was eyeing markets including Australia, Germany and Japan, and those will continue to be a strategic focus moving forward. But Jodhan said Grasshopper doesn’t plan to leave its roots.
“Ontario is our home turf,” he said. “We’re going to have a strong presence here no matter what.”
Others will suffer more significant impacts. John Gorman, president and CEO at Canada’s Solar Industries Association, points to lost business for Ontario’s installers, electricians and contractors. CanSIA estimated the cancellations will lose the province 6,000 jobs and half a billion dollars of investment.
According to the trade organization, over 90 percent of the contracts were tied to small rooftop installations for farmers, First Nations communities, schools and cities. The Ford government claims the cancellations live up to an election promise, but Gorman argues that the action undermines the administration’s promise to support “the little guy.”
“We were very surprised that the government would have moved so rashly to cancel those contracts given that their election platform was based on helping exactly these people,” said Gorman. “It’s the little guy who’s being hurt by this.”
In CanSIA’s statement on the cancellation, Gorman called the administration’s argument that canceling contracts would save ratepayers money “preposterous.” He told Greentech Media that that argument “is not factual,” because ratepayers aren’t yet paying for any of the projects.
Dr. Sara Hastings-Simon, managing director of the Alberta clean economy program at the Pembina Institute, said claims that clean energy raises Ontarians’ electricity prices are overblown. Though she agrees the FIT program could have been better designed, she said clean energy costs make up a relatively small portion of a user’s bills. She also noted the program drove savings on medical costs (Canada has a universal healthcare system) because of a decline in coal use and related gains in public health.
Renewables: ‘A force that can’t be stopped’
Despite his qualms about the contract cancellations, Gorman said he does remain optimistic about the market. The high initial price for feed-in tariffs — some over 80 cents per kilowatt-hour, 40 times market value — has fostered “a lot of baggage and misinformation” about the industry, he said. In that sense, he said, a shakeup from the administration, if done the right way, “can be a very good thing for the province.”
“The optimism comes from very early discussions, which show that there is support for solar under new terms,” said Gorman, including “a focus on cutting red tape, a focus on saving [ratepayers] money, and [finding] private-sector financing for these projects.”
Jodhan, too, framed the cancellations as potentially having a positive outcome, after the “relatively out-of-whack” original FIT contracts.
“What we understand is the promise during the campaign was that there was going to be a refresh on the energy platform,” he said. “We’re hopeful we’re going to see a layering in of renewables, specifically solar.”
The administration’s appetite to move on clean energy policy remains unclear, aside from the swift cancellations two weeks after Ford took office. In the meantime, other provinces are working to catch up with Ontario.
Gorman said investment dollars and development that are movable will likely shift west to provinces like Alberta and Saskatchewan. Both have 2030 renewable targets: 50 percent in Saskatchewan and 30 percent in Alberta.
Parikh notes Alberta’s interest in introducing solar through its requests for proposals program. Wind has already won PPAs through that process. The province’s large net billing cap also makes its commercial and industrial opportunities appealing.
Saskatchewan has started utility-scale procurements. Another western province, Nova Scotia, has an incentive program for climate-related funds and energy efficiency programs.
Ontario’s clean energy market is also pushing ahead. Soon after the contract cancellations, NRSTore and IHI Energy Storage announced contracts totaling 42 megawatt-hours of energy storage for the province. The projects are geared to reduce high electricity costs.
And Jodhan said even policy can’t slow down clean energy for long, as customer demand and economic interest are both too high.
“The migration toward adopting renewables is eventually going to come. It’s a force that can’t be stopped; it’s just too economically sensible,” he said. “We’re hoping that Ontario as a market will get there as quickly as other developing markets in the space, and, in fact, move faster.”