Ontario’s Feed-in-Tariff (FIT) program is one of the world’s most ambitious clean energy subsidy programs. Indeed, some of the rates it will pay for renewable electricity can hardly be found anywhere else in the world.
Of course, Ontario is not a pioneer in this regard. Unsurprisingly, the Europeans – who seem to do everything better than us in North America, at least when it comes to energy – have been expanding their renewable industries using FITs for a few decades. Wind and solar have seen significant expansion in Germany & Denmark using this economic tool, despite the relative lack of the necessary energy inputs (i.e. they are not the windiest or sunniest places on Earth).
Spain also toyed with a FIT to expand its solar photovoltaic industry in 2007. It offered 44 euro cents per kWh produced (~ CDN$0.66) and expected a growth of installed capacity around the 400 MW mark by 2010. The FIT was intended for projects of less than 100 kW, but developers quickly found a loophole and built several modules of 100 kW installations. Before the Spanish government knew what hit them, approximately 3 GW had been built and a lot more money needed to be doled out than had been allotted. The program fell apart shortly thereafter as the government lowered the FIT price significantly and ultimately made any new solar PV development uneconomical.
But it wasn’t economics alone that killed the program. Politically, it was a less than stellar subsidy. The FIT had no limits on where the solar PV panels had to come from and as a result the FIT unintentionally provided a boon to the German and Chinese manufacturers of solar panels, which lead the world in solar PV construction. While it also aided the domestic manufacturers in Spain, the Spanish government found itself footing the bill for a program that was helping its competing manufacturers in Germany & China, whose governments got to benefit free of charge.
That is the thing with subsidies. Since the taxpayers of a country ultimately pay for subsidies, they should be the ones who benefit. And politically, they are nice and easy. It is much easier to hand money out than take it away. So sometimes the policies guiding the subsidy are not completely thought out.
Ontario is aiming not to make this mistake. First, it is not guaranteeing FITs for every renewable producer. You first have to sign a contract with the government, thus allowing them to keep track of installed capacity. But what is more, it has placed stringent domestic content requirements on its subsidized solar PV projects. Currently, 50% of a project has to be from Ontario – this can include everything from the actual panels themselves, the installers, the feasibility analyses or even the bolts tying the panels down. According to some solar PV installers I’ve spoken with in Ontario, projects can barely meet the requirements, almost exclusively because there are no major PV panel manufacturers in Ontario. The idea with the requirement is to attract a manufacturer to set up shop in Ontario knowing the market will be there to sell. What will really provide the incentive is that in 2011, 60% of a project will need to be domestically sourced, which without a major domestic manufacturer will be impossible.
One company, Canadian Solar – which, despite its name and Canadian ownership does nothing in Canada -- has already answered the call and will be building a multimillion dollar plant capable of producing 200 MW of panels annually. But like Rome, these plants don’t get built in a day.
For now, it is a pain in the ass for solar PV developers in Ontario, but it is absolutely necessary if Ontario is to get the biggest bang for its buck and kick any free riders off its subsidy train.
Happy Holidays.
No comments:
Post a Comment