Ontario Feed-In Tariff Forum – Local Content Setting Example

The second Ontario Feed-In Tariff Supply Chain Forum was held in Toronto last week. While the Ontario FIT program is showing signs of success and maturation, there were plenty of concerns expressed and lots of candid dialog.

In the run-up to this Forum, the Feed-In Tariff program was still going through fits (sic) and starts with connection issues, or the lack thereof, affecting all applications from small residential through to large scale systems. Most recently Hydro One, the province’s transmission system operator and largest distribution system operator, has refused grid connections for FIT and the residential microFIT projects. 

Hydro One form letter:  

“Based on our analysis, we have determined that your project is impacted by system constraints. We regret to inform you that we are unable to provide you with an offer to connect your microFIT project at this time…”

Kicking off the Forum, Navigant Consulting’s Andrew Kinross noted the positive sense of urgency and ambition that had launched the FIT program. On the negative side, however, “rushing” the program forward had led to a “bunch of mistakes”. He cited both microFIT connectivity and the cancellation of offshore wind as chief concerns. 

microFIT Applications

MicroFIT applications are still being received at a brisk pace while conditional contract offers have flattened and actual installations continue to trail significantly. Leo Tasca from the Ministry of Energy cited the number of microFIT applications as evidence of the FIT program’s success. 

Jim MacDougall,  Feed-In  Tariff Program Manager at the Ontario Power Authority (OPA), however, suggested that there may be good reason to make the application process more rigorous to reduce processing workload from those applications that were not well thought out. This view was strongly opposed by a member of the audience who encouraged adoption of the German model. In Germany homeowners simply install their PV system, without any complex application process, and it is connected upon request.

Meanwhile, market projections presented by Clear Sky Advisors are based on the rate of actual installations while disregarding the large backlog of pending applications. 

Into the political maelstrom

With an election scheduled for October, the Forum’s first panel included representatives from different political leanings. Liz Sandals, MPP for Guelph, represented the Liberal Party while Peter Tabuns, MPP for Toronto-Danforth, represented the NDP. The Conservative Party was represented by written statement 

This first panel started the Forum off on a contentious note when Tom Adams, columnist for the National Post and a frequent FIT critic, recommended a “repeal (of) the Green Energy Act” that created the Feed-In Tariff.

In response, Elizabeth McDonald, President of the Canadian Solar Industry Association (CanSIA), reported that recent polling across Ontario confirmed that 85-90% of Ontarians supported the Act and that a clean environment and health were the number one issue. With that frank recommendation and response, the Forum was open to a no-holds barred dialog.

Domestic Content & contract manufacturing

Adams also suggested that “the net jobs impact (of the FIT and its Domestic Content provisions) is negative.” Given that most of the investment that is going into setting up the new factories, purchasing the equipment and hiring employees has thus far come from outside Ontario, these contentions are not backed up by fact.

6N Silicon is a case in point. One of the largest PV industry employers in Ontario, even before its acquisition by California-based Calisolar, most of the company’s equity and debt financing was raised outside Ontario and most of its production is destined for export markets.

Adams may have a stronger case, however, with concerns about the Ontario Domestic Content Requirements.

Even with concerns over these requirements, with the most recent example of SilFab Open House the day before the Forum started, more domestic content factories are being established and new jobs are being created. Global leaders in contract manufacturing, Flextronics (manufacturing for SunEdison/MEMC) and Celestica (manufacturing for Recurrent) are becoming significant local PV industry players. With their PV cell production in Germany, domestically headquartered Arise Technologies reported that they are also leveraging local contract manufacturing to expand their sales in Ontario.

Ontario an industry bellwether?

This move to local and contract manufacturing is clearly precipitated by Ontario’s Domestic Content requirements. Notably, however, this situation is now in sync with current industry thinking.

Leading industry consultant PHOTON Consulting has recently promoted both local and contract manufacturing as an overall industry strategy in their Solar Annual 2010-2011 report. With industry oversupply imminent, PHOTON has recommended local and contract-manufacturing as a flexible option to capitalize on demand opportunities, specifically citing examples from Ontario.

Even as its FIT program is working out the kinks, the Ontario market is an increasingly important crucible of learning for the global PV industry.