US and EU Challenge Ontario Solar FIT Domestic Content Rules

Last week the US and the EU both took formal action against Ontario’s Feed-in-Tariff Domestic Content Provisions. In the case of solar projects, these Domestic Content requirements are set to increase to 60% in 2011.

Last week’s news foreshadows this week’s sold out Ontario Feed-In-Tariff (FIT) Supply Chain Forum being held in Toronto October 5^th and 6^th at the Allstream Centre. The Forum’s primary agenda is focused on how the solar and wind industries are responding to the escalating Domestic Content Requirements.

With their formal actions, the World’s most powerful economies are locking arms together in strong opposition against these Domestic Content requirements. The Supply Chain Forum’s fundamental theme on readiness and viability of Ontario’s solar and wind industries could not have a better – or more distracting – introduction.

The United States and European Union join WTO Complaint

Since Japan formally complained to the WTO about the Ontario FIT’s Domestic Content requirements on September 14, the European Union, United States and the WTO itself have all turned up the heat. This mounting international pressure underscores the uncertainties associated with starting up new manufacturing operations in Ontario to try and comply with the Domestic Content requirements.

Last Friday, the Globe and Mail reported that both the US (on September 24) and the EU (on September 27) have now formally joined the original Japanese complaint against the Domestic Content requirements in Ontario’s Feed-In-Tariff.

Meanwhile, just days after the original complaint from Japan, WTO Director-General Pascal Lamy spoke out – in Canada – against these and other trade barriers, specifically citing solar products. Addressing the World Energy Congress 2010 in Montreal on September 16, Lamy stated,

 “Solar panels, fuel cells, and climate consultancy services, are but a few examples of what is on the WTO negotiating table. Barriers to the trade of these technologies penalize the planet.”

 Beyond this pointed interest from the WTO Director-General, Ontario’s FIT program is in the unenviable cross-hairs of Canadian trade negotiations. The EU complaint on the Ontario program comes just prior to the Fifth round of the negotiations between the EU and Canada on the Comprehensive Economic Trade Agreement (CETA). The EU is Canada’s second largest trading partner, has the world’s second largest solar industry and the largest solar and wind markets.

Canadian Government Promotes Free Trade, Denounces Canadian Protectionism

While Canada is obligated to support Ontario at the WTO, Canada’s Minister of Foreign Affairs and International Trade has been consistent on his viewpoint with respect to trade restrictions. Federal Minister Van Loan has called for industry to put pressure on the Provincial McGuinty Government. 

In an April 30 address to the Economic Club of Canada, Minister Van Loan specifically cited the Ontario Government as a barrier to the EU negotiations:

“Let those involved know how important this agreement is to you. If you want this agreement to go ahead, tell the provincial government. If you want it to be an ambitious agreement, let [Ontario] Premier Dalton McGuinty know. If you want the Canada-EU trade agreement to happen soon, tell the Ontario Ministry of Economic Development and Trade.” 

More recently in a September 14^th speech to the Toronto Board of Trade he stated:

“Free trade creates opportunities, jobs and prosperity.

That’s why we’re counting on the support of Canada’s business community for our efforts to create more free trade links with our partners around the world. 

We need you to talk to all levels of government to help us build this support—including your partners in the municipalities and in the provincial government.”

A couple of days later on September 16, Minister Van Loan offered these comments to the World Energy Congress:

“We must take steps to keep our markets open, and to allow for the free flow of energy, expertise and products—both traditional and non‑traditional—across international borders. …

We’re an energy leader, and we’re a leader in free trade. These go hand-in-hand. …

It was no accident that, in Toronto in June, G-20 leaders identified fighting protectionism and reaffirming a commitment to free trade as key ingredients in the economic recovery.

 Canada believes that this commitment must extend to energy.”

The Federal Government has said it is standing behind Ontario’s protectionist Feed-In-Tariff Domestic Content policy. Then again, it is also repeatedly appears to be sending the opposite message.

Protectionism Could Backfire

The US PV market is already much larger, and poised to grow much faster than Ontario’s.

Canada-US ‘Buy American Act’ negotiations are still fresh. While Canada celebrated at their conclusion, so too did US negotiators. After their successful negotiations, the US expressed pleasure regarding its gains to finally get access to Canadian provincial procurement. Protectionist sentiment is an ongoing challenge, however, and a number of US jurisdictions have preferential local purchasing for their renewable programs.

There is thus the distinct possibility that the nearest and most lucrative export markets for Ontario’s new green energy sector could be closed to Ontario’s products by following its example. Should that be the case, then what will happen to Ontario’s green energy jobs? Will Ontario be stuck with another high cost energy source as the rest of the world takes advantage of global economies of scale in these same rapidly expanding industries? These are questions that need to be addressed.

One area of hope for Ontario’s FIT Program is how quickly and pro-actively the Ontario Power Authority (OPA) deals with the many clarification requests it has received on the Domestic Content Requirements. Domestic Content is a pivotal issue. Aggressive action to work with industry –domestic and foreign – is critical to the success of the overall Feed-In-Tariff program success.

 Previous d-bits posts on the Ontario Solar PV FIT and MicroFIT programs:

• Ontario microFIT Advisory Panel formed, Japan Challenges Solar Domestic Content
• Reactions to Ontario’s Solar FIT Program Changes
• Concessions and New Restrictions for Ontario’s Solar FIT Program
• Update on Ontario PV Ground-Mount Tariff Changes
• Comparing PV Feed-In-Tariff Programs from Ontario and Germany
• Ontario’s Growing Pains: Will the Wind and Solar Industries Scale-up in Time?
• PHOTON Magazine Says Ontario Guides the Way
• Ontario FIT Program Changes Generate Controversy amid Compliance
• Ontario FIT Program: Definitions are Changing
• Ontario Power Authority Announces Change on Short Notice
• The Feed In Tariff is Energizing Ontario
• Ontario Domestic Content