The Great Canadian Feed-In Tariff is weeks away from being launched, but the question of whether the province of Ontario can create something worth pursuing is on every solar and renewable energy enthusiast's mind.
The provinces' Green Act looks promising on paper with 20 year FIT contracts for solar rooftop PV installations offering between 60 to 80 cents a kilowatt hour produced and fed directly into the grid. Other renewable energy generation will also be encouraged and paid for at varying rates, and unlike solar, the payments will be adjusted for inflation.
This is not the first time that the province of Ontario has opened its grid and offered contracts to willing generators, with the 2006 RESOP program falling flat on interest with only a few hundred takers at roughly half the tariff rate and reams of red tape that kept all but the diehards investing their money elsewhere. RESOP's successor is promised to be easier, streamlined and simple, and the FITs are being structured to offer what is being touted as a "reasonable rate of return."
Of course, reasonable is something that isn't excessive, but is fair, and the guidance to date is that a low double digit rate of return taking into account financing and the current cost of equipment is what we should expect to earn on a typical FIT contract.
But there are lots of hungry eyes on each and every FIT contract before it reaches the generators hands including suppliers who have been known to reverse engineer their prices in situations like these, the tax man, and the utility companies that are being asked to connect thousands of new generators to a grid in need of long overdue transmission upgrades. So is this a pre- or post-tax reasonable rate of return, and is it before or after the local utility extracts its cost of connection, meter reading and passes on its ever-higher cost of delivery.
Also, the FIT program has a number of aims, but chief among them is to create employment for the impoverished manufacturing sector of Ontario where for the past five years a strong Canadian dollar and cheap Chinese imports have seen the closure of numerous factories, namely in the once strong automotive sector. So the concept of building a greener power grid, in a province where half the power already comes from renewable sources like Niagara Falls or the James Bay watershed, takes second fiddle to a jobs agenda.
It's this larger agenda that is giving the politicians and bureaucrats a run for their money and entrepreneurs, distributors and renewable energy integrators a whole lot of headaches as the scramble is on to meet a yet to be defined provincial content requirement.
Ontario makes very little in the way of renewable energy equipment with a few manufacturers of any notable size currently operating here. There is only one solar module manufacturer here for example and a few others with offices in Ontario but manufacturing abroad. That's not to say Ontario doesn't have the engineering or manufacturing might to turn on an industry, but this all takes time and few financial backers are brave enough to turn on the financing taps without a firm FIT in place stimulating local demand. And of course, there are currently at least 18 U.S states that have lucrative programs in place to attract manufacturers in this space, and Ontario has yet to hit the radar screen of an industry looking for a North American base. The thinking is: Without a FIT to spur demand, why would industry come?
That being said, the impending FIT program, of which the proposed guidelines and contracts are available for all to see and submit comments on the Ontario Power Authority's website, has spurred tremendous activity to date as entrepreneurs and existing players ready themselves for an expected onslaught of demand. Distributors are busy training the throngs of contractors looking to connect current and future customers, while others that have decided to tap the market are snapping up the few qualified people available to run their operations.
A training and retail center focused at educating and supplying contractors was announced this week by a local entrepreneur in the beaten up auto town of Windsor, with the facility being proposed for a now shuttered tool and die factory. A few weeks ago a large wind and solar integrator announced that it was working with provincial government officials to transform automotive assembly lines in the once proud GM town of Oshawa into wind turbine factories with an output of one turbine an hour.
Local colleges are also ramping up their virtually dormant alternative energy programs with at least one Toronto-area school working with NABCEP to develop a certification program for PV installers so they don't have to travel to the U.S for training.
If the Ontario Power Authority makes its most recent deadline, a summer launch of the FIT and MicroFIT programs means that Ontario only has one month left before it's the envy of the North American renewable energy eye – but I can guarantee that as long as this is a Canadian program, it won't come as easy as some are hoping.
Ian Karleff is the president of Rooftop Kilowatts Solar, a solar integrator and builder of solar financial products, and the managing editor of The Financial Post.