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March 21, 2009

A New Era of Solar Energy in Ontario

CANADA/ENVIRONMENT - A new green-energy law is coming to Ontario, combined with long-term incentives for solar energy producers.

The new law (the Green Energy Act) + incentives has solar corporations clambering over each other. Tempe, Arizona-based First Solar Inc., one of the world's leading suppliers of next-generation solar modules, and solar power supplier Recurrent Energy Inc. of San Francisco are both planning to develop multi-megawatt solar projects in Ontario.

California-based Nanosolar Inc. says it is seriously considering Ontario as the location of a regional assembly plant for its thin-film solar modules. Nanosolar is also working with French energy giant EDF Energies Nouvelles to map out future solar projects in Ontario.

Why? The new laws + new prices the province is willing to pay for solar power will tip the balance in favour of investment in Ontario.

Two other firms are also planning to build solar-cell manufacturing operations in Ontario.

The recent Green Energy Act and a new renewable-power purchase program that offers a generous premium for green power is just a start. The Ontario Power Authority has proposed an European-style "feed-in tariffs" that would see it pay, as part of a 20-year contract, 80.2 cents for every kilowatt-hour of power that comes from a residential rooftop solar photovoltaic system.

(NOTE: Critics will point out that people in Ontario currently pay approx. 7 cents per kWh, so this seems like a ploy by the Ontario Power Authority to jack up electricity prices.)

Long-term contracts under a feed-in tariff model is superior to approaches in the United States that tend to be based on upfront tax incentives that create short-term sales spurts.

In theory as systems grow larger the feed-in tariff would decline. The power authority would pay 71.3 cents for rooftop systems up to 100 kilowatts, dropping to 63.5 cents for systems up to 500 kilowatts and 53.9 cents for anything above that. The largest systems would likely be found on the rooftops of schools, commercial buildings and big-box stores.

The lowest tariff, 44.3 cents, applies to "ground mount" systems that don't exceed 10 megawatts. This would apply to the massive solar farms that sprawl across acres of empty fields.

All prices replace a fixed 42-cent tariff that applied to all system categories that existed under a previous program, which itself was a continental first when introduced two years ago.

So already Ontario is paying extra for green energy, and some customers are willing to pay more for green electricity... but are they willing to pay even more?

These new prices are great news for people wanting to produce electricity in their backyard, and maybe even good for people willing to pay the extra for green energy, but what about regular electricity consumers? They care more about price than whether it is green or not.

Arno Harris, CEO of Recurrent Energy, said the new tariffs makes Ontario an attractive market for his company, which yesterday purchased a project pipeline totalling 350 megawatts from Chicago-based UPC Solar.

Harris said Recurrent and other large developers are taking advantage of the economic downtown to consolidate the market. The "vast majority" of projects acquired from UPC, he says, are based in Ontario.

"Our goal is to develop over 100 megawatts and get it into commercial operation by 2012," says Harris, explaining that economies of scale allow the company to lower costs by placing bulk orders for solar modules.

In early March, First Solar purchased a pipeline of more than 2,000 megawatts of solar projects from Hayward, Calif.-based OptiSolar Inc. in a stock deal valued at $400 million (U.S.). About 10% of those projects are based in Ontario.

Solar developers are pushing for 50 cent tariffs for large land-based solar fields in an effort to lure investment and green-collar jobs. They claim the current prices don't make it profitable enough to get investments to build.

The power authority says the tariffs have only been proposed and could change after eight weeks of consultation with industry players. "Anyone having concerns with the proposed pricing should provide their feedback to the agency," said energy ministry spokeswoman Amy Tang.

But who's going to pay for higher prices? Consumers?

Right now the cheapest alternative isn't to buy green electricity, its to buy your own solar/wind power and make it yourself.

Solar module prices are expected to fall dramatically this year and 2010 as new cheaper/more efficient solar panels come into the market.

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