Solar Incentives: Could Ontario Be the Next Germany?

Original article: http://www.renewableenergyworld.com/rea/news/article/2009/04/solar-incentives-could-ontario-be-the-next-germany

The introduction of Ontario's Green Energy Act, modeled after the successful German Feed-in Tariffs, is expected to fuel rapid growth in the clean energy market in Ontario.

by Greg Boutin and Jon Worren, Riverdale Partners

If Ontario's Bill 150 (the Green Energy and Green Economy Act) is passed as expected in May, Ontario will become the first North American jurisdiction with an incentive system modeled after the German feed-in tariffs (FITs), according to incentive expert Paul Gipe. With proposed tariffs of up to CAN $0.802 (~US $0.64, EUR €0.47) for every kilowatt-hour of solar-power generated, fixed and guaranteed for 20 years, the province would have the most favorable incentives currently available worldwide for systems below 100 kilowatts (kW). More lucrative, even, than current German incentives under the Renewable Energy Sources Act (EEG).

Ontario’s proposed Green Energy Act passed a second reading on March 11 and was ordered to the Standing Committee on General Government for public comment, ending May 5. Changes to both the act and the feed-in tariffs may still occur, but as it is almost certain to pass (the Act is supported by the Ontario Liberal Party, which controls 71 of the 107 seats in the Legislative Assembly), the Ontario government started a parallel process on February 10 to work out the deployment details.

Credit: Jon Worren, Riverdale Partners

In a separate initiative, the Ontario government will also launch a CAN $250M (~US $200M, EUR €150M) Emerging Technologies Fund, which should be operational on July 1st, 2009. This fund will match investments from private sources such as venture capital firms in Ontario-based technology companies, including cleantech firms. It might be leveraged by innovative solar companies seeking to establish a broader presence in Ontario by developing technologies locally.

Based on our experience in helping renewable energy companies to model the economics of their technologies and scale their businesses across markets, we believe that the combination of the Green Energy Act and the Emerging Technologies Fund will dramatically improve the business conditions for cleantech endeavours in Ontario. Combined with the province’s integration into the NAFTA space, traditionally low manufacturing costs, and abundant skilled workforce, this Act may actually turn Ontario into the most attractive beachhead for European and Asian renewable energy technology companies seeking to expand in North America.

So How Does Ontario Compare to Germany?

Looking solely at installed capacity, the comparison between Ontario and Germany is laughing material. While Germany has over 5,000MW installed, the whole of Canada has less than 50 MW California, the largest PV market in North America, has 530 MW by comparison. Capacity-wise, Ontario therefore has lots of catching-up to do, being today where Germany was roughly 20 years ago.

Comparing the inputs to the economics of energy is more flattering for Ontario. It might surprise even Canadians themselves to learn that Ontario receives more sunlight than Germany, which is located a little further north than the Canadian province. In fact, large parts of Ontario get 10-15% more sunlight per year than southern Germany.

Since the incentives take the form of a feed-in tariff in both Ontario and in Germany, as opposed to California where they are added to the electricity savings (through net metering), local electricity rates are less important to the ROI of solar systems.

On the other hand, Ontario electricity rates are much lower than in both Germany and California, meaning that public support to expand the energy supply side has not been as strong as in those two jurisdictions. Instead, the political “carrot” used to motivate the Ontario public and justify the Green Energy Act has been the promise of a province free of coal-fired plants.

Comparison of Germany, Ontario and California:
Key economic drivers for solar photovoltaic projects (Riverdale Partners analysis)

Top Economic drivers for solar PV projects	Germany	Ontario	California
Feed-in-tariffs, in US $/kWh	0.53 (declining 5-10% p.a.) Guaranteed for 20 years Sources: [1], [2]	0.35 – 0.64 (proposed) Guaranteed for 20 years	No FIT Incentive of 0.15 on top of electricity savings, for first 5 years (declining rate based on installed capacity step-scale) – Add to average electricity rates for a rough comparison with FITs
Average electricity rates, in US$/kWh (estimates include “hidden” fees such as distribution fee, debt retirement and other regulatory charges)	0.15- 0.25 Source: (1)	0.06 – 0.13 Source: [1], (2), (3), electricity bills	0.08 – 0.20 TOU rates go up to 0.40 Source: (1), (2), [3]
Solar Insolation, annual average (kWh/m²/d)	3.15 kWh/m²/d Munich Source: NASA	3.57 kWh/m²/d Toronto Source: Ground monitoring station, via Retscreen	4.95 kWh/m²/d Los Angeles Source: NASA

Note: all amounts converted to US$ at April 6, 2009 exchange rates

Ontario FITs Favor Systems Below 100 kW

For systems up to 100 kW in size, the Ontario FITs at the proposed rates would be superior to the German FIT. That is especially true for residential and smaller rooftop installations with rates of CAN $0.802 (~US $0.64, EU €0.47) for every kilowatt-hour of power generated by rooftop solar photovoltaic systems below 10kW. It’s worth noting that, in 2007, systems below 10 kW made up 40% of the German market; it appears that the Ontario FITs will stimulate a similar initial focus on smaller systems. Like in Germany, Ontario systems would benefit from a guaranteed 20-year fixed rate.

Proposed Feed-In Tariffs for Solar PV in Ontario
Technology	Capacity	Tariff in CAN $ / kWh	Tariff in US $/ kWh	Tariff in EURO/kWh
Rooftop	Up to 10 kW	0.802	0.64	0.48
Rooftop	10-100 kW	0.713	0.57	0.43
Rooftop	100-500 kW	0.635	0.51	0.38
Rooftop	500 + kW	0.539	0.43	0.32
Ground Mounted	Up to 10 MW	0.443	0.35	0.26

Note: all amounts converted using April 6, 2009 exchange rates

Is It Time To Set Up Shop in Ontario?

The main critic of the Act is that it does not establish long-term targets for renewable capacity. As the government suspended the the previous policy, which paid a fixed CAN $0.42 (~US $0.34, EU €0.25) per kWh to all solar project categories, two years after its introduction, some observers argue that regulatory policy stability is not guaranteed, and the Minister can still change policies if political priorities shift.

While regulatory uncertainty remains indeed a source of risk, some cleantech companies have decided not to wait for more assurance from the government, and jumped in with announcements of new installations in Ontario. Everbrite Solar, a division of Toronto-based Everbrite Industries, has licensed a turnkey manufacturing technology from an unnamed supplier overseas, to invest CAN $500 million in a photovoltaic manufacturing facility in Kingston, Ontario. Arizona-based First Solar and solar project developer Recurrent Energy of San Francisco acquired and are planning to develop multi-megawatt solar projects in Ontario, and thin-film module manufacturer Nanosolar Inc. is seriously considering to set up a regional assembly plant in the province, according to a local newspaper.

It has been made clear that the Act will favor businesses with Ontario operations and include requirements for a certain amount of domestic content (at a level yet to be decided). With the Ontario value chain in cleantech needing significant strengthening, early movers are likely to see significant advantages. Apart from a handful of local manufacturers, additional suppliers are needed to get new projects off the ground. Ontario-based companies like ARISE Technologies, 6N Silicon, Timminco and Menova Energy are technology leaders, but they all depend on outside partners to complement their offerings. This need is likely to create opportunities for best-in-class providers from Europe and Asia.
Other incentives to setting up operations in Ontario include the Next Generation Job Fund (NGJF), which covers 15% of the cost of establishing operations in Ontario for direct foreign investment, and generous R&D tax credits covering a wide range of activities. Universal healthcare and a federal pension plan, Ontario’s proximity to a market with over 400M people through NAFTA, and a very cost competitive workforce compared to the U.S., with the third largest manufacturing base in North America (after Texas and California), complete the picture.

So, while this is not a foregone conclusion by any measure, the stars seem to increasingly align to make the Ontario market more attractive. The key question is whether ambitious global players can afford to miss the train if Ontario emerges as a new solar locomotive?

The Path To Success in Ontario

As we alluded in our previous article in Renewable Energy World magazine, Roadmap for A Changed Landscape: Consolidation and Integration in the Solar PV Business, businesses with a winning formula must take advantage of international expansion opportunities like this, or risk being rapidly outflanked by their competitors. With average factory gate prices of crystalline modules already 24% down on 2008 levels due to overcapacity, and module prices decreasing, favorable business environments like the ones being created in Ontario should be explored pro-actively.

While doing so, new market entrants will need to carefully consider a number of factors when planning their moves in Ontario, relying on smart networking and targeted partnership strategies to grow their business locally. We will detail some of those considerations in an extended version of this article, to appear in the upcoming print issue of the magazine.

Back in the stock market!

I decided to get back into the stock market yesterday. I realized I hadn't made any contributions to my Roth IRA for 2008 while doing taxes. And when I did make a contribution, I decided to invest it as well.

Although consumer confidence is low, markets are crashing, and it's a recession, I think it's a good time to at least test the waters because:

1) Historically, whenever officials declare it to be a recession, we are already 1-1.5 years into the recession and the bull market or recovery has already started

2) Even if we havcn't bottomed out, it's really hard to time the bottom, and we are probably much closer to the bottom than we are to the top. 

What makes me nervous is that the DOW has been struggling to cross 8,000, which could mean it has found a ceiling and will start dropping again.

I decided to invest in two ETF's. A solar energy fund (TAN) and Brazil (EWZ). My reasons were very simplistic. Both are hammered right now. Both are definitely going to grow in the future. I'm watching the market closely and hoping I am right.

 

Feedback on Amazon Kindle 2

I had the opportunity to try out the Amazon Kindle 2 for a week. I read a lot of books and so wanted to try out the Kindle as I think it is going to change the way we read. We’re probably heading to a world where books will be obsolete and replaced by electronic devices which will enhance our reading experience. Such devices allow us to carry many books without the load of carrying physical books, search through books faster, and better manage our notes and highlights.

 

Here’s the feedback I have for Kindle:

The good - These are things I really liked:

·         I loved highlighting and being able to search my clippings. Often times while reading I will come across something that inspires me and make me want to take a note for a task or a reference for a blog entry.

·         I like that it tells me how much of the book I have completed reading, by percentage.

·         The dictionary is very useful. Perhaps it could even be linked to Wikipedia. This way a reader’s flow isn’t broken when he comes across a word or concept he doesn’t fully understand.

 

The bad - Things I think could have been better:

·         The view is not in sync with the book page number, or chapter. This makes it really difficult to figure out where in the book I am. It’s also hard to ‘flip through’ pages and then go back, which is a common user scenario while reading books.

·         Page turning transitions are not very smooth. There is a bit of a break as the next page is loading, although probably under a second. This can disrupt a reader’s flow.

·         Placement of the next page buttons and previous buttons is a bit confusing. The left next page should just be ‘previous’. That way if I press the right button, it goes to the next page, and the left button, it goes to the previous page. Also, for languages that are not left to right, it will just work the opposite way.

·         I was reading a book with large tables that spanned multiple pages. Since it was too large for the screen, the tables were truncated even if they fit in a single page in the actual hard copy book.

 

The ideas - Kindle is still in the early product stages. Here are some ideas I think will be cool in the future.

·         Built in lighting in screen. This would allow us to read even in the dark

·         Colour screen. I’m pretty sure Amazon already has this on their list

·         Anti-reflection screen.

·         An easy way to skip sections or chapters. We can go back to the table of content and then click on the next section/chapter but that is too many clicks

·         Some plan that allows unlimited books membership and gives the kindle for free, kind of like a phone plan. That would help make the kindle more affordable

Green Festival 2009 in Seattle

I spent the entire weekend of March 28-29 at the Green Festival. I went to listen to talks and check out green products on March 28 and spent March 29 volunteering at the Green Festival.
My first realization was that I definitely need to go to more conferences. It helps me open up to areas outside my immediate world. One thing that was common amongst the speakers I heard was praise for Barack Obama. I think it’s because they feel they will get somewhere when negotiating green policies with the current administration.

I heard Kevin Danaher in his talk on “Building the Green Economy”. He also happens to be one of the founders of Green Festivals. I liked his talk a lot because he was an entertaining speaker and gave many practical examples of green project and their saving. He had a strong focus on San Francisco and one interesting project he talked about was building a green building in downtown San Francisco that would be cheaper to operate, and then subsidizing it for teachers allowing them to live in San Francisco if they teach in schools in San Francisco instead of spending 3 hours a day commuting. It was refreshing to see green efforts help solve some of our social problems as well.

I then went to David Korten’s talk “Agenda for a New Economy”. I thought it was a bit radical, especially when David likened getting our ‘freedom and independent’ from Wall Street to when the US got independence from the British. He’s proposed a new economy that is wealth based with smaller community banks. And throughout his talk he really criticized Wall Street mercilessly. Because of such an immoderate stance, I didn’t come out feeling convinced with his talk.

Two talks were enough for a day for me and I spent the rest of the day checking out green products in the fair. There were many energy efficient products, organic food items, and schools with environmental studies. There was even a green massage that I was tempted to try out! I really wondered why some of the exhibiters had stalls in the Green Festival because they seemed irrelevant. I spent most of my time checking out energy efficient rooftop tiles as well as solar powered tiles. I’m no expert but I couldn’t really tell the aesthetic difference between energy efficient and regular rooftop tiles.

Volunteering the next day was fun. I was placed at the waste disposal facility and was sorting and differentiating compost, glass, cardboard, recyclable stuff, and waste. I also took out a trolley and went around the fair where other volunteers would empty their compost, recyclable, and waste cans into my trolley in separate bags. It did make me wonder why we even need to do all this sorting beforehand, why we can’t just have systems smart enough to do this all by themselves. I know it’s not that easy. There’s a process to raise all the tape on cardboard boxes by using heat. We’ll need something similar for pretty much every waste scenario. Still, something to think about.