Mr. Heck said many people also mistakenly think of grid parity – the point where the cost of solar power becomes equal to other forms of power production – as a singular event that will be reached at a particular time. But the price of electricity varies widely, he noted, and so grid parity is reached in different markets at different times.
Another key factor is the amount of sunlight hitting the ground, and that varies sharply around the globe, creating a vast range of economic conditions for solar depending on the location.
Still, the McKinsey report projects that many more solar companies will face difficulties and even collapse in the coming years, as global manufacturing capacity increases and subsidies shrink. However, the report says, these are “natural growing pains, not death throes,” and they will set the stage for more stable, and far more expansive, growth in the solar industry after 2015.
Mr. MacLellan, the former Arise executive, also remains optimistic about the industry as a whole. “We all knew that at some point there would be a massive amount of consolidation, similar to what happened to the automotive industry in the 1920s or the personal computer industry in the [1990s],” he said. “What has happened is that solar has gone mainstream, and when [industries] go mainstream they consolidate.”
In the next few years, he predicts, the manufacturing portion of the industry – like its automotive and computer predecessors – will be dominated by very large companies that can generate economies of scale. Meanwhile, downstream users – those buying and installing panels to generate power – will benefit greatly from lower and lower prices. “Solar in the next 10 or 20 years will become totally ubiquitous,” he said.
In Canada, where power prices are relatively cheap, unsubsidized solar power is still a long way from grid parity.
So why, then, is Ontario paying a huge premium for solar-generated power? Under the “feed-in-tariff” (FIT) provisions of the province’s Green Energy Act, the province forks over as much as 55 cents a kilowatt-hour for solar power generated on domestic rooftops, more than five times what it pays for most other forms of electricity. It requires solar (and wind) power producers to source about 60 per cent of their equipment in the province.
The idea, the McGuinty government says, is to promote the shift to renewable power sources, and to kick-start manufacturing of green power products in the province – with the view that Ontario could eventually become a key international supplier of solar and other renewable products.
This is an important transition strategy for Ontario’s manufacturing economy, argues John Gorman, president of the Canadian Solar Industries Association. The subsidies will create an industry that will thrive as solar expands around the world, he said.
Ontario’s solar industry – which now comprises dozens of companies making everything from panels to power inverters to the racks that hold them – exists solely because of the FIT program and its local content rules, Mr. Gorman said. Grid parity is “absolutely coming” to Ontario, likely within six years, he insists. When it does, the companies that have settled in the province will no longer need government support.
Among the companies that have set up a manufacturing base in the province is Canadian Solar Inc., a firm that – while based in Canada – made all of its solar panels in China until Ontario introduced its local content requirements. “We specifically built our factory in Guelph because of the program and the Ontario content [rules],” said Milfred Hammerbacher, who runs the company’s Canadian arm.
He acknowledged that the global drop in panel pricing has made it “a real struggle” for his company and others, but Canadian Solar is hedging its bets by getting involved in the downstream end of the solar business – it is investing in solar projects instead of just supplying panels to developers. That gives the company an outlet for its production, and adds some stability to pricing, Mr. Hammerbacher said.Report Typo/Error