Government incentives such as Ontario's new "feed-in-tariff" are crucial to attracting investment to the renewable energy business, solar power executives say, but only if the subsidies remain stable over the long term.
At the Canadian Solar Industries Association annual conference in Toronto yesterday, top executives of several Canadian solar energy firms praised Ontario's feed-in tariff program that pays premium prices for renewable power - more than 10 times the normal electricity price for certain solar projects.
The rules in Ontario's new Green Energy Act, which require some solar equipment in a project to be made in the province to earn the subsidy, have prompted several manufacturers to set up shop in Ontario.
Essentially, feed-in tariffs "attract private capital to the business of creating solar energy, because you can make money doing this," said John MacDonald, chief executive officer of Day4 Energy Inc., a Vancouver-based solar panel maker.
No only does the new price structure get investors attention, he said, but it encourages equipment manufacturers to be innovative so they can generate more power for the same dollar they spend - generating even more profits.
But it is crucial that Ontario leave the program in place for the long term, and not change the rules abruptly, Mr. MacDonald added. He said his advice to the government is: "Keep it stable. Don't fiddle with it. Once you've started it, keep stability in the system."
It is inevitable that the government will eventually trim what it pays for renewables as costs come down, Mr. MacDonald said, but companies can deal with that if they are given enough notice.
The wrong approach was taken in Spain, he said, where a feed-in tariff was so lucrative that the government suspended it in 2007 and then brought it back with huge changes, almost killing off the booming domestic solar industry in the process. "There's nothing an investor hates worse than instability," Mr. MacDonald said. "They had instability in Spain and [the solar industry]basically collapsed."
Ted Lattimore, president of Victoria-based solar equipment maker Carmanah Technologies Corp., said he generally doesn't favour protectionism, but conceded the content requirements could encourage the creation of a large solar industry in Ontario.
The province needs to "be bold about what it is they are trying to do, and keep those rules in place so that we in industry can respond to it," he said. "If I can figure out a way to make money, I'll go after it with everything I've got."
He said he would consider shifting some of Carmanah's manufacturing to Ontario if it allowed the company to meet the content requirements and get more business.
Michael Carten, executive chairman of Calgary-based inverter maker Sustainable Energy Technologies Ltd., said the biggest market for solar power systems in Canada will likely be for rooftop systems on large commercial buildings.
Solar panels on individual homes will be the next biggest market, with large, ground-level "solar farms" pumping power into the electrical grid likely to be the smallest segment, he said.
Big profits will come when buying a solar power systems is akin to purchasing any other kind of appliance, with reasonable installation costs, he said.
In the meantime, Ontario's feed-in tariff "is very intelligent fiscal policy," Mr. Carten said. "I think this is going to be a very successful experiment."
Kerry Adler, CEO of large-scale solar farm developer SkyPower Corp., said he is concerned that Ontario may change its renewable energy policies because of the departure of energy minister George Smitherman, who spearheaded the Green Energy Act. Mr. Smitherman is leaving provincial politics to run for mayor of Toronto.
Mr. Adler criticized the federal government for its failure to set a firm mandate for the amount of renewable power that Canada will generate in the coming years.