Ontario's new Green Energy Act could pump as much as $4.5-billion into the hands of the province's renewable energy companies, utilities and power distribution firms.
An independent analysis to be released today by Mississauga-based Hatch Management Consulting says there are potentially huge gains to be gleaned from new rules that will see Ontario pay guaranteed prices for power generated by wind, solar, hydro or biomass - a so-called "feed-in tariff" - and require equipment for these projects to be built in the province.
The act's regulations, spelled out by the government last month, will also guarantee that green-power producers can connect to the transmission grid, and will make it easier to get projects approved.
The rules were greeted with enthusiasm by companies considering renewable energy projects, and several domestic and international clean-power equipment manufacturers are now considering or will set up shop in the province.
But huge capital investments - as much as $23.8-billion in more than 100 projects - will be needed to make sure that the potential benefits accrue to the companies involved, the Hatch report said.
Firms that build renewable energy projects will benefit the most, accumulating up to $3.2-billion of the gains, the study suggests. Transmission companies will get about $740-million in gains, while local distribution companies (which will be allowed to build their own renewable energy facilities) will get about $566-million, the report said.
These financial gains will be realized over 18 years, from 2009 to 2027, the analysis suggests, and there could be further gains after that point.
One of the most important potential benefits from Ontario's new law will come from the local-sourcing provisions, which require a specific percentage of Ontario content in each project, said Mergen Reddy, a Hatch director who worked on the study.
It could produce an "ecosystem of skills and capabilities," making the province a key locus of green energy manufacturing, Mr. Reddy said.
The feed-in tariff, on its own, could never achieve this because it would end up encouraging projects built mainly with equipment manufactured outside the province, he said, adding that job gains would be much lower than the 50,000 projected by the government over the next three years.
Among the companies that have already opted to shift manufacturing to Ontario is Sustainable Energy Technologies Ltd., a Calgary-based maker of solar energy products. Last week, it said it will build power inverters for the North American market in Ontario.
"Had Ontario not put its program in place, we would likely have ended up in Europe or in the United States," executive chairman Michael Carten said.
While Sustainable Energy will be selling around the world, the Ontario local content rules "give us some early volumes and a little bit of a head start within our own backyard," Mr. Carten said.
He expects the rules will attract foreign manufacturers, especially Europeans familiar with feed-in tariff plans who will make Ontario a "beachhead" for North America.
Wind-turbine manufacturer AAER Inc. of Bromont, Que., is also considering setting up an Ontario plant, chief financial officer Eric Phaneuf said. The high price Ontario is paying for wind energy will accelerate development in the province, making it a solid market for AAER's turbines, he said.
British-based renewable energy giant International Power PLC also cited the new law as one of the reasons it decided to buy Toronto wind power developer AIM PowerGen Corp. When the acquisition was announced, IP's chief executive officer Philip Cox said the new law "was a key driver of our interest in AIM."
South Korea-based conglomerate Samsung C&T Corp. is also in talks with Ontario about setting up a business, possibly as a developer of large solar and wind power projects and an equipment manufacturer.
Highlights of Ontario's Green Energy Act
A "feed-in tariff" that sets specific rates for electricity sold to the grid. They range from 10.3 cents per kilowatt-hour for some landfill gas projects to 80.2 cents for small residential solar systems.
Domestic content rules that require 25 per cent of wind project costs, 40 per cent of small solar project costs and 50 per cent of large solar project costs to be sourced in Ontario. These levels increase in future years.
A streamlined approval process that will approve projects more quickly, but give local governments less input and make it harder for individuals to block projects.
Projects will be guaranteed connections to the electrical grid.
Wind turbines must be at least 550 metres from residences.
No large solar projects will be allowed on top-quality farm lands.