In the summer of 2008, Ontario's then-newly appointed energy and infrastructure minister, George Smitherman, went on a trip to Europe to figure out how to transform the province into North America's greenest jurisdiction.
It was only natural that his research would take him to Germany. Though hardly the sunniest place on Earth, Germany was widely credited for kick-starting the global solar industry in the early 1990s, using a feed-in tariff policy that granted solar energy producers guaranteed preferential long-term rates as compensation for betting on expensive technologies such as photovoltaic (PV) cells.
With rapid innovation, falling prices for ultra-pure silicon and improvements to the wafer production process, the solar industry has recorded an impressive growth curve, with total annual installation levels rising from just 21 megawatts in 1985 to over 7,300 MW in 2009. The acceleration has been such that Keith Stewart, an energy analyst for Greenpeace Canada, admits that his organization has consistently underestimated solar industry growth. Yet for all those numbers, solar power still accounts for only a tiny slice of global energy production.
The bulk of the solar industry is based in Germany, Spain, Japan, China and the American Sun Belt, although other regions are also beginning to see rapid growth. Areva, the many-tentacled French energy giant, recently decided to place a $3-billion bet on the nascent solar market in India, where the national government has launched a plan chock-a-block with incentives meant to spur 20,000 MW of solar power by 2022. Another European group is trying to figure out how to develop solar farms in the Sahara.
Germany, as Smitherman discovered, didn't require solar power producers to source components locally. Instead, it enticed the equipment industry with lucrative grants, especially in high-unemployment regions in the former East Germany. Waterloo's Arise Technologies, for example, secured a $35-million grant in 2007 to build a $70-million solar cell factory in Saxony. These German-based manufacturers now ship modules to emerging solar markets, and the country's government claims to have created more than 150,000 jobs in the solar sector. To Ontario policy-makers, such figures offered clear evidence that Western governments could leverage their own green energy policies to create green-collar jobs.
When Ontario's Liberals passed the ambitious Green Energy and Green Economy Act in 2009-the upshot of Smitherman's research trip-they formalized the link between renewable power and jobs with carrot-and-stick rules requiring solar and wind producers to source equipment in Ontario. McGuinty has said the policy will create 50,000 new jobs by 2013.
In the two years since the law was passed, Queen's Park has found itself in the awkward role of matchmaker, cajoling offshore solar manufacturers to set up factories in Ontario. Smitherman (who left the government for an unsuccessful run at the Toronto mayoralty) got his knuckles rapped in late 2009 when leaks indicated that he'd promised Samsung an inside track on $7 billion of equipment purchases if the South Korean giant built several factories in Ontario.
McGuinty formally unveiled the massive deal in January, 2010; it provides Samsung with $437 million over 25 years if the company delivers on its pledge to create 16,000 jobs. "We're trying to lay the foundation here for new economic growth in Ontario," the Premier said at the time. Last December, the company announced it would build a pair of wind turbine plants in Southwestern Ontario. Samsung has pledged to construct two more plants as part of the overall deal. But details are scarce, no construction has begun, and the opposition parties are demanding that the government come clean about the terms. The sweetheart deal also predictably irritated other equipment manufacturers, including giants like Mitsubishi. And, so far, the Samsung arrangement has done nothing to break the logjam that bedevilled solar developers like Paul Ghezzi.
Indeed, the mounting "supply chain" problem has caused headaches because provincial officials must give the thumb's-up before the factories can start selling panels and other components; after all, the program would seem pretty hollow if these companies, many of them foreign-owned, did nothing more than establish warehouses and sales offices in the province. "There's been no shortage of announcements," concedes Jim MacDougall, who oversees the feed-in tariff program for the Ontario Power Authority, adding that solar producers and regulators are now waiting anxiously for the manufacturers to get shovels in the ground. "The big question is when will companies commit money to Ontario facilities," says MacDougall. Meanwhile, green energy producers have project approvals in hand but are scrambling to source parts.