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Ontario's search for a solar system Add to ...

The 950-acre farm has 1.3 million thin film modules-each about the size of a kitchen cabinet door-and generates enough electricity for almost 13,000 homes. After auditioning a range of solar equipment suppliers, Enbridge decided to source the modules from First Solar, a well-regarded California clean-tech firm that builds them in factories in Ohio and Malaysia.

John Maniawski, Enbridge's senior director of power generation business development, says the company feels solar is a viable enterprise that satisfies the utility's strategic and financial goals. Enbridge, he notes, is planning to invest between $2 billion and $3 billion in renewable energy in North America over the next few years; the company is actively scouting around Ontario for new solar sites. But Maniawski knows he won't be able to turn to First Solar for components for this next set of projects: The company has opted not to locate a plant in Ontario because the provincial market doesn't offer enough scale to justify the investment.



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Late last year, Energy Minister Duguid released a long-awaited report predicting that Ontario's power rates will double over the coming 20 years, rising by about 3.5% annually. The run-up represents the price consumers must pay in order to clean up and modernize Ontario's electricity system (including refurbishing nuclear plants) while also creating those green-collar jobs. Duguid estimates Ontario will spend $27 billion on renewable energy by 2030, a third of that on solar power.

In a province that's long enjoyed artificially low energy rates, any increases are bound to be unpopular, and the Liberals are trying to reduce the sticker shock with assorted rebates. Still, the opposition parties are eagerly attacking the cost of the green energy strategy in the run-up to the election set for this October. "The subsidies being offered were ridiculously generous," John Yakabuski, the Ontario Conservatives' energy critic, recently told The Wall Street Journal. "We would have never instituted the program."

More worrisome for Duguid and his officials is Japan's WTO challenge. "We weren't surprised that other jurisdictions have taken notice," says the minister, adding that he's confident the green energy policy will survive. If he's wrong, the WTO decision, a global precedent-setter, could gut Ontario's domestic content rules and lay waste to its pledge to create thousands of green jobs.

The solar firms testing the Ontario market are watching these proceedings intently, but not because they're all hoping the WTO will uphold Ontario's regulations. "We have members who are deeply against domestic content and members whose support is very strong," admits Elizabeth McDonald, president of the Canadian Solar Industries Association. Having researched the subsidy and incentive structures for solar manufacturing in jurisdictions like Japan, Joshua Pearce of Queen's isn't optimistic about the future. If the province has to water down or cancel its feed-in tariff policy, he says, "all those jobs will be gone."

The case underscores the difficulties that governments face in orchestrating the transition to a clean economy. Despite its leadership role in North America, Ontario is no longer alone when it comes to offering inducements to suppliers of renewable energy gear. And the green logic begins to wilt if manufacturers are compelled to build factories in every market they hope to supply. It's possible, for instance, that Ontario's emerging solar manufacturing sector will encounter export barriers when looking to crack other North American jurisdictions, specifically because of the province's domestic content rules. What's more, solar energy, though much cheaper than it was even three years ago, still suffers from a substantial price disadvantage compared to traditional sources, so a fractured North American supply network could make this form of subsidized power even more expensive for consumers.

In Germany, where the solar revolution began, critics are now questioning the huge size of the subsidies, estimated at $200,000 to $300,000 per job created. In other jurisdictions, the solar industry has had to lobby hard to defend its subsidies, even though module prices and the net costs of producing the energy are dropping rapidly. By contrast, observes Pearce, Japan offered generous upfront subsidies to solar equipment makers but warned them that the supports would be phased out within a decade, forcing the manufacturers to invest in innovation that would drive down prices. Nothing of the sort has been proposed for Ontario, he points out. "It's sad. There's no other word for it."

Despite all the glitches and the warning clouds on the horizon, some solar proponents are still hopeful, pointing out that most forms of energy production have benefited from a financial leg up-from tax breaks for oil and gas exploration to huge subsidies for nuclear plants. As Greenpeace's Keith Stewart says, "Let's not forget that Niagara Falls [generating station]was obscenely expensive when it was first built. But I think everyone's glad we built Niagara Falls."

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