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Solar power surging to forefront of Canadian energy Add to ...

The action on large solar projects is taking place only in Ontario, where pro-renewable-energy government policies essentially subsidize solar installations.

Dave Chan for The Globe and Mail

In what was once a rocky hayfield in southeastern Ontario, a very 21st-century type of farm is taking shape.

Construction workers are piecing together rectangular racks supported by galvanized steel posts. Tractors pulling loads of solar panels trundle by. Others teams attach one-by-two metre solar modules into groups, and mount them gingerly onto the racks.

Here, a few kilometres from the tiny town of Newboro, Ont., in the Rideau Lakes region between Ottawa and Kingston, one of Canada’s newest solar farms is close to completion, with the final rows of photovoltaic panels now being installed. Standing among them is like being in a vast shiny sea that rolls off in all directions over the contours of the land.

“By October, this thing will be pumping power,” says project manager John Caruso, who has been nursing what he calls his “baby” to completion since work on the site began last fall.

His baby is Newboro 1, a utility-scale solar-power-generating station being built by contractor Renewable Energy Systems Canada for renewable energy developer SunEdison Canada. When it’s finished, the project’s 55,000 solar panels, mounted on more than 5,000 posts driven into the rock across 120 acres, will generate 10 megawatts of electricity for Ontario’s power grid, enough to power more than 2,000 homes.

Workers install a solar panel at the SunEdison Newboro 1 Solar Project. (Dave Chan for The Globe and Mail)

The Newboro project is part of a solar building boom under way across Ontario this summer, with construction crews active on about two dozen large solar projects. They will add to the more than 70 large solar farms already up and running all over the province – from Dryden in Northern Ontario, to Chatham in the Southwest, to Cornwall near the Quebec border.

While that puts Canada among the top 10 countries of the world when it comes to the amount of solar installed, the planned and operational solar farms will contribute only about 1 per cent of Ontario’s power. Still, combined with other renewables such as wind, it is helping the province to wean itself away from fossil fuels, and close its coal-fired power plants.

The action on large solar projects is taking place only in Ontario, where pro-renewable-energy government policies essentially subsidize solar installations. That has not been duplicated in any other province. Without government support, solar projects elsewhere will likely be small scale, until dropping panel prices allow the industry to compete with other forms of power. The biggest project outside Ontario right now is a small 1 MW solar farm under construction near Kimberley, B.C.

But in Ontario, big solar farms have become positively commonplace. Directly across the road from SunEdison’s Newboro site is another 10 MW project owned by Northland Power Inc. that has been in operation for a year. SunEdison has another solar site under construction a few kilometres away, near the town of Westport. Less than an hour’s drive southeast from Newboro, South Korea-based Samsung Renewable Energy is planning a massive 100 MW solar farm – 10 times the size of the Newboro project – on the western outskirts of Kingston.

These aren’t anything like the rooftop installations of a few dozen panels that you see on houses, factories and warehouses across the country. They are huge, ground-level projects, sometimes covering vast tracts of land. A massive 100 MW Samsung solar farm currently under construction south of Hamilton, covers 750 acres and when finished will have 450,000 solar panels angled toward the sky.

Unlike wind farms, which have drawn heavy criticism from nearby residents for their shadow flicker, noise and the towering presence of turbines that rise over 100 metres into the sky, solar farms have a much lower profile – both literally and figuratively.

“Solar has a very high approval and support rating,” says Georges Arbache, vice-president for global infrastructure at consultant KPMG. “It sits there, it’s quiet, and it is not very visible because it is flat on the ground.”

There are some legitimate concerns from residents who live near planned solar farms because of the hum from inverters, the glare from panels, and worries over water, wildlife and the loss of farmland. But these have usually been remedied by setting the panels back from roads and property lines, and making sure panels are clear of waterways. And Ontario no longer allows solar farms to be installed on its most productive farm land.

Last year, a Canadian Solar Inc. project set to be built on the Oak Ridges Moraine – part of the green belt surrounding Toronto and an important watershed – raised hackles among some local residents. But a compromise was reached at an environmental tribunal when the project was shifted to protect nearby wetlands.

Chuck Mercier, mayor of Scugog, the township where the project is located, says the solar farm now has a smaller footprint, and will have plantings to make the site more presentable.

“I don’t think anybody is totally opposed to [solar projects],” Mr. Mercier says. “Over all, solar has been embraced by most of the community. Solar doesn’t present the same kind of issues as wind.”

Dave Chan for The Globe and Mail

This relative lack of opposition has cleared the way for the flurry of activity in large-scale solar, which is a direct result of Ontario’s public policy on renewable power. Its Green Energy Act passed in 2009 was designed to boost renewable energy development – and the industry that supports it – by paying high prices for electricity generated from wind, solar and other clean sources.

Under that “feed in tariff” (FIT) program, the owners of the Newboro 1 project, for example, will receive 44 cents a kilowatt hour for all the power it generates over the next 20 years, about three times more than the retail electricity rate of less than 14 cents a kilowatt hour.

Developers who won contracts under the the FIT program are now rushing to complete their projects by set deadlines, to ensure they can collect on those high power rates.

“There has been a lot of construction activity last summer, this summer in particular, and it will continue through 2015,” says John Gorman, president of the Canadian Solar Industries Association (CANSIA).

“Our numbers show that by the end of the construction season next year, Ontario will have installed 2 gigawatts [2,000 megawatts] of solar, and the majority of that is utility scale.”

Canada still sits behind leaders such as the United States, however, where 4.7 gigawatts of solar was installed last year alone. “In the U.S., 33 per cent of all new electricity generation installed was solar,” Mr. Gorman says.

At the moment, however, the Ontario boom is intense enough to cause a shortage of skilled labour in the solar construction game.

“Bottlenecks within the system have been a struggle for everyone in the industry,” Mike Dilworth, country manager for SunEdison in Canada, says. “That is the biggest challenge for [meeting] timelines, and getting the projects built,” he says, especially when the bulk of construction is concentrated during the summer months.

Still, Ontario’s solar boom is not likely to last, at least not at the current pace. That’s because last year the provincial government – under pressure from critics concerned about upward pressure on electricity prices and slower demand growth – discontinued the FIT program for large-scale solar projects.

Workers unload solar panels for installation at the SunEdison Newboro 1 Solar Project. (Dave Chan for The Globe and Mail)

From now on, solar farm developers will have to make competitive bids if they want to build large solar farms. Essentially, the provincial government will determine how much solar power it wants to buy, and developers will submit potential projects and say what price they are willing to sell their electricity for.

In general, the lowest bidders will get the contracts, provided their projects meet other criteria and are in locations where power is needed.

Ontario has also said it will likely buy just 140 megawatts of new solar power from large scale projects in each of 2014 and 2015, far less than in the past few years. Under the competitive process, it is certain that developers will be paid less for their solar power than they received under the FIT program.

“Now things are going to start to level off a little bit,” Utilia Amaral, director of government affairs for SunEdison in Canada, says. But a more measured pace of solar development is not a bad thing after an overheated few years, she added, particular if the procurement process becomes “reliable and predictable.”

It was a relief to those in the industry that the Liberal Party won a majority in Ontario’s recent provincial election, as it has pledged to continue supporting renewable power production. The opposition Progressive Conservatives had essentially pledged to dismantle all green energy support.

Mr. Gorman, of the solar industry association, said he is confident there won’t be much of a lull in solar energy development over the long term. If the new procurement process is run efficiently, new projects contracted this year and next should be under construction by 2016, he said. “We are hopeful that the momentum will continue.”

Dave Chan for The Globe and Mail

There is one crucial factor that will allow developers to continue building money-making projects, even if the price they get for the electricity they produce is much lower than under the FIT program. The price of solar panels is continuing to fall sharply, reducing one of the key costs of building a large-scale solar farm. Solar cells cost about $76 per watt in the 1970s, according to CANSIA figures, and have now dropped to below $1 per watt.

Developers may also save money from another crucial change to Ontario’s renewable energy policy: Solar projects will no longer have to guarantee that they will buy a certain percentage of their supplies from Ontario-based manufacturers. Those “local content” requirements, which applied to a variety of renewable energy projects, including wind farms, were dropped after a World Trade Organization panel ruled that they breached international trade law.

The Newboro project, which had to follow the local content guidelines, got its panels from Canadian factories run by Celestica and Flextronics. Racking came from the Toronto plant of U.S. company Unirac, and steel piles were sourced from a company in Windsor, Ont. But future projects will be able to look further afield for lower-cost supplies if they want to.

The end of local content rules was deeply disappointing to most Ontario-based companies supplying the renewable sector. But some suppliers, such as Canadian solar panel makers Celestica and Canadian Solar Inc., have been gearing up to export some of their products, to help replace lost volume from Ontario.

“We’d like to be here for the long haul,” said Colin Parkin, general manager of Canadian Solar’s panel-making operations in Guelph, Ont., which now ships some panels to the booming U.S. market. “We’re not at par with manufacturing costs in China yet, but we are trending in that direction.”

Mr. Arbache of KPMG says there will certainly be rationalization among the Canadian solar product makers as a result of the end of the local content provisions, but the program has succeeded in creating strong local firms with expertise in manufacturing and a reputation for high quality.

“We have developed an expertise here that is in demand outside of Canada,” he said, and consequently many firms that sold their products and services in Ontario should be able to make the transition. “The Green Energy Act and the FIT program is what created the market. … I don’t know that we would have been able to achieve what we have achieved without [it].”

A worker inspects a solar panel. (Dave Chan for The Globe and Mail)

Canada's Solar Players

It is hard to track who actually owns the dozens of solar farms planned, under construction or completed in Ontario, because many of them change hands at various stages of their development.

Typically, a developer will plan a solar project, get the permits and financing in place, supervise its construction, then sell it to an independent power producer or investment fund once it is complete. That’s how one of the biggest solar developers, Recurrent Energy, operates. It built a portfolio of 20 projects, generating 220 megawatts of solar power, but all have been sold to investment firms after completion.

SunEdison Canada, which has built about a dozen solar farms and has several more in the works, has sold most of its projects at completion, but intends to keep some in the future for its own portfolio.

Some developers, such as Northland Power Inc., hold on to the projects they complete. Northland has 80 MW of operating plants and 50 MW more under construction in Northern Ontario. Other developer-operators include Toronto-based SkyPower, which has several Canadian solar farms but has shifted its development focus overseas, and U.S.-based companies NextEra Energy Resources, Invenergy LLC and Penn Energy Renewables Ltd.

Some companies, such as Canadian Solar Inc., also manufacture the solar panels that are installed at the projects they develop and build. But Canadian Solar sells its Ontario projects upon completion, to operators such as utility TransCanada Corp., investor Concord Green Energy (an arm of real estate developer Concord Pacific), asset management firm BlackRock Inc., or independent power producer BluEarth Renewables Inc.

One of the biggest owners of completed Ontario solar projects is Fiera Axium Infrastructure Inc., a Toronto-based portfolio management firm controlled by Fiera Capital Corp. and Axium Infrastructure Management. It has quietly bought about 280 megawatts of operating solar farms in the province from developers, creating the largest portfolio held by any one company.

Institutional investors like the low-risk, proven solar technology, combined with the predictable income they get from selling the power to the province at a fixed rate. Other institutional investors that have bought Canadian portfolios of solar projects include Firelight Infrastructure Partners and Great Circle Solar Management Corp.

Among the key players in the solar universe are the companies that actually do the construction work on the solar farms. Specialist solar contractors include RES Canada, ABB (the Canadian branch of the Swiss engineering firm), PCL Construction and HB White Canada Corp.

Dave Chan for The Globe and Mail

Alberta's Sunny Outlook

Ontario has been the centre of utility-scale solar power development in Canada so far, thanks to its incentive programs that pay high prices for solar power.

At the moment, there appears to be little interest federally, or among other provincial governments, to encourage large solar farms.

But Alberta – with an aging fleet of coal-powered generation and an expanding population – may be the next province to add some some large-scale solar power. Private power developer GTE Power Corp. has plans for a $30-million, 15-megawatt project on 78 acres of land just outside of Brooks, Alta.

GTE president Ian Rogers says solar can work well in Alberta’s merchant market for electricity, where the supply and demand at any particular time determines the price paid to power producers.

A solar farm will generate its peak power in the middle of the day in the summer, when air conditioning demand is highest, and thus the rates paid to electricity generators top out. That helps to lift the average price received by a solar farm over the course of a year, Mr. Rogers said. At the same time, the cost of solar panels has dropped sharply, so it is now possible to build a solar farm in Alberta that can produce a “decent” investment return, he said.

Indeed, Mr. Rogers said the per-watt capital costs for building his solar farm could work out to less than that of a new natural-gas-fired power plant.

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