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Energy Minister Glenn Thibeault says the province is cancelling plans to purchase up to 1,000 megawatts of green power.Sean Kilpatrick/The Canadian Press

Ontario's renewable energy industry has been dealt a blow with the province's decision to cancel the latest round of green power projects.

The Liberal government announced on Tuesday that it is killing off its second "large renewable procurement" plan, the process in which companies bid to build wind and solar farms and other projects.

Ontario Energy Minister Glenn Thibeault said the electrical system operator told him it does not need the power, and Ontario wants to save money and cut electricity bills. The decision will save the province $3.8-billion, and spare consumers an average extra payment of $2.45 that would have been added to their monthly bills, he said.

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Mr. Thibeault said contracts signed in an earlier green-energy procurement will be honoured. In March, the province reached 16 deals with 11 firms to build wind, solar and hydroelectric projects for a total of 455 megawatts of new capacity. The negotiated prices were much lower than earlier fixed-price contracts for renewables because of the competitive bidding.

Ontario already has more than 4,000 MW of wind capacity and 2,000 of solar power.

The Liberal government has been under pressure from the opposition and rural residents who oppose wind farms to scale back its renewable plans and to find a way to trim increases in electricity prices.

But the cancellation was a shock to the renewable-energy industry, which was counting on the new program, which would have awarded contracts for about 1,000 MW of projects in 2018.

John Gorman, president of the Canadian Solar Industries Association, said the decision could hurt manufacturers and installers of solar product in the province just as they are becoming significant global competitors. "We are on the cusp of being recognized players in the international community, and we are at the doorstep of other provinces like Alberta [which are about to start] developing vast amounts of solar," he said, adding that the changes in Ontario could damage the industry before it gets a chance to expand.

Robert Hornung, president of the Canadian Wind Energy Association, said the wind industry is "shocked and extremely disappointed." He said the decision is a "missed opportunity" for the province to prepare for future energy needs and mitigate climate change. He also noted that the cost of wind is now competitive with that of other forms of power generation.

Siemens Canada Ltd., which makes wind-turbine blades in Ontario, called the decision "disappointing" but said its plant in Tillsonburg remains "a key part of our global supply chain."

Lobby group Environmental Defence called the cancellation "short-sighted" and said this is "exactly the wrong time to put the brakes on renewable energy." It noted that prices for wind- and solar-generated power are dropping and are now competitive with new nuclear power or natural gas sources. Gideon Forman, an analyst at the David Suzuki Foundation, said the move was "baffling," at odds with Ontario's low carbon plans, and potentially puts many jobs at risk.

However, John Cook, president of Toronto-based clean-tech investment firm Greenchip Financial Corp., said many Canadian power producers have already shifted development plans from Ontario to provinces that are moving away from coal-fired electricity production, such as Alberta.

Mr. Cook said it is important that Ontario residents realize green energy was responsible for only 5 per cent of the total increase in the price of electricity for the past five years. "The real cause of [higher] electricity prices has been nuclear refurbishment, transmission upgrades, the HST, and debt retirement," he said.

Earlier this year, Mr. Thibeault's predecessor as energy minister, Bob Chiarelli, said more green power would be needed in a few years when the province's nuclear power plants are undergoing refurbishment. But Mr. Thibeault told a news conference he was told "unequivocally" by the province's electricity system operator that Ontario will have enough power even during the refurbishment.

Sarah Petrevan, senior policy adviser at green energy think tank Clean Energy Canada, said that over the short term, Ontario's decision is inconsistent with its message that it is committed to climate action, reducing emissions, and shifting towards clean sources of energy. "Today's announcement feels out of step with that message."

With a report from Adrian Morrow

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