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Solar sector must develop business-like strategy, Ottawa says

A crew installs solar panels on a house in Ontario. Natural Resources Minister Joe Oliver said Monday that the solar sector cannot expect any increase in support from Ottawa until the deficit is tamed.

Pure Energies/Pure Energies

Natural Resources Minister Joe Oliver made it clear Monday that federal government support for the renewable energy sector will be limited while Ottawa is dealing with the deficit.

The solar power industry must develop its own "sound business model" if it wants to succeed, the minister said.

In a speech to a solar industry conference in Toronto – where he extolled the virtues of oil and gas – Mr. Oliver said the solar sector must figure out how to be self-sustaining if it is to thrive.

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While he said there is no question that renewables will form an important part of Canada's energy mix in the future, he emphasized that most non-emitting power now comes from hydro and nuclear plants.

He also said oil and gas will continue to be the dominant sources of energy globally, and this "underlies the economic and strategic importance of Canada's world-class oil and gas reserves, as well as the vast potential to diversify markets for Western Canadian crude."

The oil industry represents hundreds of thousands of jobs and billions of dollars in taxes and royalties, he told the solar industry executives who had gathered in Toronto for their annual conference.

Mr. Oliver cited the government's past support for clean technologies through its EcoEnergy programs, and other initiatives that pay for development and demonstration projects. He said Ottawa will continue to be helpful "in the context of our current fiscal situation."

However, he said, "no matter how desirable they are from an environmental perspective, new technologies that cannot offer a strong business case will encounter difficulty gaining acceptance in the marketplace." In solar, investors will be even more cautious after the collapse of some players in the U.S. market, he added.

After his speech, Mr. Oliver said he sees solar "as one element of Canada's attempt and obligation to reduce our greenhouse gas emissions by 17 per cent from 2005 to 2020." Ottawa's role will be to provide some funding for technological advancements "so the industry can be self-sustaining," he said.

Several industry executives at the conference said, however, that the key element which is propelling Canada's solar industry at the moment is Ontario's "feed-in-tariff" program, which pays very high rates for solar generated power – essentially a subsidy. It has helped create a whole development industry which is installing solar panels on rooftops and on large ground-level solar farms. Local content requirements in the program have prompted several companies to build factories in Ontario, where they are manufacturing solar panels and other equipment.

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If other provinces want to see a solar industry take hold, they need to create similar programs, said Kerry Adler, chief executive officer of solar power developer SkyPower Ltd. "The challenge we face is convincing other provincial governments that the feed-in-tariff works," he said.

If provinces see that investments and jobs result from FIT programs, they will embrace the industry and open their markets with similar approaches, he added. "It is high time that these other markets in Canada recognize that it's not just hydro and coal and natural gas that is going to power our homes and our children's homes in the future."

The Ontario government is in the process of reviewing the FIT program, and is expected to reduce the price it pays for solar power because of the decreasing costs of equipment. But there is debate in the industry over how much those rates should be cut.

Mr. Adler said Monday that the industry cannot deal with a power price cut of more than 15 per cent. While the solar industry is on its way to "grid parity," where its costs are similar to other forms of power generation, it is not there yet and still requires some form of government subsidy, he said.

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About the Author
Reporter, Report on Business

Richard Blackwell has reported on Canadian business for more than three decades. At the Financial Post and the Globe and Mail he has covered technology, transportation, investing, banking, securities and media, among many other subjects. Currently, his focus is on green technology and the economy. More

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