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Ontario Solar Market Booms But Local Sourcing Mandate Could Limit Growth

File image.
by Staff Writers
El Segundo CA (SPX) Sep 09, 2010
Aggressive government incentives are set to trigger booming growth in solar installations in Ontario, Canada, in 2010-but regulations requiring the use of locally sourced photovoltaic (PV) products will cause the expansion to slow dramatically in 2011, according to market research firm iSuppli Corp.

Ontario's PV solar technology system installations are expected to rise to 257 Megawatts (MW) in 2010, up 272.5 percent from 69MW in 2009. However, installation growth will slow dramatically in 2010, rising by 75.5 percent to 451MW in 2011. The attached figure presents iSuppli's forecast of PV solar panel installations in Ontario.

Given that Ontario is the most populous province in Canada, the Canadian government's moves could have a major influence throughout North America.

"Ontario in 2009 passed the Green Energy and Green Economy Act, adopting an aggressive green energy policy that includes a Feed-In Tariff (FIT) program as its centerpiece," said Mike Sheppard, financial services/PV analyst for iSuppli. "This FIT program represents North America's first comprehensive guaranteed pricing structure for electricity production from renewable fuels sources including solar PV, bio-energy waterpower and wind."

No coal goal
A major factor driving the FIT is Ontario's plan to phase out coal-based electrical generation by 2014. Coal in 2008 represented 21 percent of Ontario's electricity generation, a gap that must be filled by renewable energy technologies, solar power trends show.

Meanwhile, demand for electricity is also growing in Ontario, with almost 40 Gigawatts (GW) of electricity required to meet estimated demand projected by 2025, according to the Ontario Power Authority (OPA). OPA has determined that if no new existing capacity is created or refurbished by that time, there will be a 30GW gap between existing electricity supply and demand, spurring further demand for renewable technologies.

Local content requirements spur supply constraints
Beyond the FIT, Ontario's Green Energy and Green Economy Act specifies that in 2010, the component bill of materials for 40 percent of residential installations as well as 50 percent of commercial installations must be sourced locally.

"The growth of PV installations in Ontario in 2011 could become supply constrained, as module and inverter production located in the province will not be sufficient to support the 60 percent content requirement until the middle of the year, Sheppard said. "These supply constraints will imply strong growth opportunities for companies that are currently building module and inverter facilities in the region as project developers clamor for their product.

While such developments will limit PV market growth for the whole of 2011, Sheppard added, the undersupply situation will fade out as an issue by the fourth quarter of next year when newly built facilities are expected to properly meet demand for PV solar energy.

The major beneficiaries of the shortfall will be local solar companies. Firms like Canadian Solar, SMA, Fronius and Silfab are stepping in to meet the demand for local solar components, building module and inverter manufacturing facilities in Ontario.

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