PV Manufacturers take Note… Ontario will be Primarily a Commercial Rooftop Market

The Ontario solar PV market is on the verge of transformation. At the end of 2009, the province had approximately 40 MW of solar PV connected. Now, the Ontario Power Authority has executed contracts for over 1.2 GW of solar RESOP and FIT projects. That there will be significant short-term growth is obvious. On the other hand, even as the industry begins to build out awarded contracts, there is a good deal of uncertainty about how the market will evolve over the long-term.

ClearSky Advisors has recently completed a report entitled, “Ontario Market Forecast 2010-2015”. One key finding of our research is that Ontario will develop into a largely commercial rooftop market. In fact, by 2015, we project that over 70% of new installations (by MW volume) will come from the commercial rooftop market segment.

Initially, this observation may seem unlikely. As of October 12, 2010, the OPA had executed 732 MW of solar FIT contracts. Of this total, 553 MW were utility scale projects, 169 MW were Capacity Allocation Exempt (a close proxy for commercial rooftop projects), and the remainder were microFIT projects. This early information suggests a market that will be dominated by utility scale projects. After all, that market segment currently accounts for over 75% of executed solar FIT contracts.

Looking beyond 2012, however, transmission constraints make it unlikely that the volume of utility scale contracts can continue at its early pace. Commercial rooftop projects, on the other hand, do not require connection to Ontario’s transmission system. They can connect directly to local distribution networks where capacity is not so tightly constrained.

While new utility scale projects await the Economic Connection Test, the OPA has continued to offer commercial rooftop contracts. In fact, since the first round of offers in March, the number of CAE contracts offered by the OPA has more than doubled. We project that this volume will translate to 254 MW of contract offers over the course of a year. As businesses in Ontario become more aware of the benefits from investing in a rooftop solar system, it is likely that the rate of CAE applications will continue to grow.

Since commercial rooftop projects have unique needs, the growing importance of this market segment should be of significant interest to manufacturers planning to assemble modules in Ontario. We see three key implications from a large commercial rooftop market segment.

1. Space must be used efficiently.

Since size is a limiting factor for rooftop projects, proponents require panels that can create a lot of solar power using little space. Technologies that fit this requirement will enjoy an advantage in the province.

2. Building structures and codes provide opportunities for manufacturers.

Building restrictions are important constraints in the commercial rooftop market. Neither building codes nor rooftops in Ontario were designed with solar power in mind. Manufacturers who can provide low-weight equipment solutions that work well within existing codes and structural limitations will provide significant value to developers and building owners in the commercial rooftop segment

3. Marketing will be an important part of the success formula.

Even with the appropriate products, manufacturers’ success will depend on how effectively they communicate their value proposition. Due to the smaller size of commercial rooftop installations (as compared to utility scale installations), manufacturers will need to sell to a greater volume of projects. This will require building more partnerships with, and generating more leads for, developers in Ontario. In order to achieve these goals, manufacturers will need to invest in their sales and marketing activities.

As the PV supply chain in Ontario begins to be built-out, manufacturers should take note of the long-term importance of the commercial rooftop segment in the province. Strategic decisions should be made with an understanding that this is where the market is heading.

–Illustration photo by hjl