by Justin Malecki, PhD, Analyst

Next to California, New Jersey has the most active PV market in the US.  Generous rebate programs in the past and aggressive policy goals combined with some of the highest electricity prices in the US have given rise to a thriving marketplace for commercial and industrial PV installations.  However, this rapid growth has caused the state to recently overshoot its solar energy generation goals as mandated in New Jersey’s Renewable Portfolio Standard (RPS), signaling a dramatically different PV market environment in the years ahead.

The primary driver of solar installations in New Jersey is the Solar Renewable Energy Credit (SREC) market.  For every MWh of electricity produced by solar PV, one SREC is awarded to the owner of the installation.  SRECs are a tradable commodity that utilities must purchase to demonstrate their compliance with the state’s solar-specific RPS targets.

Prior to Energy Year (EY) 2012, the New Jersey SREC market has been undersupplied in that there was insufficient capacity to produce enough SRECs to meet the annual generation targets of the state.  Such a state of undersupply meant high SREC prices in excess of $600 on average, fueling demand that led to a record number of installations in 2011.  (The schedule for RPS compliance in New Jersey is mandated for each energy year running June-May; EY 2012 runs June 2011 – May 2012.)

But just how oversupplied will be New Jersey’s solar market in the years ahead?   The following graph shows the expected PV generation in the state based on ClearSky Advisors’ 5-year forecast compared with New Jersey’s RPS solar targets.

With more than 600 MW of approved projects scheduled to be built, there appears, on the surface, to be little slowing of the state’s solar market in the next two years.   Not all of these approved projects will be built, however.  Yet even if only a fraction of these projects are built (as assumed in ClearSky Advisors’ New Jersey forecast) the consequence will be an oversupplied market until 2016 and SREC prices significantly lower than those seen in the past.

Indeed, there has already been a 38% drop in the monthly average SREC price since the beginning of EY 2012, from $610 in June 2011, to $376 in January 2012.  The widening gap between actual and targeted solar generation will only drive this price even lower.

The dramatic change in PV market conditions has not gone unnoticed by the state’s legislature which is currently considering increasing the solar RPS goals over the next three years.   By increasing the number of SRECs that utilities must purchase, it is hoped that prices will continue to remain at a level that allows for a reasonable rate of return for project owners.  Under the current rules, the earliest the RPS targets could be increased is EY 2016 (such an increase is included in the graph above).

While market-based incentives such as SREC trading are meant to provide a reward mechanism that will automatically adapt to market conditions, such automatic corrections can come as a shock in such a new and rapidly growing solar industry.    Unless legislated changes are made to the current solar policy, industry players should expect a significant cooling of New Jersey’s historically hot PV market in 2013 and beyond.

Photo credit: Kimco Realty

A Year Of Change in Ontario’s PV Marketplace With More Change To Come

 Justin Malecki, PhD, Research Analyst

Stability, predictability, and transparency.  These are three items on the Christmas wishlists of almost everyone involved in the solar photovoltaic market in Ontario.  After a year that has been characterized by the incongruent combination of rapidly changing global market conditions, government policy attempting to adapt, and the uncertainty of a possible change in political leadership, it is hard to blame industry stakeholders for such a request.

But will they get what they ask for?  In this article, we take a look back at the salient characteristics of PV development in Ontario in 2011 and a look ahead at what 2012 will bring to an industry hungry for a stable marketplace.

2011: Challenge and Growth

Ask anyone working in Ontario’s PV market about the challenges facing their business and you will often be met with an exasperated sigh or an ironic chuckle followed by a litany of complaints.  Some of the most common challenges that were communicated throughout the year as part of ClearSky Advisors’ ongoing information gathering service include:

• Frequent and often unexpected changes introduced to the program  throughout the year;
• The ongoing and seemingly unnecessary delays associated with the environmental Renewable Energy Approval (REA) process for utility-scale projects;
• Continued constraints due to grid capacity limits imposed by local distribution companies such as Hydro One;
• Fierce competition among module manufacturers in the province resulting from both an oversupplied market as well as dropping cell prices that fell more than 40% over the course of the year;
• Market uncertainty that came about because of the October election and its heated renewable energy rhetoric that cast doubt on the future of the Feed-In Tariff (FIT) program; and,
• Further uncertainty associated with the announcement of a review of the FIT program that is currently ongoing, deciding on new, yet-to-be-announced rules and rates that will be applied to most new contract awards.

Judging from the results of over 200 in-depth interviews and surveys with key industry stakeholders conducted throughout the year, it is not an understatement to say that many in the province’s PV industry are weary with frustration.

Nevertheless, despite such a tumultuous environment, the Ontario PV market has experienced significant growth and maturation in 2011.  The total volume of installations in the province is expected to be just over 300 MW (dc), an increase of roughly 130 MW (dc) over the previous year.  This growth was driven primarily by the completion of utility-scale projects awarded under the Renewable Energy Standard Offer Program (RESOP) together with a microFIT program that took off in 2011, especially among rural residents installing 10kW groundmount systems.

The previous year also saw significant improvements in terms of market efficiency. Installation costs have decreased by 12-28% over the course of the year as a result of both the significant decline in module prices as well as increased installation efficiency.

Underlying this growth and development is an increasingly efficient local value chain that has truly blossomed in 2011, able to produce more than enough equipment to meet current market needs.

2012: More Growth and Stiff Competition

The most significant trend in the forthcoming year is that growth is expected to continue at its current pace.  ClearSky Advisors predicts 80% growth in the volume of installations in 2012 over that seen in 2011.  This growth is predicated on the fact that over 2,000 MW (ac) of RESOP, FIT and microFIT contracts are currently under development, a substantial fraction of which are expected to be built and connected in 2012.

The bulk of this installation volume will consist of the first batch of utility-scale groundmount FIT projects coming online along with a commercial rooftop market that is expected to increase substantially.  This increased activity will be in addition to the province’s thriving microFIT market which is expected to see a move away from 10kW groundmount installations and towards more residential rooftop projects.

The previous year saw a significant increase in the number of module manufacturers entering the Ontario market, more than doubling production capacity of domestic content compliant modules over the course of the year.  As a result, production capacity of modules as well as inverters is more than sufficient to meet 2012 demand despite the significant expected increase in the volume of installations.

Combined with the fact that module prices are expected to continue to fall and even more new players are expected to enter the market, manufacturers will find little reprieve in the new year from the fierce competition that has characterized the Ontario market in the latter half of 2011.  Indeed, the existence of many Ontario manufacturing facilities will be threatened if they fail to find new export markets in the US or elsewhere.

One positive trend for manufacturers, however, is that there will be a significant increase in demand for equipment requiring 60% domestic content (DC) compared with 2011 demand.  Specifically, although overall demand is expected to increase by 80% in 2012 over 2011, demand for locally assembled modules is expected to increase by more than 550%.  This should mean a very large increase in activity for Ontario manufacturing facilities in the coming year.

What will shape the Ontario PV market in 2012?

The issues surrounding the REA process and distribution grid have not been resolved.  It is not clear if, how, or when these issues will be addressed though many stakeholders within the industry are hoping that the bureaucratic process, from contract application to grid connection, will be accelerated and streamlined as a result of the FIT review.  Currently, these delays are adding significant costs to both developers and manufacturers and are one of the primary concerns within the Ontario PV marketplace.

Another element of uncertainty is the rate at which new contracts will be awarded.  All new FIT and microFIT contract awards have been suspended since October 31, 2011 until the conclusion of the FIT review, leaving many to speculate on how future awards will be handled.  Several factors will affect the number and rate of new contract awards:

• Attrition.  It is clear that not all currently awarded contracts will be built and the volume that are cancelled and abandoned will free up additional room for future contract awards.  For example, an increase of 10% in the attrition rate of awarded contracts would result in an estimated 335 MW (ac) of additional contract awards.
• Categorization of MicroFIT.  Many people within the industry have advised the FIT review to consider removing microFIT installations from the solar carve-out described in the government’s Long Term Energy Plan (LTEP) and considering these projects as a form of conservation instead.  If adopted, the 372 MW (ac) of microFIT contracts expected to be awarded by 2018 can be awarded as additional FIT contracts instead.
• How Samsung Fulfills Its Contract.  Samsung currently has a contract allowing them to develop 500 MW (ac) of PV projects.  The number of projects that Samsung chooses to purchase from existing contract holders to fulfill this volume will need to be compensated to fulfill the LTEP goals, increasing the volume of future FIT contract awards.

Although many questions surround the award of future contracts, this will have little influence on project development in 2012 which will be dominated by existing contracts.

Ongoing trade disputes are sure to play a significant role in shaping the 2012 Ontario PV market.  Directly, Japan’s WTO complaint and Mesa Power’s NAFTA complaint could call into question the province’s domestic content requirements, putting even further pressure on beleaguered manufacturers who may still be depending on the existence of a (shrinking) premium for Ontario modules.

Indirectly, escalating rhetoric between China and the US over solar trade practices may have a positive effect for the Ontario industry, making imports from Ontario look more attractive than those from China.  On the other hand, such heated talk may simply increase US trade protectionism overall, making it harder for Ontario manufacturers to enter US markets.

How these trade issues play out remains to be seen but the outcome is sure to have an effect on the industry, both psychologically in the short term and more substantially in the long term.

Conclusion: Stability requires a period of change

With so many questions remaining unanswered and with a market and policy still in flux, industry stakeholders can take a little comfort in knowing that such a period of change must necessarily precede any period of relative equilibrium.  So, while stability, predictability, and transparency will not come to the market in time for Christmas, many are hoping that the results of the FIT review will usher in a new phase of public policy early in the new year that will be structured to promote a sustained, predictable, and stable PV market in Ontario for many years to come.

Photocredit: Wayne National Forest

Continued overcapacity in the solar supply chain will see the cut-throat competition in the solar PV supply-chain continue, with average selling prices for modules continuing to fall at least for the first part of 2012. Not until 2014 will market conditions improve markedly for those equipment suppliers that have managed to continue to cut costs, as solar power will become cost competitive even without state level incentives in some areas.

In the short-term, the analysis performed by ClearSky Advisors points towards opportunities in carefully targeted markets. The diversity of state-level solar policies means that the US market must be treated as many local markets – each with its own set of policies and conditions that determine the magnitude of the local opportunity.

“In 2012, the US PV market belongs to those equipment suppliers who are able to effectively target their market and calibrate their offering to local market dynamics” says Brennan Louw, Senior Analyst at ClearSky Advisors. “Simply having a presence in the California and New Jersey markets will not cut it going forward”.

Key highlights from the forecast:

• Driven by state-level policies, especially states with renewable portfolio standards with solar carve-outs, market growth in 2015 will be increasingly dominated by utility scale projects.
• Continued decreases in equipment prices will make solar power cost competitive in certain areas toward the end of the forecast period.
• The West will remain the largest regional market for the foreseeable future and California and New Jersey will be the single most important states for some time to come, even if both states will face intermittent market disruption.

All facts and figures are reported in the US PV Market Forecast 2011-2015, published by ClearSky Advisors Inc. The report contains market forecast scenarios, pricing, market volume, regional analysis and an analysis of emerging states. The market forecast is based on an analysis of the PV markets and the key market policies in each of the 50 US states.

For inquiries and interviews contact:

Tim Wohlgemut
+1-(647)-297-0045
tim@clearskyadvisors.com

Press Release posted on PR Buzz

Illustration photo by Hamed Saber

Photo credits: stantoncady and David Blaikie

The OPA Announces FIT Review as PV Installation Costs Continue to Fall

On October 31, the Ontario Power Authority (OPA) formally announced the commencement of what many in the Ontario renewable energy industry already knew was coming: a comprehensive review of the rules and rates governing the province’s Feed-In Tariff (FIT) program.    Although no date was set for when the results of the review will be announced, the OPA indicated that the new program rules and rates would be developed to “balance the interests of ratepayers with the need to encourage investments in new clean energy in Ontario”.

This review has long been expected yet some have been unpleasantly surprised by the announcement that existing FIT applications that have not yet been awarded a contract will be subject to the new rules and tariff rates set by the review.   In the case of microFIT applications, only those applications submitted after August 31, 2011 will fall under the new rules and rates.  As a result, no new contracts will be awarded until after the review.

In other words, proponents of almost 7GW of outstanding PV contract applications are now faced with the likely possibility of receiving a lower rate than originally expected.  For projects applications submitted as long as one year ago, this could be a bitter pill to swallow.

The announcement of the OPA review comes at a time of dramatically decreasing total installation costs for PV projects.  For example, according to research conducted by ClearSky Advisors, the installation costs for both utility-scale and residential rooftop projects have dropped by 10-20% over the first 6 months of 2011.  Commercial rooftop projects, whose long connection approval delays have made it more difficult to capitalize on falling equipment prices, had installation costs drop by only 2-5% during the same time period, though this cost is expected to fall further if projects begin to be built at a faster pace.  Overall, the cost of components, particularly the cost of panels, has dropped much faster than the reduction in the total cost of installation.

In the face of such rapidly falling installation costs, there is clearly room to lower tariff rates to minimize the cost to ratepayers while still ensuring a reasonable profit for owners and developers of well-managed PV projects.   The OPA has mentioned the possibility of considering a rate digression model as part of the FIT review, indicating that tariff rates may be set dynamically in order to accommodate changing installation costs or other factors.

Nevertheless, the imposition of yet-to-be announced rules and rates to existing contract applications is another manifestation of the primary criticism that has been leveled against the Ontario FIT program:  uncertainty.  The frequent and often unexpected changes made to the rules and rates governing the FIT program have been one of the most common concerns raised by industry stakeholders.  While a certain level of uncertainty and change may be a necessary element of any nascent and evolving government program, the FIT review could and should be an opportunity to provide more stability and transparency than has been characteristic of the program in the past.

ClearSky Advisors has been actively interviewing industry stakeholders for their opinion on the FIT review process.  Based on this research, the following guidelines would help to ensure that the FIT review will be of the most benefit to the renewable energy industry:

• The review should be conducted and the results announced as quickly as possible; even if it only takes 2 months, that is two more months of inactivity that could hamper the industry. From an industry perspective it would be desirable to have the OPA commit to an end-date for the review process as soon as possible.
• The review should clearly state goals (preferably in MW) and show how those goals align with the Long-Term-Energy-Plan or other such directives
• The review should count on changing market conditions going forward and implement rules that will automatically and predictably account for such changes in order to achieve the desired program objectives
• The review should streamline the contracting and permitting process to reduce delays in contract approval and project connection; more than anything else, this could significantly reduce installed costs and thus reduce the cost to ratepayers

Clearly, FIT and MicroFIT rates should be reduced, but unless those reductions are combined with increased transparency and predictability, it will be very difficult for the industry to grow and prosper.

Constant change has been one of the defining characteristics of the PV industry in Ontario and ClearSky Advisors will continue to provide in-depth insight to our clients on the impact of the FIT review as the process goes forward.

Photo Credit: Alexander Henning Drachmann

The purpose of this article is not to pass judgment on the election outcome, but to contribute to a discussion about the role green energy policy played in the outcome of the Ontario election. Were their respective positions on green energy either positive or negative for the election results of the two main parties in Ontario, the governing Liberals and the opposing Progressive Conservative party (PC)?

Let’s consider McGuinty first – the man behind the Green Energy Act:

Recent reporting suggests that Carol Mitchell and possibly John Wilkinson – both ministers in McGuinty’s previous cabinet – lost their seats because of the Liberal party’s policy on renewable energy. An article in the Globe and Mail also mentions Leona Dombrowski as suffering the same fate in addition to the two aforementioned candidates. The same article goes on to say that because of those three losses, McGuinty lost his majority, which, given that he is now only one seat short of majority, is an accurate statement. But, does that also mean that we can attribute McGuinty’s loss of majority to the Liberal’s green energy policy?

Let’s consider the following facts:

• The Liberals lost 19 seats in this election
• Three of the losses have been attributed to the green energy policy
• That leaves 16 other lost seats, each of which could have given McGuinty a majority, if only one of those Liberal candidates had won their riding

In other words, there are many reasons why McGuinty lost his majority, and green energy policy may be one of them – but in a year with strong conservative winds blowing across Ontario, it surely is not the only and perhaps not the most important reason. Conversely, there is evidence that McGuinty’s green energy policies may have helped him greatly in some parts of the province even if it didn’t in others.  Moreover, evidence also suggests that Hudak’s aggressive stance against green energy policies may have hurt, more than it aided his cause.

It is worth noting that in none of the three ridings mentioned by the Globe and Mail as costing McGuinty his majority can the voting be characterized as landslide victories for the PC party and their particular stance on renewable energy:

• In Perth-Wellington, the PCs made a gain of 1,981 votes, just slightly more than the “green friendly” NDP’s gain of 1,674 votes. Given that John Wilkinson lost his seat by only 630 votes, one might just as well attribute his loss to the “orange wave” as to the Conservative’s opposition to the current green energy policy. With both the Liberals and NDP supporting a progressive green energy policy, the popular vote in Perth-Wellington was clearly in favour of a green energy policy.
• In Huron-Bruce, the shift from Liberal to the PC party was more pronounced as the PCs gained 5,560 votes compared to the 2007 election and beat the incumbent Liberal candidate by 4,463 votes. However, the majority of the popular vote still favoured parties with a progressive green energy policy.
• In Prince Edward – Hastings the PC party gained 3,909 votes versus the Liberals’ loss of 5,294 votes. Even so, if this election was indeed a vote on a progressive green energy policy, it is still the case that a clear majority of the votes in the riding went to parties with progressive green energy policies on their programs.

Looking at the examples above, it is clear that it wasn’t green energy policy that contributed to McGuinty’s loss of a majority; a more likely reason is a continuation of the voting trends seen in the federal election both towards NDP and towards the conservative party in rural Ontario; another is the general wear and tear of having been in power for two terms. However, as long as the popular majority in all of these ridings is clearly in favour of progressive green energy policies it is hard to pin McGuinty’s loss of majority to the introduction of the Green Energy Act.

But what about Hudak: Did he lose this election because of his negative stance towards green energy?

We can’t know for certain, but two pieces of evidence suggests that the PC party would benefit from a more pragmatic approach to green energy in the future:

1. The PC party did not gain a single seat in 11 ridings with significant new green energy manufacturing facilities, suggesting that green energy policy might actually have saved McGuinty from an overall loss. PC did win Haldimand-Norfolk, the location for one of the much-publicized Samsung facilities in Tillsonburg, but that was a strong PC riding in 2007 as well. The table below lists the ridings with the associated manufacturing facilities and election outcomes referred to here.
2. Tim Hudak announced on May 10^th that he would end the “expensive and unsustainable Feed-in Tariff (FIT) program and [McGuinty’s] sweetheart Samsung deal”. Prior to that, polls had pegged the PC support at around 40-41%, whereas the Liberals were at 34%. For Hudak, that was the high point in terms of support – his announcement to end current green energy policies did not appear to attract any new voters to PC. Instead, his support started withering away and on election day the PCs ended up with 35.4%  of the popular vote (a loss of 5% since May) and the Liberals with 37.6% (a gain of 3.6%) for a swing of 8.6% since the May announcement. As a result, Hudak failed to make any inroads where he needed it the most – suburban ridings in the GTA.

While the PCs’ loss of support can’t be solely attributed to Hudak’s aggressive stance on green energy policy, it is clear that he made no gains by taking such a negative position.

Green Manufacturing Ridings and Election Results

(it should be noted that in addition to the above list of companies there are many more manufacturing facilities benefiting from domestic demand for solar and wind equipment; such as existing machine and tooling shops, suppliers of electrical components etc., but we have left those out because those companies existed before the Green Energy Act was introduced which makes it harder to attribute any effects to it’s introduction than is the case for the listed companies )

In brief, these are our main conclusions on the Ontario provincial election:

• There are many reasons why McGuinty lost a majority. While green energy policy might have contributed, the reality is likely more complex.
• It is probable that the Liberal’s green energy policy actually prevented an outright loss for McGuinty by shoring up support in most ridings benefitting from green energy manufacturing facilities and in suburban ridings.
• It is impossible to conclude that Hudak lost the election because of his negative stance on the current green energy policy, but he certainly made insufficient gains because of that position.
• Given that the majority of the electorate supports a party with a progressive green energy policy, any party that is looking to win in Ontario in the future would be wise to enter an election with a positive program for green energy expansion in order to attract voters.
• As Ontario’s renewable energy industry is breathing a collective sigh of relief, they should not feel beholden to McGuinty’s government: Without the private investment and efforts of the solar and wind entrepreneurs to create businesses and jobs in Ontario, McGuinty may not have returned to Queen’s Park. Furthermore, the industry should be aware that any political party that is looking to get elected in Ontario in the future must incorporate a progressive green energy policy in their program.

Toronto, Ontario (September 30, 2011): Ontario’s inverter market is highly fragmented with enphase energy, SMA Solar Technology and Power-One leading the market according to a recent survey of Ontario installers performed by ClearSky Advisors.

Overall, SMA Solar Technologies was the brand installers were most likely to recommend, but Power-One and enphase energy also rate highly among Ontario installers. That none of the players have a dominating position in terms of market share, means that all competitors in the industry still have work to do both on the product and the marketing side.

“Should the pack of current leaders fail to strengthen their position, players such as Fronius, Solectria, Kaco and Satcon and others have positions of strength that they could leverage for increased market share,” says Jon E Worren, President and co-founder of ClearSky Advisors. “Careful targeting of specific market segments will be critical for success in Ontario’s installer market going forward”.

Other highlights from the Ontario Installer Survey:

• Market segmentation is key – installer buying behaviour and preferences vary significantly between segments
• An effective channel strategy is critical for success in the inverter market
• Warranty is decreasing in importance as a buying criteria
• Installers are reporting a significant increase in the share of rooftop projects compared to groundmount microFIT projects. Unless some inverter brands re-position their products this change will impact their market shares in Ontario’s inverter market

The Ontario Installer Survey included responses from 66 installers representing 48% of the Ontario PV market for microFIT and small commercial installations, (based on reported installation numbers for the first six months of 2011).

The survey covers installers’ buying preferences, buying behaviour, channel preferences, pricing, market outlook and recommendations to inverter manufacturers.

For inquiries and interviews contact:

Jon E Worren

+1-416-670-6780

jon@clearskyadvisors.com

Toronto, Ontario (September 30, 2011): The Ontario wind market will decline 41% from record highs in 2011 to 304 MW in 2012. The decline is largely caused by slower than expected permitting processes according to a market analysis by ClearSky Advisors. However, driven by the FIT program, the pipeline of wind projects is strong and may bounce back to new heights in 2013, depending on the outcome of the October 6 provincial election.

The expected market decline in 2012 is caused by a number of wind projects originally targeting construction in 2011 and 2012 failing to clear the Renewable Energy Approval process in time.

According to the study, the projects that are expected to be built in 2012 already have most of the necessary permits and approvals, which makes those projects much less dependant on the provincial election outcome than projects slated for construction start in 2013 and beyond.

“ Our research found that the Ontario wind market is clearly affected by the ongoing political uncertainty in the province,” says Jon E Worren, President and co-founder of ClearSky Advisors. “ With an increasing number of projects requiring 50% domestic content, both supply-side and demand-side have sought to balance their investment exposure before the provincial election. “

Despite the understandably restrained progress on the supply-side, ClearSky Advisors do not expect significant supply-chain shortages when domestic content requirements increase.

Study highlights:

1) Short-Term: Compared to 2011, Ontario’s wind market will decline 41%, mostly due to delays

2) Mid-term: Assuming that the FIT program exists without drastic changes after the October-election, Ontario will see the emergence of a Ontario-based wind supply-chain, a development driven by the controversial domestic content requirements.

3) Long-Term: Starting 2013, the current project pipeline of Ontario wind projects would support market volumes of between 750MW and 900MW of new wind capacity per year until 2016.

The ClearSky Advisors report includes market forecast scenarios, supply capacity, pricing and market volume in the Ontario Wind market for the period 2011 – 2016.

For inquiries and interviews contact:

Jon E Worren

+1-416-670-6780

jon@clearskyadvisors.com

Photo by Caveman Chuck Coker

Toronto, Ontario (September 29, 2011): A recent survey by ClearSky Advisors found that Sharp has maintained its market leading position among Ontario PV installers on some measures, but has lost ground to the competition on other measures.  The survey, which took place in September 2011, analyzed brand satisfaction and buying behavior for module brands in Ontario.

A similar study performed by ClearSky Advisors in January 2011, had found Sharp to be the module brand of choice for Ontario installers at the time.  While Sharp is still a leading player in the Ontario market, Conergy and others have gained ground on several measures of success.

“Sharp continued its strong showing in Ontario with more customers than any other brand.” says Tim Wohlgemut, CEO and co-founder of ClearSky Advisors. “However, Conergy was the module brand installers were most likely to recommend, which translated into capturing a higher share of wallet than anyone else in the first half of 2011.”

Other highlights from the Ontario Installer Survey:

• Buying behavior and channel preferences vary greatly by market segment; a fact that makes careful segmentation and targeting critical for continued success in the installer market
• Ontario market increasingly dominated by module brands that comply with Ontario’s domestic content rules: 8 of the 10 largest module brands in the survey offer Ontario compliant modules
• 80% of installers use more than one module brand
• Warranty coverage was not found to be a powerful driver of buying decisions

The Ontario Installer Survey included responses from 66 installers representing 48% of the Ontario PV market for microFIT and small commercial installations (based on reported installation numbers for the first six months of 2011).

The survey covers installers’ buying preferences, buying behavior, channel preferences, pricing, market outlook and recommendations to module manufacturers.

For inquiries and interviews contact:

Tim Wohlgemut

+1-(647)-297-0045

tim@clearskyadvisors.com

Photos by US Army Environmental Command

1. Policy is currently the single most important driver of the province’s renewable energy industries
2. With a provincial election slated for Oct. 6, Ontario’s future policy environment for renewable energy is anything but certain

During its previous term in office, Ontario’s governing Liberal Party implemented a Feed-in Tariff program for wind, solar PV, and other renewable generation technologies. Many in Ontario’s key renewable energy industries have pinned their hopes to the success of the province’s Feed-in Tariff (FIT) program. Now the future of that program is unknown.

Possible Outcomes

Ontario is in the midst of a tightly contested election campaign. Currently, it appears as if there are three possible outcomes:

1. The incumbent Liberal government will remain in power with a majority government
2. The official opposition, the Progressive Conservative party of Ontario will win power with a majority government
3. There will be a minority government in which the NDP will hold the balance of power

While each of these potential election results has different implications, it is the possibility of a Conservative majority that has the industry stakeholders we have spoken with most concerned. Both the Liberal and NDP platforms include continued support for the current FIT program. The Conservatives, on the other hand, have officially pledged to cancel the FIT program but they have not publicly said what, if anything, would replace it. There have also been comments from the Conservative camp that existing FIT contracts would be revisited and that any contract yet to receive its Notice to Proceed could be at risk of cancellation.

Quantifying Risk

ClearSky Advisors recently published a document entitled, Key Risks to Ontario’s Solar PV and Wind Energy Industries. The report provides both qualitative and quantitative analysis (including the potential impacts on installation volumes) of four key risks facing Ontario’s wind and solar PV industries:

• The provincial election
• The two year FIT program review (also taking place this fall)
• Grid constraints
• Japan’s WTO dispute against domestic content requirements in Ontario’s FIT program.

Based on our analysis of the political landscape in Ontario, we do believe that a majority Conservative government would result in reduced wind and solar PV installation volumes in the province from 2011-2016. The wind industry is likely to be most affected by this outcome with up to 49% of expected installation volume at risk.

On the other hand, we believe that the majority of existing FIT contracts are not in danger of cancellation. Cancelling a large number of FIT contracts would be expensive (up to $49 million for the repayment of pre-construction development costs), would cost the province jobs (at a time when provincial unemployment is at 8.7%), and would potentially open Ontario up to a swath of lawsuits.

Interesting Times

Regardless of who wins the election, Q4 will be a hectic time for Ontario’s renewable energy industries. In the months following the provincial election, industry stakeholders will need to assess the implications of policy and program changes (including the impact of the two year FIT review) and to position themselves for success in the post-election environment.

ClearSky advisors will continue to monitor the market closely and will publish updated market forecasts for both the province’s wind and solar PV industries over the coming months.

Photos by Benson Kua