Operations & Management
Forum tackles green energy policy and the manufacturing industry
April 25, 2011 by Mary Del
The second annual Ontario Feed-In Tariff Supply Chain Forum kicked off on April 19 at the Allstream Centre in Toronto, attracting 400 attendees – from wind and solar developers, manufacturers and suppliers to government representatives. One hot topic at the conference was the upcoming Ontario provincial election and its possible impact on the Green Energy Act, feed-in tariff (FIT) program and manufacturing in the province.
Since the Liberal government passed the Green Energy Act in May 2009, which set the stage for the FIT program – a guaranteed pricing structure for renewable electricity production – in October 2009, both have been the topic of much debate. Though some praise FIT for its economic development opportunities – bringing jobs and investment to the province – others blame it for recent energy rate hikes and worry about the potential long-term health effects of wind turbines near residential communities, as well as the impact on property value.
Though the program is still relatively new, companies eager to play have already invested millions of dollars in wind and solar manufacturing projects in the province. With the provincial election just months away, delegates and speakers at the two-day conference wondered what the future direction of energy policy will be in Ontario and what the impact will be on manufacturers.
Political representatives and advisors kicked off the conference with a debate about the future of Ontario’s energy policy.
Though a representative from the Conservative Party was not in attendance, the party did provide comment regarding where they stand.
“The Ontario PC party believes that if we want a strong and growing economy in Ontario, we must treat energy policy as economic policy. Our decisions must meet our short- and long-term economic needs in a responsible, stable manner. We must put consumers first – both families and businesses – and respect that they pay the bills. And third, we need to develop a long-term policy framework that grows our economy. And once set, it can’t be directed on a daily basis by Queen’s Park or special interests. Hydro rates have already gone up 75 percent under the McGuinty government’s launch; 100 percent if you’ve already got a smart meter. Under Dalton McGuinty’s current plan, bills are expected to go up by another 46 percent within a few years, but we suspect that he’s actually low balling it. This all adds up to an enormous amount of stress being put on hydro consumers – both residential and industrial – and the need for relief. The Ontario PC party has been clear. Renewable energy should be a part of Ontario’s supply mix, but it must be at prices we can afford. In the months ahead, we will deliver our plan to govern, which speaks in more detail about energy policies and our plan to provide relief to hard working Ontario families.”
Liz Sandals, Liberal party MPP for the riding of Guelph, represented Liberal policy at the conference. It’s no surprise, then, that she applauded the Green Energy Act, calling it a success story in terms of generating jobs, thanks to its domestic content requirements – at least 25 percent of wind project costs and 60 percent of large solar project costs must come from Ontario goods and labour. Sandals cited companies who have set up shop in her riding of Guelph for wind and solar projects thanks to the Act.
The Canadian Wind Energy Association’s (CanWEA) supply chain manager, Stephen Rach, spoke at the conference on day two, and highlighted the job creation benefits.
“The feed-in tariff program and wind in general is a great enabler and job creator for industry. When wind farms are in operation, there remain tremendous amount of opportunity for local businesses to participate over the 20 or 30 years that wind farms are producing electricity – operations staff on site, turbine maintenance, gear boxes for refurbishment in the cases that the technology requires it, spare parts supply and all of the related indirect opportunities to supply further down stream.”
Tom Adams, an independent energy and environmental advisor, doesn’t buy the job creation argument, is not in favour of the Green Energy Act, and explained on day one of the conference why he feels it should be repealed.
“If you look at the capital intensity of various sectors of the economy, there are very few sectors that compare to electricity in terms of capital intensity,” explained Adams. “So if you’re looking for a place to create jobs, electricity is one of the most expensive places to do it in the economy, and the consequences of higher than efficient prices for power spread very broadly across the economy. So, I think the real concern here is: What is the net jobs impact? And I think it’s pretty clear that the net jobs impact is negative.”
Adams also pointed to the potential impact on property values in residential areas with wind farms as a reason to re-evaluate where Ontario is headed in terms of its green energy policy.
“The Green Energy Act has some elements, particularly with respect to municipal zoning, that I think are having unanticipated effects. There are a lot of folks out there who feel that they are incurring significant impairment of their property value associated with these developments. And there is a fire being lit under these people. The scale and scope of the reaction is difficult to judge at this stage, because it’s just picking up steam. But I think it’s going to be a game changer,” he said.
Ontario NDP party’s environment and energy critic, Peter Tabuns (MPP Toronto-Danforth), also spoke at the conference about where he and the NDP party stand in regards to energy policy.
“The NDP supports the investment in renewable power. We support greater investment in efficiency and conservation,” said Tabuns. “I think it’s critical that we develop renewable power. I look at what’s happened in Japan. I look at what’s happened in the global climate. I don’t think there are a lot of alternatives to us if we want to have lights on and be warm in the winter and cool in the summer. And that’s why, for me, it’s really important that we do the political piece correctly.”
While Tabuns supports the Green Energy Act, he said that the Liberals made a mistake by not beefing up the ability of communities to participate in the development of green power. He agreed that there is a sentiment in rural areas against wind development, but that there are also a lot of people who want that revenue from the wind turbines.
“If I look at what has happened in other places, the extent to which local control is real and is exercised in ownership has huge impact on acceptability of wind turbine installation,” he said.
With millions of dollars already invested in green energy in the province, what happens to those contracts if the next provincial leader repeals the Act or dismantles FIT? What will happen to those developers and manufactures who have already invested in renewable energy in the province if the new government pulls the plug on the program?
Milfred Hammerbacher, president of Canadian Solar Solutions Inc., which provides solar solutions for residential, commercial and solar farm markets in Canada, discussed exporting as an option.
“We are dabbling a little bit in what potentials we [have to] accelerate our export strategy,” said Hammerbacher. “My team already has ongoing plans to be competitive with our brothers and sisters in China. That’s the goal of everyone on our team, so we can export outside of Ontario…But if the projects in Ontario don’t materialize, then that puts us in a very difficult position.”
Martin Pochtaruk, president, Heliene Canada, a Sault Ste. Marie, Ont.-based manufacturer of photovoltaic solar panels, agreed that exporting is a strategy, but it’s not ideal.
“Our strategy so far has been [to] go to a local market, supply that market as much as you can, and export the balance,” he explained. “But we didn’t invest in Canada to export. We invested in Canada to supply to the Canadian market.”
Benjamin Kennedy, account manager with GE Energy, which is involved in both wind and solar projects in Ontario, feels that regardless of the outcome of the election, there will still be a market for renewable energy.
“Our approach is, regardless of what happens in October, we still think the province will procure wind. It may be under a different mechanism, but we still think renewables will be procured going forward. So we are very flexible as to what happens after October.”
“Yes, we’re up against some very vocal forces that are making the public believe that this is unpopular,” he said, citing polls conducted by Canadian Solar Industries Association (CanSIA) and the Green Energy Act Alliance that prove otherwise. “The results are all quite similar. The people somewhat or strongly in favour of renewable energy was very high…And we saw this pretty consistently across the studies. So we’re really sensing that the anti-wind sentiment is a lot of mud being thrown against the wall that’s making a lot of noise, but frankly it does not represent the view of the average person in Ontario.”
Chris Benedetti, principal of public affairs consulting firm Sussex Strategy Group, agreed.
“I think that right now, renewable energy, clean energy, green energy is certainly getting a lot of attention for many of the issues…[including] price and impact on local property values, impact on local communities. How that actually manifests itself at the polls, it will be difficult to say,” he said. “I do believe that it is a relatively small minority who are the most vocal parties that are coming [out] as opponents. The polling seems to be rather consistent, that if you look across the spectrum, that there is an overabundance of support for clean energy, no matter where you go. But I think you have to remember as well that it’s usually not the silent majority that goes out to the polls in droves. It is those small, very tightly focused minority groups that often have an impact on the broader electorate when it actually comes time to go vote.”
Political uncertainty is certainly not preventing some manufacturers from opening up shop in Ontario. Just this past week, two new solar agreements were announced – Emerson is partnering with electronics contract manufacturer Sanmina-SCI to build solar power inverters at Sanmina-SCI’s Ottawa, Ont.-based manufacturing facility, and United Solar announced that it will establish a manufacturing facility in Ontario that will be operational by August 2011.
Though there were many things that the panelists at the conference did not agree on in regards to the Green Energy Act over the two-day conference, they did agree that the future of Ontario’s policy is unknown. And they count the days until the October 6 election, when they will have a better idea of what the future holds.