Cap on green-power suppliers criticized; Province's rules to help 'small guys' will chill investors, critics say

Toronto Star: Peter Gorrie - May 27, 2008

It could be lights out for renewable electricity in Ontario if the province goes ahead with new rules, industry officials say.

The changes jeopardize several wind and solar projects, and are giving investors second thoughts, critics said yesterday.

"They're not only throwing the baby out with the bathwater, they're throwing out the entire bathtub," said Sean Whittaker of the Ottawa-based Canadian Wind Energy Association.

"It feels like a freeze. Everything has stopped," said Elizabeth McDonald, head of the Canadian Solar Industries Association, whose members would be hardest hit.

At issue is a program, often lauded by Premier Dalton McGuinty, aimed at promoting alternatives to coal and nuclear power.

The "standard offer" pays a guaranteed premium for renewable electricity that's at least double what conventional sources receive: Solar generators get 42 cents a kilowatt-hour; the rest, 11 cents.

In a mid-May conference call, the Ontario Power Authority told the industry it was limiting the size of projects that qualify. Companies now can channel no more than 10 megawatts through any transformer station, and have no more than 50 megawatts capacity under development at any time.

The change is meant to force large firms to shift to another program, which requires them to bid to sell renewable electricity, said power authority spokesperson Tim Taylor. This kind of competition hasn't been held since 2005. A new round is set for this year and it's expected companies will have to offer prices below the standard-offer level.

Apart from the three-year gap, preparing bids costs millions. So large companies were moving to the less onerous standard-offer process, sometimes crowding out smaller firms. That's one reason it exceeded its 10-year target of 1,300 megawatts in a year.

Standard-offer was always intended for smaller producers, Taylor said. "We want the big solar and wind boys to play in the large sandbox and leave the smaller sandbox for the smaller guys."

Consultations will be held, he said.

Industry officials admitted the current policy has flaws, but said the changes won't fix them and threaten a business that has grown beyond all expectations.

The lack of warning is bad news to investors, McDonald said. "This will send people to other jurisdictions and other places."

The solar industry will be hit especially hard because, with its far higher capital costs, it can't compete in the bidding process.

Projects approved before the announcement can continue. But the 50-megawatt limit means one of the largest solar developers, OptiSolar Farms Canada, with 60 megawatts underway near Sarnia, can't start other planned projects, said spokesperson Peter Carrie.

Limiting developers to 10 megawatts per transformer station increases costs and adds uncertainty, said Glen Estill, whose Sky Generation is working on a 30- megawatt wind project. "Absolutely, it's very much at risk now," he said.

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