Ontario is hitting the radar screens of wind and solar manufacturers worldwide as a key destination to set up shop or upgrade existing facilities. The province’s ambitious feed-in tariff (FIT) program, which guarantees fair prices for renewable energy over 20 years and includes domestic content requirements, has created exciting opportunities for renewable energy manufacturers. Now suppliers and developers are watching for big announcements from Ontario-bound manufacturers who will form the backbone of this burgeoning renewables market.

One such announcement came in early August with Samsung C&T and Pattern Energy signing an agreement with Siemens for the supply of up to 600 MW of Siemens wind turbines to serve the Ontario market. This marks the first major announcement from Samsung about partnerships in the region following its deal with the Ontario government to invest $7 billion in the province to establish manufacturing and build solar and wind projects here.

Under the agreement, Siemens will build Ontario’s first blade factory. ‘Ontario's Green Energy Act and the FIT program are important enablers for the development of clean sources of energy, and the Ontario government has shown tremendous leadership in ensuring that the province is one of the world's most progressive jurisdictions,’ said Bill Smith, Senior Vice President,  of Energy Sector, for Siemens Canada, in a statement. ‘Our blade factory will enable the Ontario market and will deploy Siemens' state-of-the-art blade manufacturing technology in doing so.’

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Solar manufacturers are also putting stakes in Ontario which has become the third largest market for solar photovoltaic (PV) installations in North America, according to a recent report by the Interstate Renewable Energy Council (IREC). Vancouver-based Day4 Energy intends to license its technology to local manufacturers looking to diversify away from traditional industry. ‘The Ontario market is attractive for its size, continuing growth, and the grid energy challenges it has,’ says John Stonier, Vice President of Strategic Planning and Treasurer, Day4 Energy. ‘Ontario’s good solar resource profile will provide a strong growth market for many years to come, even after the feed-in-tariffs are phased out.’

Still, as Stonier points, Ontario’s solar market is still a ways a way from Europe’s well established markets. ‘Ontario has yet to achieve the familiarity and experience with the technology that enables efficient delivery of systems,’ he says. ‘But all that will change as the install base increases, supply chains grow and develop, crews refine their skills, and financiers become familiar with the low risk and stable cash flows that solar systems can provide.’

Right now many FIT solar developers aren’t buying Ontario-made products because of the price, comments Sean Moore, CEO of Unconquered Sun Solar Technologies. ‘People have to understand that it costs more to build in Ontario and that the spirit of the Green Energy and Green Economy Act (GEGEA) is to build a sustainable manufacturing base here,’ he says. Moore predicts that once the domestic content rules bump up to 60% next year for solar projects, the regional industry will takeoff. ‘Everyone will then be clamouring for product but the smart and serious developers are getting it now,’ he adds.

Key risks for manufacturers entering this market include certainty of volume, potential rule changes from the government, and transmission developments. ‘One of the biggest looming risks is from a political standpoint with the government having the right to potentially change the rules midstream,’ comments Simon Olivier, General Manager (Northern Region) of Power Generation at General Electric. ‘The second is the uncertainty of volume as the new investments will have to take into account the  second round of contracts to be announced at the conclusion of the latest Economic Connection Test (ECT).’

More than 250 renewable energy projects are currently awaiting ECT approval from the Ontario Power Authority (OPA). These projects were stalled because they were determined to be uneconomical under existing transmission and distribution capacities or due to other technical issues. They are now being re-evaluated by the OPA through the ECT. ‘Developers and suppliers need to know how many megawatts are approved as soon as possible because everyone needs to make long-term decisions,’ Olivier adds. ‘Manufacturers require certainty of volume and clarity on the timing of transmission upgrades.’

General Electric operates several clean tech facilities in Ontario and Olivier says the company is considering upgrading some of its existing facilities as well as working with new and existing suppliers to take advantage of the opportunities under FIT. GE’s goal is to leverage its relationships with suppliers to meet the program’s domestic content requirements. ‘GE has been investing in Canada since 1892 and we look forward to new long-term investment opportunities in Ontario,’ he adds.

North Dakota-based DMI Industries made the leap into Ontario four years ago in setting up its Fort Erie wind tower manufacturing plant. Considerations before investing in the province included proximity to wind energy development, availability of the right skilled workforce, and opportunity for growth to accommodate increasing demands from the industry, reports Michael Barczak, VP of Sales at DMI Industries. ‘In fact, all three DMI facilities are strategically located near primary areas for wind development in the US and Canada,’ he adds. ‘Our Fort Erie, Ontario location not only serves Ontario but also the surrounding areas with significant wind energy projects including the northeastern US.’

What manufacturers have to consider is whether the risks of investing in this developing market are outweighed by the potential benefits, says Mike Richmond, Partner & Co-Chair, Energy Law at McMillan LLP, and advisor to many FIT project developers. ‘On paper the feed-in tariff program is good and has attracted lots of interest across Canada, the US and abroad because it is structured to offer fair pricing at a time when government-backed power purchase agreements (PPAs) are a rarity in North America,’ adds General Electric’s Olivier. The province is offering 44.3 cents per kWh for solar PV ground mounted projects above 10 kW and 13.5 cents per kWh for onshore wind at any size. 

For now, suppliers and developers are eagerly awaiting more announcements about who is going to step in and supply the wind and solar industries to make the FIT program a success. For developers, the main concern does not appear to be the availability of domestic supply itself, but more the uncertainty surrounding future domestic supply, according to Richmond. ‘They want to know who will actually build a manufacturing facility in Ontario, when it will be built, and whether its output will qualify as domestic content under a FIT contract,’ he concludes.

Author’s note: All of the organizations interviewed for this article will be presenting at The Ontario Feed-in Tariff Supply Chain Forum on October 5-6 in Toronto. They will be joined by +50 other speakers to discuss the challenges and opportunities for building the region’s wind and solar supply chains.