Growth in Residential Segment Keeping Lights on for Ontario’s PV Manufacturers

In our recent study “Ontario PV Market Forecast 2011-2016,” we predict a growth of 228% for the Ontario solar market from 2010 to 2011, a number that confirms Ontario’s importance in the North American solar industry. However, while the residential segment is predicted to post unexpectedly strong growth, slower than expected activity in the commercial and utility scale segments prompted us to reduce our overall Ontario market forecast for 2011 by 16% to 381 MW (dc).

Political and regulatory uncertainty continues to be the dominant issue for the more than 150 solar industry executives that we interviewed and surveyed for this study. Threats from Ontario’s official opposition to shut down the FIT program should they win the provincial election in October and lack of access to the Hydro One-controlled grid are slowing down investments in the Ontario market.

The delays in the market, in large part caused by interconnection and regulatory processes, have resulted in overcapacity for Ontario-made equipment and led to extremely tough price competition in recent months. A continuation of the current market conditions would see some of the equipment manufacturers throwing in the towel soon and others looking for an outlet in the U.S. market.

With 29 MW connected YTD and 204 MW of contracts under development, the residential market is larger than expected and will exceed the commercial market in 2011.

Assuming that a FIT program still exists after the provincial election in October, cut-throat local competition and falling prices on global supplies such as solar cells are paving the way for significantly lower FIT rates. It also increases the likelihood of a shake-out among Ontario’s solar equipment manufacturers. Indeed, in a news release on August 9th, the Canadian Solar Industry Association (CanSIA) suggested that the industry would like to see a reduction in FIT rates going forward, in a similar way that the solar industry has seen rate reductions for the German FIT program in the past.

Meanwhile, the volume of new applications to Ontario’s FIT program means that the solar pipeline could grow beyond the targets in the Government’s Long-Term Energy Plan. We therefore expect a reduction in the rate that new FIT contracts will be awarded, especially in the utility scale market.

Such a reduction in the volume of new contracts will in turn lead to intensified competition for existing contracts between investors and IPPs looking to grow their project portfolios through acquisition. Owners of existing FIT contracts were given a significant boost by the Ontario Power Authority on August 2, which offered to waive their contract cancellation rights and thus reduce pre-construction risks associated with their FIT projects. Lower risk combined with ever lower equipment prices mean that the second-hand market for Ontario FIT contracts will continue to be red-hot for some time.

The report “Ontario PV Market Forecast 2011-2016″ was published on August 2, 2011 by ClearSky Advisors.

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Jon is the co-founder of ClearSky Advisors. He has more than 18 years of experience in the clean technology and IT industries. Jon has worked with clean technology companies operating in both North America and Europe and his experience includes strategic planning, marketing and branding, business development, start-up financing and international expansion. Prior experience includes 2 years as a management consultant with Riverdale Partners and six years working for research and advisory firm Gartner Inc in the UK, Germany, Canada and the USA, and seven years working in the software industry, including successful software start-ups. Jon holds a Master of Science in Media & Communication from London School of Economics and a Master of Science in Business and Economics from the Norwegian School of Management.

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