Ontario PV Market to Grow 270% To Reach 455 MW in 2011

Despite ongoing political and regulatory uncertainty, Ontario’s PV market will continue it’s growth in 2011 and in total we expect there to be 455MW of new installations in 2011, up from 169MW in 2010. Our forecast shows that Ontario’s Photovoltaic (PV) market is expected to reach cumulative installations of 2,650 MW by 2015. This includes demand from the Feed-in Tariff (FIT) program, and non-FIT program sources such as the RESOP and the Korean Consortium agreement.

The market forecast is based on in-depth interviews with over 65 key stakeholders and surveys with over 50 installers in the Ontario market  – all undertaken between December, 2010 and February, 2011.  Our key findings include:

  • Persistent political and regulatory uncertainty around the political FIT program has caused a number of module and inverter manufacturers to postpone or scale back decisions to invest and hire in the province.
  • Delays during the permitting process will push the vast majority of FIT utility-scale demand back into 2012-2013. As a consequence, ClearSky Advisors has downgraded its market forecast by more than 200MW for 2011. 
  • An increasing number of suppliers, reduced global costs, and delayed demand have combined to drive expected module prices down in Ontario
  • As demand for solar panels increasingly switch to Ontario-made content some supply constraints may be experienced in the first half of 2011. However, by the second half of the year, we expect such supply constraints to be eliminated.

Supply and Demand

Domestic Content Requirements (DCR) restrict the amount of equipment that is available to developers in Ontario. Though there has been concern that installation volumes would be limited by supply shortages, it is now most likely that there will be sufficient capacity to meet demand from 2011-2015.  

  • Of the 30+ panel manufacturers ClearSky Advisors has been tracking, 17-24 are likely to produce DCR compliant modules in 2011
  • Increasing volumes of panel supply continue to become available (i.e. Recurrent and Celestica recently announced a joint venture to manufacture solar panels at the Celestica facility in Toronto )
  • Delayed utility-scale development will enable panel supply capacity to exceed demand by Q3, 2011
  • Large inverter manufacturers will be able to fully serve Ontario’s FIT market from 2011-2015 – mostly through flexible capacity arrangements with third party contract manufacturers such as Celestica and Flextronics.
  • We expect that several Ontario-based panel and inverter manufacturers will attempt to export equipment to other Canadian provinces and parts of the US, especially the Great Lakes area and the East Coast.

Panel and Inverter Manufacturers in Ontario

 

Facility in ON

Using 3rd Party Manufacturer

Using ON Silicon

Total

Panel Manufacturers

11-15

4-6

2-3

17-24

Inverter Manufacturers

7-11

6

NA

13-17

Market Instability

Without doubt, the most pressing issue that emerged from our research, is the political and regulatory uncertainty surrounding the FIT program. This is due to three main factors:

  • Continuous changes and delays in Ontario’s FIT program,
  • A FIT program review scheduled for 2011,
    • A provincial election slated for the fall of 2011.

All of this uncertainty has combined to make Ontario a challenging market in which to operate.

  • Long-term planning is exceedingly difficult for any business participating in Ontario’s FIT program
  • A number of manufacturers have delayed investment in the province (either by entering the market cautiously and waiting for more stability before expanding or by avoiding the market altogether)
    • Uncertainty means risk; this has made project financing more expensive and harder to come by

Long-Term Outlook

To date, the Ontario solar industry has been awarded a total of 2,680 MW worth of contracts – including contracts offered through RESOP, the Korean Consortium and the FIT Program – of which only 220 MW dc had been built by the end of 2010. With contracts of approximately 2,460 MW that have yet to be built, Ontario’s PV market will experience strong growth from 2011-2012, even if we don’t expect all of those contracts to be built. Beyond 2013, the market will shrink significantly in response to ratepayer concerns, transmission constraints, and the limited size of Ontario’s electricity market. By 2015 we expect the market to reach cumulative installations of 2,650 MW.

Given that the Ontario Government’s goal for solar energy is around 2,700 MW by 2018 according to the draft Long Term Energy Plan (LTEP) published in November 2010, we expect that the next couple of years will see significantly lower volumes of new contracts issued than what has been the case in recent years. 

In 2014-2015 Ontario’s Government will again be putting together a new Long Term Energy Plan. At that point, the Government must balance ratepayer burden and energy supply mix with the needs of the solar industry. If the Ontario solar industry wants support from the provincial government to continue, the collective challenge facing the industry the next couple of years is clear:

  • To be sustainable beyond 2015, cost levels for equipment and installation must come down significantly.
  • At the same time, the industry must build “solar goodwill” by firmly demonstrating the economic benefits (such as job creation and export potential) that were part of the initial political appeal when the FIT program was launched.

An increased target for solar energy in the 2015 Long Term Energy Plan and indeed continued existence of a solar industry in Ontario depends on how well the industry executes on those two points.

Note: All MW figures are DC.

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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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