Ontario makes dark horse bid for North American cleantech crown

While the United States has remained at an impasse over the extension of its clean energy tax credits, the Canadian province of Ontario has been busy positioning itself as a go-to destination for cleantech’s mountains of cash.

Ontario initiated a flurry of incentive programs aimed at increasing its overall renewable energy production capacity in early 2004 through its 20-year energy plan, dubbed the Integrated Power System Plan (IPSP). Its goals were to obtain an extra 5 percent, or 1,350 megawatts, from renewable sources by 2007 and 10 percent, 2,700 megawatts, by 2010.

Optisolar, 6N Silicon, Cyrium Technologies and Verdant Power are but a handful of companies that are either based in Ontario or that have plans to build projects there. Several of these have received generous backing from the government, with Mississauga-based 6N Silicon, a manufacturer of low-grade silicon, securing nearly $8 million. Hayward, Calif.-based Optisolar has begun construction on a 50 megawatt plant in Sarnia and plans on adding two more 20 megawatt projects in nearby Petrolia and Tilbury.

Its first initiative was to launch the Request for Proposals (RFP) program, through which the government purchased power directly from renewable energy projects. In 2005, it started ReNew Ontario, a five-year, $30 billion plus plan to renovate and rebuild the province’s ageing infrastructure.

It also began to provide a number of tax incentives for businesses and homeowners and started funds aimed at encouraging research into alternative fuels and growing the northern economy by creating new jobs and subsidizing clean energy siting. The Next Generation of Jobs Fund, a 5-year, $1.15 billion program, supports companies’ efforts to train and create a new generation of highly skilled green-collar workers.

The Renewable Energy Standard Offer Program (RESOP), started in late 2006 and managed by the Ontario Power Authority (OPA), has become the province’s real ace in the hole. Similar to the feed-in laws that have made Spain and other European countries such dominant cleantech players, it provides a standard pricing regime, simplified eligibility and streamlined contracting requirements for small renewable projects — wind, solar, biofuel or other.

Producers of solar photovoltaic energy are offered a fixed rate of 42 cents per kilowatt hour. To give you some perspective, that is more than 4 times as much as the 20-year fixed feed-in tariff offered by the California Public Utilities Commission (CPUC) for small renewable projects started in 2008.

Initially, all other producers were paid at a base rate of 11 cents per kilowatt hour. The government soon made the rate more attractive by awarding an extra 3.52 cents per kWh to projects that operated reliably during peak hours. It has also made 20 percent of the base rate subject to annual indexing for inflation, with the rate adjusted every May.

To become eligible, the projects must be located in Ontario and have an installed capacity of 10 megawatts or less — roughly enough to supply 10,000 homes — which they supply through the local grid. The producers must also enter into a 20-year, fixed rate contract.

By comparison, only small installations that are less than 1.5 megawatts in size can qualify for California’s feed-in rates. These can also be derived from a variety of renewable sources, however, including solar, geothermal, biogas, fuel cells and others.

The Ontario government has handily beaten its renewable targets, contracting for over 2,500 megawatts of clean energy since the programs’ inception, and is well on its way toward reaching 4,000 megawatts in signed contracts by the end of 2008. There are now 43 projects that are either planned, under construction or already online. It plans to double its renewable energy capacity to 15,700 megawatts by 2025, which would be enough to provide around 48 percent of Ontario’s energy needs; its current capacity supplies roughly 22 percent of its needs.

A large proportion of its current needs, around 52 percent, is being satisfied by its large nuclear capacity, which it will maintain at its existing 14,000 megawatts. The government plans on meeting another 6,300 megawatts in demand through conservation by 2025.

Despite Ontario’s aggressive expansion into the cleantech space, it remains to be seen whether it will be able to wrest the crown from Silicon Valley or European countries like Spain and Germany, which leads the world in solar energy capacity.

Because U.S.-based companies will have a harder time breaking into its extremely competitive markets, they may decide to keep their projects stateside in the hopes that Congress or a future administration enact a more favorable tax and investment regime. Faced with a gloomy investment climate at home, however, many companies may be lured by Ontario’s attractive tax and financial incentives package.