Research: Ontario’s solar market set to prosper, but local sourcing mandate could limit growth

It said Ontario’s PV solar technology system is expected to rise to 257 megawatts (MW) this year, up 272.5 percent from 69 MW last year. However, installation growth will “slow dramatically” this year, rising by 75.5 percent to 451 MW next year. It added that given Ontario is the most populous province in Canada, the Canadian government’s moves could have a “major influence” throughout North America.

“Ontario in 2009 passed the Green Energy and Green Economy Act, adopting an aggressive green energy policy that includes a feed-in tariff (FIT) program as its centerpiece,” said Mike Sheppard, financial services/PV analyst for iSuppli. “This FIT program represents North America’s first comprehensive guaranteed pricing structure for electricity production from renewable fuels sources including solar PV, bio-energy waterpower and wind.”

iSuppli continued by saying that a major factor driving the FIT is Ontario’s plan to phase out coal-based electrical generation by 2014. It said that coal in 2008 represented 21 percent of Ontario’s electricity generation; a gap that must be filled by renewable energy technologies, solar power trends show. Meanwhile, the research firm stated that demand for electricity is also growing in Ontario, with almost 40 gigawatts (GW) of electricity required to meet estimated demand projected by 2025, according to the Ontario Power Authority (OPA). OPA has determined that if no new existing capacity is created or refurbished by that time, explained iSuppli, there will be a 30 GW gap between existing electricity supply and demand, spurring further demand for renewable technologies.

It went on to say that beyond the FIT, Ontario’s Green Energy and Green Economy Act specifies that the component bill of materials for 40 percent of residential installations, as well as 50 percent of commercial installations must be sourced locally this year. “The growth of PV installations in Ontario in 2011 could become supply constrained, as module and inverter production located in the province will not be sufficient to support the 60 percent content requirement until the middle of the year,” commented Sheppard. “These supply constraints will imply strong growth opportunities for companies that are currently building module and inverter facilities in the region as project developers clamor for their product.”

While such developments will limit PV market growth for the whole of next year, continued iSuppli, Sheppard believes the undersupply situation will fade out as an issue by the fourth quarter of next year, when newly built facilities are expected to properly meet demand for PV solar energy. It said the major beneficiaries of the shortfall will be local solar companies. Firms like Canadian Solar, SMA, Fronius and Silfab are stepping in to meet the demand for local solar components building module and inverter manufacturing facilities in Ontario, it concluded.