Ontario test case for green experiment
Alia McMullen, Financial Post
It is not often someone gets to start a power-generation company from the ground up, particularly when that person is fresh out of university. But that is one company among the many that are sprouting from Ontario’s anticipated green experiment — a new direction for an economy suffering the demise of North American manufacturing.
“It’s going to be major,” said Brian Maxwell, a recent economics graduate from Queen’s University and co-founder of NowSolar Inc., who is anxious to hear the terms for Ontario’s new Green Energy Act. The solar power development company Mr. Maxwell and structural engineering graduate Scott Mather started in February is designed to tap into the incoming Feed In Tariff program, a section of the Act that would allow individuals and businesses to sell energy to utility service providers at rates that are the third-highest in the world after Spain and Italy.
Ontario is the first province to offer such a program and the rest of the country is watching closely to see if it pays off. The Act was passed in June but will not take effect until the program’s guidelines have been established, a process the Ministry of Energy and Infrastructure said would take a few more months. Even so, businesses have begun to position themselves to pounce on the new opportunities.
The Feed In Tariff program, for instance, has allowed for the creation of a new type of power-generation company, such as NowSolar. The company’s objective is to build million-dollar solar panel installations on land or roof space rented from individuals and corporations. The company earns money through the energy produced by the solar panels and the lease holder, who is effectively an investor in the project, receives a 10% return on the earnings.
The Ontario Power Authority released draft Feed In Tariff rates on July 8 that vary depending on type and size of a project. Project types include solar, wind, waterpower, biomass, biogas and landfill gas.
“There’s a lot of people just getting into it like us. We have heard of companies being approached by several different parties,” Mr. Maxwell said, noting there has also been interest from large companies from France and Spain.
While there is some movement, companies are anxiously waiting for the release of the official terms, contract details and guidelines before starting their projects. The key concern is what the proposed provincial content requirements will look like. Businesses will need to ensure a set percentage of a project is sourced from Ontario, however the government has not indicated what that will be.
If the percentage is too large, Mr. Maxwell said, it could derail his company’s project. Solar panels are not produced in Ontario and it could take years for a local manufacturer to get up and running, he said.
“We’re in a wait-and-hold period until the final contract comes out,” Mr. Maxwell said.
Amy Tang, a spokeswoman for the Ontario Ministry of Energy and Infrastructure, said the government will take a “balanced approach” to the local-content requirement, which is designed to encourage investment in Ontario. Considerable progress has been made in fine-tuning the regulations since the Act was passed, but a conservative estimate for the release of the details would be in the next couple of months, she said.
Robert Hornung, president of the Canadian Wind Energy Association, said the provincial content requirement is meant to create opportunities for Ontario-based companies to enter the green-energy supply chain, but that businesses in other provinces and countries could take advantage of the Act. He said there were many opportunities for businesses, whether in manufacturing, the supply chain, or services.
“A wind turbine has 8,000 components. There’s a lot of opportunities in the provision of lubricants, lighting systems, bolts, and all sorts of other things. It’s not necessarily that it becomes the dominant feature of a business, but it becomes a new line associated with an industry that is growing quickly.”
The province has the skill set and the equipment to begin to produce entire wind turbines and other renewable technologies, said Ed Bernard, president of XAG Energy Inc., a supply chain management company focused on helping Ontario’s businesses make the transition into renewable energy, particularly those left stranded by the demise of the auto manufacturing industry.
“We’ve got high layoff numbers of highly skilled people. There’s no question that we could build entire turbines right here,” he said.
“But all of the wind turbines we are erecting here in Ontario, they’re all built in Europe.”
He said it cost between $2,000 and $3,000 to transport the turbines from Europe, and production costs are not cheaper. Despite the possibilities, Mr. Bernard contends Ontario businesses generally are not ready to tap the budding renewables market because a lot of manufacturers had depleted their resources when conditions in the sector tightened.
XAG Energy developed an assessment process called NextGen Ready that will help manufacturers transition into renewables.
The range of business that can get involved is wide, Mr. Bernard said, pointing to sectors such as gear box manufacturers, surveyors and mappers, plastic injection moulding, temperature and icing-sensing systems, education and training, metal stamping, and crane operation.
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