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Solar subsidy plan’s content rules burn local homeowners

Local-content rule could cost solar system buyers and drive off new ones

By Tyler Hamilton – Toronto Star

Tim Short knew the province was getting ready to launch a program that paid a rich premium for solar electricity, so he eagerly went ahead earlier this month and installed solar panels on the roof of his home.

Like many homeowners and organizations throughout the province, including the City of Toronto, Short figured he could get the physical work out of the way and fill out the paperwork later, allowing for a quick and easy connection to the power grid.

Then he was blindsided. The Toronto resident found out last week that the McGuinty government’s new feed-in tariff (FIT) program comes with a requirement that small rooftop solar systems meet a 40 per cent local content requirement. Large ground-mount systems must achieve 50 per cent.

“It’s kind of ridiculous,” said Short, who spent $31,000 on his 2.5 kilowatt system, which doesn’t make the cut even with 37% local content. “A number of people were expecting a 20% requirement, so when we heard 40% it was a shock.”

The government set the rules to lure investment in local manufacturing and job creation, but the solar industry in Ontario is now worried that setting the bar high at the outset will kill the market and scare away potential investors.

“It’s a fairly mind-boggling way to start the program, and incredibly limiting,” said Blair Beesley, founder of solar installer SolSmart Energy Solutions Inc. of Toronto.

David Watts, a managing director at Toronto-based Solera Sustainable Energies Co., said his company has installed a number of systems over the summer for customers counting on the FIT program, which pays 80.2 cents per kilowatt-hour for solar power that comes from small rooftop systems.

At that rate, it’s possible to get a payback on a $30,000 system in less than 15 years. Watts said without it, the payback is closer to 60 years. He said the lack of Ontario manufacturers of solar panels, inverters and other gear makes it virtually impossible today to meet the 40% target. The few manufacturers that do exist will now be swamped with orders and may hike up prices.

Ben Chin, a spokesman for the Ontario Power Authority, which is managing the program, said the government has analyzed the market and is convinced that 40 per cent is achievable, and now.

“There are some legitimate concerns for people who moved before the launch of this program,” he said. “I just don’t know what to say about that … These are some of the growing pains we’ll have to work through as an industry.”

Energy and Infrastructure Minister George Smitherman told the Star on Saturday that he’s open to hearing industry concerns and making adjustments if necessary.

Watts said the government didn’t do its research and is out of touch with the industry. It didn’t take into account that solar installers would be stuck with existing inventories that don’t comply with local content rules, he said.

It also didn’t consider the impact of announcing in March that a FIT program was coming, but not disclosing local content rules until September. He said it made customers reluctant to move ahead with projects.

“We had to keep installing, even though there was no clarity,” said Watts. “You can’t just have a business and cease to have revenue for six months. That’s a recipe for disaster. We had to move forward, and now we end up with the short end of the stick.”

Both Watts and Short hope the government will decide to grandfather those who pre-installed systems between March and September. Alternatively, they’d like to see the content target lowered to 25 per cent or 30 per cent during the first year of the FIT program, then raised to 40 per cent and eventually 60 per cent by 2011.

Rob McMonagle, senior energy consultant for the City of Toronto, echoes that view. The city built four projects this summer totalling more than 150 kilowatts, all in anticipation of the FIT program and disqualified from the process.

“We’ve got another five that were in the works, but we’ll have to pull back on them now ,” he said. “It’s discouraging.”

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Contact Laurin Jeffrey for more information  -  416-388-1960

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