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It’s a rollercoaster ride for solar energy

“It's pretty grim for solar companies in Ontario right now.”


October 18, 2012

EDMONTON, AB, Oct. 18,2012/ Troy Media/ – When it comes to solar panel manufacturing the laws of supply and demand may as well be Heisenberg’s uncertainty principle.

Just ask the former president of one of the largest solar photovoltaic module manufacturers in Canada.

‘You know we’ve coined the phrase solar rollercoaster; it’s had a lot of great moments and a lot of pretty low moments, but it’s been a great ride,’ says Milfred Hammerbacher, the ex-president of Canadian Solar Solutions.

As countries all over the world grapple with how best to build out the next generation of clean, green electricity generation infrastructure they oscillate between wanting as much as they can get as soon as possible and industry collapse.

While local markets can crash, the overall worldwide numbers for solar photovoltaic manufacturing look like a simple exponential function.

Global exponential growth in solar is the cumulative effect of companies like Canadian Solar, the parent company of Canadian Solar Solutions. Based in Guelph, Ontario they are, by some estimates, the fifth largest manufacturers of solar panels in the world.

Milfred Hammerbacher

Hammerbacher is an affable, friendly guy who got started in the solar industry 24 years ago. His company, S2E Technologies, is now doing work in Latin America. He was hired by Canadian Solar to develop and execute their Ontario business plan. Under Hammerbacher, Canadian Solar diversified out into developing and constructing solar power plants.

‘By vertically integrating it allowed us to control more of our destiny and push back the margins. It’s also kind of a natural fit, solar modules are the most important part of a solar farm so controlling that whole space has some advantages.’

Moving into engineering, procurement and contracting means that you’re not as dependent on the cruel mistress of supply and demand. This was especially important when the government of Ontario waffled on its feed-in tariff program in the run-up to the last election.

An example of this kind of project is the Thunder Bay Airport Solar Park in Thunder Bay. The 8.5 megawatt solar project went live in October of 2011 and is owned by Skypower.

With projects and partnerships like these in hand Hammerbacher casually lets it drop that the manufacturing plant has more than a year of work to do on their own projects.

Unfortunately the Ontario Government got twitchy about green energy and, after delays in announcing version 2.0 of the FIT program, the government decided to focus on smaller rooftop systems at the expense of larger, ground-mounted utility scale systems.

This, together with a cap of 50 MW on solar FIT projects, spells problems for an Ontario industry that now has the capacity to build 700 megawatts of solar each year.

Not much has been said publicly but according to Hammerbacher ‘It’s pretty grim for solar companies in Ontario right now.’

Solar Manufacturing Economic Landscape

To illustrate the ups and downs, just look at this report from the federal government. Leading Canadian PV component manufacturers employed over 2,100 people and over 5,100 full time equivalents. At the end of 2011, total Canadian PV installations of 571 MW could generate 692 GWh per year with a potential value of $50 million per year. 2011 was unequivocally a good year.

These companies and these jobs were spurred on by the domestic content requirement in the Ontario Green Energy Act, which requires a certain percentage of solar project costs come from Ontario goods and labour.

These policies definitely help create the solar rollercoaster that Hammerbacher talks about, but with every gigawatt of solar photovoltaic modules that are produced the closer the industry gets to financial sustainability.

Caring about how the solar panel got here or where it came from is irrelevant. What the world needs are cheap, effective and constantly improving solar energy projects. And that’s what we’re getting.

As solar approaches grid parity in Germany, Latin America and the Middle East (grid parity is the point at which producing solar power is equal to the cost of getting it from the grid) Hammerbacher expects continued growth over time.

Now working as CEO for his own company, S2E Technologies, Hammerbacher is ever hopeful: ‘In the early 1900s there were 200 car companies in Detroit. The car industry didn’t die, it consolidated and continued.’

While there might be short term pain, the long term gain means consumers everywhere get access to cheap, plentiful and constantly improving solar panels.

Troy Media columnist David Dodge is the host and producer of Green Energy Futures, a multi-media series presented at www.greenenergyfutures.ca. The series is supported by TD, Suncor Energy and the Pembina Institute.

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1 comments
Maury Markowitz
Maury Markowitz

"Unfortunately the Ontario Government got twitchy about green energy and, after delays in announcing version 2.0 of the FIT program, it decided to focus on smaller rooftop systems at the expense of larger, ground-mounted utility scale systems."

If only this were so simple.

According to a study out of Queen's University about a year ago, there is about 5GWp of available power on Ontario commercial rooftops - taking into account things like HVAC units, blockage from trees or parapets, etc. 5GW is nicely matched with the peak pattern in Ontario, which varies from about 11.5GW at night to about 17.5 during the day.

So given these numbers, it might seem that a good program would be one that focussed on these roofs - which are otherwise wasted space, and as they are flat, easy to install on, and thereby the greatest economic bang for the buck. The panels last about 25 years (actually, all indications are longer, but for now we'll stick with the industry standard number) so if we wanted to install 1/25th of our desired peak load every year, the program would be buying 250MW a year, a very reasonable number. And the result would be a program that naturally fell to grid parity over time, like the similar program in Germany, would be steady in terms of development, and would "start over" in 25 years when those first panels started to wear out and thereby provide constant employment.

So that would be a good idea, right?

I guess that's why they're not doing it.

Instead, the program has been constantly meddled with in a seemingly desperate attempt to fill holes that allowed people to game the system. For instance, in the original program one could install up to 10 kW using the dramatically paperwork-simplified microFIT program, which was intended to give homeowners a way to install a handful of panels and still make economic sense. This is the reason for the very high tariff for the microFIT program, 80.2 cents, which is needed to offset the very high relatively cost of installing just a few panels,

Instead, developers immediately deluged the program with tens of thousands of ground-mounted installs, where it is easier and cheaper to install. Double-digit returns were trivial. So the rules were changed to lower the tariff to 65 cents. So now the developers starting installing units on various bits of land owned by one person. So the rules were changed to eliminate this. So the developers...

Under the current rules, installing on those commercial roofs is basically impossible. In order to eliminate the possibility of companies buying multiple systems, the microFIT program can only be applied for by a "natural person". This, of course, eliminates every commercial rooftop, which are by definition owned by companies. Now they can still apply under the larger FIT program, but only at the cost of hundreds of pages of paperwork that costs tens of thousands of dollars to complete, only to get the lower tariff originally intended for low-cost ground-mount systems.

So it's the rock of impossible to meet legislative requirements or the hard place of a system that can never pay for its own overhead.

This is the sort of thing that happens when people pass legislation when they don't really understand a topic, nor precisely what they're trying to accomplish. There was no clear goal in terms of the amount of power they wanted to get from PV, where they wanted it to be installed, or whom should be involved.

And here we are three years later and the program continues to lurch from new vision to new vision, with no apparent long-term policy. Any hope of providing either steady employment or a sensible power policy have been abandoned. It's sad to see.

As your article points out, this is a local effect: globally PV is either the #1 or #2 fastest growing power source - wind being the other. But that is little consolation to either the taxpayers or workers of Ontario, both of whom bet on a future our bureaucracy couldn't figure out how to deliver.