Following months of speculation, the results of the Ontario FIT Two-Year-Review have now been released.

During this period, the solar industry in Ontario had been highly concerned that the review could radically alter the structure of the FIT program, perhaps even change local content requirements, increase regulatory hurdles, or drop support altogether for certain PV installation-types.

The good news is that the review largely maintains the current program structure. Although rates for solar PV projects will subsequently decline, this change had been anticipated by most stakeholders tracking PV deployment in Ontario.

The review encompasses 6 key recommendations that help to clarify the basic path for renewable energy development in the province.

However – like any policy change – there are upsides and downsides to each of these recommendations. These are now discussed in more detail below.

1. Continued commitment to clean energy
   Upside: The review proposes to keep the existing FIT program largely intact – a major win given that the Green Energy Act was under threat during the provincial elections in 2H’11. This renewed commitment will now provide a more stable funding climate and should minimize the prospects of a repeat of the previous RESOP program closure.
   Downside: Ontario’s non-hydro renewable energy target remains at 10.7 GW by 2018. With approximately 4.6 GW of renewable energy contracts already signed since FIT-implementation, the concern is that this target could be reached during the next 2 years. This target will be reviewed at the end of 2013, but – if the hard cap remains in place – the long-term potential for the market may remain constrained.
2. Streamlined processes and job creation
   Upside: The time-delay between applying for a FIT contract and beginning construction has historically been a significant factor in delaying PV growth within Ontario. In particular, large-scale projects have often been under development for 2 years (or more) before construction has started. In theory, by streamlining the review process, this may help to solve this problem: the goal is to reduce the development-timeframe for small-scale projects by 75% to 3 months and for large-scale projects to reduce this period by 25% to 12-18 months.
   Downside: The original FIT also had a goal of approving projects within a 12 month window. However, due to an overload of project applications, this goal had not been achieved and the overall process was still somewhat on a steep learning curve. Whether the new targets can be achieved now remains to be seen.
3. Encourage greater community and Aboriginal participation.
   Upside: By encouraging greater participation across different customer segments and communities, the beneficiaries of the new FIT program would be distributed more fairly. This may consequently provide a broader political support base for PV deployment in Ontario moving forward.
   Downside: The primary reason that community/Aboriginal participation has been lower is mainly because these project types have tended to take more time to organize and have been more challenging to finance. By allocating a 10%-minimum quota reserved specifically for this segment, the program may actually be slowed down in favor of more expensive installations.
4. Improve municipal engagement
   Upside: Similar to the previous discussion point, by encouraging more local engagement in solar projects, the program has the potential to strengthen its collective support base and ensure that resulting benefits are more widely distributed.
   Downside: However, in practice, this could offer a ‘de-facto’ veto-power to communities that remain hostile to solar energy facilities. Also, the updated ‘zoning’ recommendation – prohibiting ground-mount PV systems from being the primary purpose for land utilization – may have a damaging effect if open-field PV developments are significantly cut back, as few other industrial activities can ‘cohabitate’ the same location.
5. Reduce pricing to reflect lower costs
   Upside: Most PV industry participants within Ontario had acknowledged that the FIT rates for solar projects were likely to decline given the tremendous uptake of the program initially. However, system price reductions should prolong the viability of the program, while still offering sufficient return-on-investment for developers. Moreover, as domestic PV manufacturing capacity comes online, installation costs will have greater scope to absorb the reduced FIT rates. The new program will adjust rates on an annual basis, with results published each November and then implemented the following January.
   Downside: The solar segment experienced – by far – the greatest FIT rate reductions, while other technologies (with the exception of wind energy) received no reductions at all. The scale of the reductions imposed on PV may significantly impact future PV project applications: rather than receiving a specific rate at the date-of-application, the new program will now fix the rate only when the final contract is offered. This type of process may actually lead to a flood of applications that are back-end loaded annually, as developers seek to receive contract offers before new rates kick-in at the beginning of each year; mirroring some of the cyclic issues that have characterized FIT program deployment in Europe during recent years.
6. Expand Ontario’s clean energy economy
   This goal appears consistent with an increased focus on exporting domestic Canadian-based manufacturing product, rather than purely on local PV development.

Long-term PV demand implications
The results of the review process support the view that the Ontario PV market will continue growing: current Solarbuzz forecasts in Photovoltaic Markets Quarterly North America show the market will increase over 60% Y/Y in 2012. If the review achieves its second goal – streamlining the application process – the market could grow even faster.

However, the fact that regulatory issues – mainly the lack of transmission capacity – were not addressed implies that no significant increase to Ontario’s PV demand for 2012 can be expected.

But the mere fact that the FIT program is not going to be summarily closed is overwhelmingly positive news for PV deployment in Ontario. However, the underlying issues that have plagued the program since its inception are not likely to disappear also, due to this review.