Despite hopes that the Ontario Power Authority (OPA) FIT review, initiated in October 2011, would offer more clarity for current and future project applications, it now appears that the review is simply providing more uncertainty and program deadlock. When the review was started, developers in Ontario were optimistic that the process would address a variety of issues, including grid capacity and local government discontent, and would get the program back on track.
Back in January 2012, PV demand was forecast to grow by over 50% compared to 2011 levels. However, this forecast has been revised downward during the past few months, as continued delays in program implementation have effectively put the program on pause for more than a year.
While initial FIT 2.0 review results were announced in March 2012, the final program results were not released until August. But despite the final “FIT 2.0” documents being released, no new projects have received contracts. As part of the program review, the OPA moved from an open application process to an “application window” scheme, but the opening of that window has been delayed.
Therefore, PV demand growth in 2012 has been comprised of project applications that were submitted in the first three quarters of 2011, a further indication of how long lead times and slow approvals have had considerable impact on end market growth.
The only progress within the review has been seen in the “microFIT” program (for systems ≤10 kW) and this was only achieved after Ontario’s Minister of Energy directed the OPA to provide clarity on the program. However, the impact on market demand is likely to be minimal, with only 50 MW of microFIT capacity available for contracts; as of October 1st less than 20 MW of projects have been approved.
In terms of non-microFIT systems, the OPA indicated that an application window for small FIT projects (10-500 kW systems) would open on October 1st, but the start date was delayed at the end of September. The OPA has not given any indication when it will open the small FIT application window. Furthermore, the application window for larger-scale systems remains unidentified.
These factors have contributed to a lower growth forecast for Ontario in 2012, with expected megawatt volumes only slightly above those achieved in 2011. Future growth prospects may improve if the policy situation can be clarified, but significant risks exist both internally and externally to the province.
Internal risks include further policy delays to the initial review process and new, lower, rates. The FIT program is now set to undergo annual reviews with new rates anticipated to be announced in November and implemented in January the following year. This could result in further cuts to the FIT rates that have already been reduced by 10-32% in the most current review.
A bigger threat, however, comes from outside the province/country. Japan, the US, and the EU had filed complaints (dating back to September 2010) with the World Trade Organization (WTO) challenging the legitimacy of Ontario’s local content requirements (LCRs). Reports of a preliminary WTO decision indicate that the WTO panel will indeed find that Ontario’s LCRs are in violation of WTO agreements. A final ruling from the WTO panel is expected in November. If Ontario is forced to remove its local content provisions, it may affect the local job creation component that had been a major political defense used to justify the scheme, thus the future of the entire program may be called into question.
If only the projects that have received contracts before the end of the program were installed, then the Ontario market would still have approximately 1 GW of PV installations outstanding. If installations proceed at the current run-rate, then Ontario could continue to play a significant role in the overall North American PV market in the short-term.