Ontario Solar Market Booms — but Local Sourcing Mandate Could Limit Growth

According to market research firm iSuppli Corp.

, aggressive government incentives are set to trigger booming growth in solar installations in Ontario, Canada, in 2010 but regulations requiring the use of locally sourced photovoltaic (PV) products will cause the expansion to slow dramatically in 2011.

Ontario's PV solar technology system installations are expected to rise to 257 Megawatts (MW) in 2010, up 272.5 percent from 69MW in 2009. However, installation growth will slow dramatically in 2010, rising only by 75.5 percent to 451MW in 2011.

Canadian government's moves could have a major influence throughout North America, since Ontario is the most populous province in Canada.

"Ontario in 2009 passed the Green Energy and Green Economy Act, adopting an aggressive green energy policy that includes a Feed-In Tariff (FIT) program as its centerpiece," said Michael Sheppard, Analyst (Photovoltaics & Financial Services) at iSuppli. "This FIT program represents North America's first comprehensive guaranteed pricing structure for electricity production from renewable fuels sources including solar PV, bio-energy waterpower and wind."

No coal goal

Ontario's plan to phase out coal-based electrical generation by 2014 is a major factor driving the FIT. , Solar power trends show that coal in 2008 represented 21 percent of Ontario's electricity generation, a gap that must be filled by renewable energy technologies.

Meanwhile, according to the Ontario Power Authority (OPA), demand for electricity is also growing in Ontario, with almost 40 Giga Watts (GW) of electricity required to meet estimated demand projected by 2025. OPA has determined that if no new existing capacity is created or refurbished by that time, there will be a 30GW gap between existing electricity supply and demand, spurring further demand for renewable technologies.

Local content requirements spur supply constraints

Beyond the FIT, Ontario's Green Energy and Green Economy Act specifies that in 2010, the component bill of materials for 40 percent of residential installations in addition to 50 percent of commercial installations, ought to be sourced locally.

"The growth of PV installations in Ontario in 2011 could become supply constrained, as module and inverter production located in the province will not be sufficient to support the 60 percent content requirement until the middle of the year.", Michael Sheppard said. "These supply constraints will imply strong growth opportunities for companies that are currently building module and inverter facilities in the region as project developers clamor for their product."

Michael Sheppard added that, "While such developments will limit PV market growth for the whole of 2011, the undersupply situation will fade out as an issue by the fourth quarter of next year when newly built facilities are expected to properly meet demand for PV solar energy."

Local solar companies will be the major beneficiaries of the shortfall. By building module and inverter manufacturing facilities in Ontario, firms like Canadian Solar, SMA, Fronius and Silfab are stepping in to meet the demand for local solar components.

Learn more about this topic, with Michael Sheppard's report, entitled Photovoltaics: Local Content will Lead to Supply Constraints in 2011' at http://www.isuppli.com/Photovoltaics/Pages/Photovoltaics-Local-Content-will-Lead-to-Supply-Constraints-in-2011.aspx?PRX

Ontario Solar Market Booms but Local Sourcing Mandate Could Limit Growth

By: Larry Wilson

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