Ontario will comply with the WTO ruling that found that the
domestic content requirements of the Ontario Power Authority's
Feed-in Tariff program violated Canada's international free
trade obligations. That was the message delivered by Minister
of Energy Bob Chiarelli when he announced
major changes to the FIT program at the CanSIA conference held
May 30. On June 12, he issued a directive to the OPA indicating his
expectation that complying with the WTO ruling "would affect
the domestic content requirements of the new FIT program
procurements lauched after May 24, 2013." Now it appears
that the OPA is considering exactly what that might mean for the
Commencing June 24, the OPA is soliciting feedback from the renewable industry
on what removing domestic content requirements from future microFIT
and FIT procurements should mean for FIT prices. The OPA is
consulting closely with CanSIA and CanWEA and is asking
stakeholders to provide their input through these industry
organizations to the extent possible. The consultation period
will close Wednesday, July 10, 2013. This new round of
consultation supplements an earlier round of more general consultation regarding the OPA's ongoing
review of FIT pricing.
If the domestic content requirements are removed, FIT prices
will almost certainly be reduced, particularly for solar. The
OPA uses estimates about equipment and construction costs,
financing costs and reasonable rates of return to construct
compelling power pricing for various renewable technologies and
projects sizes. Historically, the cost estimates for
equipment and certain other items took into account domestic
content requirements which required that a large percentage of
these items be procured in Ontario. If the domestic content
requirements are removed, developers will be able to shop for these
items in the more competitive global market. Global
competition will drive down the capital cost of renewable projects
in Ontario. This may be particularly true for solar projects
given the global oversupply of solar modules that is expected to continue into 2014. If the
OPA expects capital costs to be reduced, it will likely reduce FIT
Lower capital costs and the correspondingly lower price paid for
renewable power will be a positive development for many people in
Ontario, including project developers and electricity rate
payers. However, for equipment and service suppliers who
established businesses in Ontario to take advantage of the domestic
content requirements, the changes will likely be quite
painful. Faced with increased price pressure and a declining
volume of procurement under the modified FIT program, a number of
these business may struggle to continue operating in Ontario.
Stay tuned for the outcome of the price review and the final
fate of the domestic content requirements.
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