Wind sector reviews FIT cut impact

CANADA: Ontario should remain an attractive destination for investment despite its decision to cut its feed-in tariff (FIT) for wind energy, industry experts say. But questions remain about how large the opportunity will be.

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The province's scheduled two-year review of its renewable energy FIT programme ended in March with a decision to cut the rate it pays for future wind-energy contracts from C$0.135/kWh(US$0.135) to C$0.115/kWh. The decrease reflects ongoing cost declines in the sector and should still be manageable for project developers, says Matt Kaplan, a senior analyst at IHS Emerging Energy Research. "It's still a very attractive price. You go across the Great Lakes to New York or Ohio and you'll probably not get close to that," he said.

Robert Hornung, president of the Canadian Wind Energy Association, calls the reduction "aggressive but not unreasonable". He expects it will be new entrants and smaller projects unable to take advantage of economies of scale and cheaper financing that will be most affected by the cut.

"What this does is work to somewhat limit the diversity of players within the industry in Ontario," Hornung said. "Does it mean that there will be no wind developed in Ontario or that the province will be challenged to meet its renewable-energy target? No, I don't think that's the case."

Ontario's target is to have 10.7GW of non-hydro renewable energy online by 2018, and the review recommended it award all the contracts needed to reach that mark by 2015. That commitment to continued deployment is a positive signal "especially in contrast to what we were looking at last fall, when there were real fears of the programme evaporating", said Jesse Broehl, of Make Consulting. "The difference is night and day. I think companies all along the value chain can take that to heart."

The review does not say how large future demand will be. Ontario has 7.93GW of non-hydro renewables either operating or under contract, and another 1.43GW of contracts still to be finalised under an agreement with a Samsung-led consortium. With only a limited amount of new capacity needed to hit 10.7GW, many in the industry had been hoping the review would recommend increasing the target. Instead it said the government should "review Ontario's electricity supply and demand forecast in 2013 to explore whether a higher renewables capacity target is warranted".

David Butters, president of the Association of Power Producers of Ontario, said the review takes a realistic approach to the current realities of the province's electricity system, which include constrained transmission, generation surpluses and flat demand.

"I think this a reasonable balance between what the government has articulated as a fundamental policy, the current demand and supply situation, and ratepayer interests," he said. "I think what it is trying to do is tie those three things together in a way that provides some kind of roadmap forward."

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