Meet the new boss

childdiscipline-02022011a
No more kid gloves

Kids are very aware that some rules are enforced and some aren’t. They test every rule constantly. They keep testing in the hopes that the parents will get exasperated and drop the rule to avoid the hassle of enforcement.

Will mom and dad notice if I just leave the dishes beside the sink, instead of putting them in the dishwasher like I’m supposed to? After all, they do the morning dishes after I’m safely off at school, and the evening ones when I’m safely tucked in bed.

The answer (at least in my household): Yes, we will notice. Yes, you will hear all about it. And yes, next time you’ll get stuck with an extra punitive chore like emptying the dishwasher or taking out the garbage as a lesson not to cut corners with your responsibilities again.

In its handling of the Feed-In Tariff (FIT) review, the Ontario Power Authority (OPA) has behaved like the child cutting corners with household duties.

When the Green Energy and Green Economy Act (GEGEA) became law in 2009, its most prominent feature was the FIT program. One of the three categories of the FIT program, MicroFIT, includes systems up to 10kW in size. MicroFIT is synonymous with solar photovoltaic (PV) systems – PV accounts for 99.99% of MicroFIT contracts released in the current tranche.

A key objective of the FIT was to build an industry, creating green energy jobs for Ontarians, growing the corporate and personal tax base, and producing spin-off economic benefits. For the first two years, all looked well. MicroFIT created an entire sub-industry focused on rooftop and ground-mount solar PV installations. The industry included installers, distributors, manufacturers, and more. It looked like the GEGEA was living up to the billing.

Fast-forward to the present day, and it ain’t going so good. The OPA bears much of the responsibility for this, for behaving like a recalcitrant child. The Ministry of Energy and the Government of Ontario bear the remainder, for not being sufficiently stern parents.

In October 2011 the OPA closed the province’s MicroFIT program to new applications. The program remained in a deep freeze for the next nine months. In the end, the Ministry of Energy had to issue a public directive demanding that the OPA stop sitting on its hands, finish its review, and reopen the program. The directive was issued July 11th and the OPA obeyed and opened the MicroFIT window later that month. If I had been working for the OPA at the time, I would have been dreadfully chagrined, like the child caught shirking on chores. The exact same thing happened November 23rd; the province issued a directive demanding that the OPA reopen the small FIT window, and the OPA obeyed a couple of weeks later – more than a year after that portion of the program had been frozen. We can expect that the ministry will have to do the same thing again to get the OPA to re-open the large FIT window.

The Ministry had good reason to deal decisively and publicly with the OPA. The long delay dealt a mortal blow to many small companies. One installer, focused on MicroFIT and small FIT, had to let go a third of its staff in the spring of 2012. Half of the remaining staff left in July just before the program finally did reopen. The company partnered with mine in August, but the damage had already been done. We bought out what was left of it last month. The owner is seeking greener pastures outside of the PV industry.

I toured a PV manufacturing plant in Mississauga last week and my host told similarly sad stories from among her customers – she cited a number of examples in which a customer had been ordering PV modules one month, and the next their phone had been disconnected. Even larger businesses such as Siliken were driven under because they had essentially zero sales for the better part of a year.

History may soon repeat itself.

When the MicroFIT window was again opened in July 2012, the OPA indicated that it would accept applications for contracts totaling 50MW. As of the biweekly MicroFIT report issued on February 4th, the remaining amount is 13MW. Assuming the rate at which contracts are awarded stays constant, the current tranche will be completely used up at the beginning of April.

What then?

Many in the industry are pessimistic, and with good reason. They remember the lesson of 2011 too well. When the window closed in October of that year, the OPA was careful not to give itself a deadline for completion of its review. However, most indications were that it would be complete in a matter of weeks. The final public submissions were received in mid-December. I spoke to a number of people in the industry during that period, and most expected that the report would be issued and the program re-launched by March at the latest.

It took the OPA not three months, but seven.

How can anyone run a business under those conditions? Remember that nobody knew when the program would open again, but most thought it was imminent. It remained imminent for the better part of a year.

If the 50MW tranche is exhausted in April as anticipated, we have learned to expect the following:

  1. The program will be completely closed to any new applications.
  2. The OPA will not set a target date to reopen the program.
  3. Even the most cynical observer will underestimate the dry spell.
  4. More companies will close their doors.

The mandate of the OPA does not include managing an entire industry. However, with its monopoly over the province’s electricity market, it effectively has become the state planning department for green energy. This is a job the OPA is neither equipped nor willing to perform. It needs much closer supervision and direction from the Ministry of Energy, or the baby will get thrown out with the bathwater and the nascent Ontario green energy industry will starve to death.

Ontario has a new Premier. Since the GEGEA remains the boldest renewable energy program in the country, Canada also has, in effect, a new Most Powerful Patron of green energy. Kathleen Wynne has been making some encouraging noises on the topic, but it remains to be seen how truly committed she is.

This is a crucial time. It takes about four years to amortize the cost of a PV manufacturing plant. Several plants in the province are rapidly approaching that age. With plants fully paid for, PV module manufacturers may soon be able to reduce prices much further than the gradual but substantial drops we’ve already experienced in the four years since the launch of the GEGEA. This will benefit the green energy market not only within the province, but the export market to other provinces and to other countries (most notably the United States). If the industry can just make it through the next two years or so, price reductions in PV panels will mean that the Feed-In Tariff can drop significantly – eventually disappearing altogether.

Ms. Wynne, and her new Minister of Energy Bob Chiarelli, have the opportunity to usher in a new era – an era in which solar energy grows explosively with no government involvement at all. Perhaps this time the OPA will play ball, and the MicroFIT window will reopen with minimal delay. However, if history is any guide, Wynne and Chiarelli will only bring about that exciting green energy future if they are ready and willing to take off the kid gloves when dealing with the OPA.

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2 thoughts on “Meet the new boss”

  1. Great article! I couldn’t agree more. It is unfortunate that politicians have used Green Energy Act as a Political platform, rather than common sense policy.
    Ms. Wynne at the helm of Liberal government had better put her hands around OPA,s neck and squeeze it until it taps out.
    We need a tough leader who will bring the end to nonsense of abandoning the program that has created jobs, opportunities, better environment and a bright future for Ontario.

    Like

    1. Thanks for the comments, and for the support! Our industry needs to let our political leaders know that they need to provide real leadership.

      Like

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