February 22, 2012 / 6:41 PM / in 6 years

Ontario won't alter local content in green-energy

(Reuters) - The Canadian province of Ontario’s review of its pioneering green energy program will not alter controversial rules that require local content for all projects, the province’s energy minister said on Wednesday.

In an interview with Reuters, Energy Minister Chris Bentley said the review will be complete by the end of March, and, as has been widely expected, will recommend cuts in generous government subsidies for the production of green energy. Bentley would not say how big the cuts will be, however.

“I am working really hard to get it done in the first quarter... I know people are anxious,” he said.

Ontario, Canada’s most populous province, launched the green energy program, the most ambitious of its kind in North America, in October 2009, primarily as a means to create jobs to replace those in its declining manufacturing sector, but also to replace electricity from coal-fired power stations. The Liberal provincial government plans to have all coal-powered generators shut by 2014.

The centerpiece of the program is the feed-in tariff (FIT), a plan similar to ones in Germany and Spain that pays above-market rates to producers of renewable energy from sources such as the sun, wind and biomass.

The province says the FIT program, which pays some of the world’s richest rates to solar power producers, has attracted investment commitments of C$26 billion ($26 billion) and created more than 20,000 jobs.

But it has also faced a backlash from ratepayers who subsidize the program through monthly electricity bills, which have risen sharply.

Expensive green power was a flashpoint in last October’s Ontario election. The Liberals managed to remain in power but lost their majority in the provincial legislature.

Central to the FIT program’s job-creating strategy are local content rules, which require projects that want FIT financial support to source 50-60 percent of their equipment and services in Ontario.

Bentley said the requirement would not be tampered with in the review. “We are committed to those rules,” he said.

Both the European Union and Japan have launched legal challenges at the World Trade Organization against Ontario’s local content rules, complaining they are protectionist.

Bentley confirmed widespread expectations that FIT rates will be cut because the costs of raw materials and manufactured components have fallen. He declined to comment on which types of renewable energy will face rate reductions and by how much.

Most in the industry expect solar energy rates to face the deepest cuts.

“We are anticipating changes to the pricing because the cost of solar modules have dropped considerably,” National Bank Financial analyst Rupert Merer said.

In a recent report, Merer said solar module prices have crashed from close to C$4 per watt to as low as C$1 per watt in the more than two years since the FIT was set up.

The review, mandatory every two years and started on November 1 last year, has received 2,900 online submissions and 130 on paper, Bentley said.

He said the province was “absolutely looking” at adding new technologies, such as energy storage or small wind projects, to the FIT program. Wind energy is covered by the program but all projects receive the same rate, unlike solar, where small projects are paid higher rates.

Nuclear power will continue to generate 50 percent of Ontario’s power, Bentley said, despite plans by several European countries, including Germany and Belgium, to exit nuclear after the Fukushima disaster in Japan.

The province had no immediate plans to lift a moratorium on offshore wind power, he said.

Reporting By Nicole Mordant in Vancouver; Editing by Janet Guttsman and Peter Galloway

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