Last week, Ontario’s Minister of Energy and Infrastructure, Rt Hon George Smitherman, announced the proposed feed-in tariffs for producers of renewable energy under Ontario’s new Green Energy Act. The proposed tariffs were developed by the Ontario Power Authority on Minister Smitherman’s request.
Best for Solar and Biomass
While both the Act and the feed-in tariffs may still be changed before implementation, the current Act and accompanying incentive scheme appear very positive in terms of creating a marketplace for renewable energy in Ontario – especially for solar power and biogas. Wind power advocates will be a little less enthusiastic according to Paul Gipe, an expert on international renewable energy tariffs who offered detailed commentary about the proposed feed-in tariffs on his blog (“Ontario Proposes Precedent-Setting Renewable Tariffs”).
How the feed-in tariff works:
If you are a homeowner with suitable roof space, feed-in tariffs mean that you can install a photovoltaic system on your roof, connect it to the grid and get paid $ 0.802 per kWh that your system delivers to the grid (for systems up to 10 KW). The rate is guaranteed for 20 years, a guarantee that allows you to get financing for the required investment and that, in most cases, will generate greater returns than your RRSP portfolio.
The New Jobs
In addition to property/land owners and the renewable energy industry, the Green Energy Act and the proposed tariffs would benefit candidates for the 50,000 jobs the politicians are hoping the Green Energy Act and the incentive scheme will create. Both Minister Smitherman and Premier Dalton McGuinty have clearly stated that job creation is the primary objective of the new legislation (read my blog from January 27th for more details).
But Ontario isn’t Germany
However, to achieve the job creation target the Ontario Government still has a formidable task at hand: demand generation. Minister Smitherman deserves credit for his willingness to adopt a legislative scheme that has been successful elsewhere (mainly Germany), but it is important in the adoption process that he recognizes that Ontario is different than Germany in terms of latent demand for renewable energy. The primary difference lies in the simple fact that Germans strongly dislike depending on external sources for their energy (i.e. Russia). So when the German state offers households and businesses an incentive to invest in renewable energy, they are happy to oblige and earn a healthy return at the same time. Energy rich countries like Canada don’t have energy demands that are driven by energy insecurity, nor does reducing greenhouse gases appear to be a big motivator for many Ontarians.
The feed-in tariffs proposed for Ontario will be enough to offer owners of a roof-top solar system a decent return on investment with a high degree of security. The problem is that when it comes to asking people to invest in solar (or biogas or wind power for that matter), the investment required is fundamentally different from that involved in investing in mutual funds. People might have a degree of comfort when investing in mutual funds, or at least a trusted someone they can turn to for advice. However, a lack of similar knowledge and understanding about renewable energy technology will make the process of demand creation for renewable energies in Ontario very slow. Sure, the industry itself will invest in marketing, but corporate marketing is one of the least trusted sources of information out there. As a result, the task of informing and educating the public about the value of solar energy largely falls on Minister Smitherman, not only to ensure widespread public interest and investment in solar energy but to ensure that Ontario gets the new jobs it needs.