Generous green-energy subsidies on the chopping block

TORONTO—Ontario’s new energy minister is set to make his first move, reducing the generous premiums the province pays for wind and solar power after a review of the province’s feed-in-tariff program.

In 2009, the Liberal government decided to offer lucrative rates for renewable energy projects to help it develop a new, green economy, but it also put an automatic two-year review in place.

Other countries took similar action after getting their green energy projects off the ground and then lowered their feed-in-tariff rates, said Chris Bentley, the Liberal’s newly minted energy minister.

“When you look around the world, when they’ve done their reviews the FIT rates have come down,” he said. “That’s part of a natural progression, and I know (we’ll) be looking at rate reductions here.”

In the U.K., its government has cut subsidies for solar power by half—from $0.68 per kilowatt hour to $0.21—suggesting the big reduction isn’t surprising because of the industry’s falling costs and their big rate of return.

Ontario pays up to $0.80 per kilowatt hour for power from small solar projects—about half that for wind power—while electricity consumers pay between $0.05 and $0.10 per kilowatt hour.

Bentley suggests the province’s solar sector also knew those premium rates would drop after the first two years.

“We had the start-up phase for the FIT applications, now we want to take a look and see how we can improve it,” he said. “One of the things we want out of the review is to be able to build this clean, green economy. We want it at the right price so it’s sustainable over the long term.”

The New Democrats said they were interested in the outcome of the feed-in-tariff review, but have attacked the Liberals for shutting government-owned Ontario Power Generation out of the green-energy program.

“I’ve made no secret about my disappointment with the fact that they’ve gone completely private and that private power deals are ones that are far more expensive,” said NDP leader Andrea Horwath. “I think there are some major mistakes that have been made by the government when it comes to renewable power and the pricing may be one of them, but certainly the sourcing is a big one where I come from.”

During the fall provincial election, Progressive Conservative Leader Tim Hudak called the subsidies for wind and solar power “unsustainable” and vowed to scrap the Liberals’ energy program.

As in other countries, the premiums led to far more interest in Ontario’s feed-in-tariff program than expected, landing the province contracts for 4,500 megawatts of renewable energy.

But that has led to complaints from some producers that it’s taking too long to get everyone feeding to the power grid.

The review of the feed-in-tariff program will report back early next year after hearing from the public and industry players, looking at the prices paid by consumers, already scheduled to jump 46 per cent over five years as the province rebuilds its aging power system.

“Rates and price are both things I’m very interested in taking a look at,” said Bentley. “I want to take a look at that and make sure that we not only have a reliable system but our ratepayers are taken account of as well.”

The Liberals say more than 30 businesses are setting up or expanding plants in Ontario to manufacture parts for solar and wind power projects.

A Statistics Canada (StatsCan) report may also help Bentley’s case after the agency suggested a surging energy sector drove real gross domestic product up 0.3 per cent in August.

StatsCan says GDP would’ve been unchanged if not for a 2.8 per cent increase in the energy sector.