Solar in the Great White North

November 22, 2015, was a day that will forever change Canada’s energy sector. In Alberta, newly elected Premier Rachel Notley of the center-left New Democratic Party (NDP) announced that the province would entirely phase out coal-fired generation and move to 30% renewable energy in its electricity supply by 2030.
The very next day a similar announcement was made in Saskatchewan. SaskPower, the province’s state-run utility, declared that it would double the share of renewable energy in its power mix to 50% by 2030. This announcement was made under the leadership of the center-right Saskatchewan Party.
These are major developments for Canada, and particularly for its solar industry. The large majority of solar put online to date is located in only one province, Ontario. Furthermore, the Ontario Power Authority has reduced its plans for solar deployment in recent years, and the near-term future in that province is not promising.
The new mandates in Alberta and Saskatchewan coupled with a slowdown in Ontario make for interesting times for the nation’s solar industry, with more questions than answers about the future.

Breakthrough in Alberta

What happened in Alberta was a shock to many. The province’s economy is dominated by oil and gas, including the carbon-intensive extraction of tar sands in the north. And as conservative parties had dominated Alberta’s political leadership for 80 years, the election of Notley’s NDP was a complete upset.
However, the election of the climate-conscious NDP was not the only factor.In the run-up to the 21^st Conference of the Parties (COP21) in Paris, a number of cities, provinces, states and nations made ambitious plans to reduce carbon emissions and scale up renewable energy.
It is also important to note the internal dynamics of Alberta’s energy sector. While there are coal mines in Alberta, the big industry in the province is oil and gas, not coal. Despite its environmental stance, the NDP has supported the oil industry by backing pipeline projects, and as petroleum is still used primarily for transportation in North America, wind and solar do not represent a near-term threat to the province’s main industry. Instead, renewable energy merely allows Alberta to expand into another field of energy production.
Alberta’s program will be based on a renewable portfolio standard (RPS) for large-scale renewable energy, and the Canadian Solar Industries Association (CanSIA) expects the implementation of a renewable energy credit system, such as is used in many U.S. RPS policies at the state level. The organization also anticipates a “carve-out” for solar, which means a mandate for solar PV to supply a certain portion of total renewable electricity. Canadian Solar Solution’s General Manager of the Canada Region Ken Rowbotham notes that critical details of Alberta’s policies for utility-scale renewables have not yet been determined. “It is a very efficient merchant market,” he noted. “They don’t want to interrupt that, and it’s going to be hard to, so there isn’t policy laid out as to how they are going to get there. The next six to nine months will determine that direction for us.” At the time of writing the province had also not yet finalized a policy for distributed generation. However, CanSIA has been working closely with the government and has proposed the use of a standard offer, a proposal that it expects the government to implement. The organization predicts that Alberta’s small-scale renewable energy program will be in place and procurement will begin this year.

Saskatchewan moves in

Perhaps more surprising than the Alberta NDP’s new renewable energy policy was a move a day later in Saskatchewan. SaskPower, the province’s public utility, announced that it would double the share of renewable energy in its electricity supply to reach 50% by 2030.
While there was no mention of the then-upcoming COP21 meeting in a press statement by SaskPower, it did mention a goal of replacing coal-fired generation “in light of existing and emerging xAdvertisement
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greenhouse gas regulations”. Either way, the new policy in Saskatchewan demonstrates that in Canada conservatives are also interested in renewables. Like Alberta, this does not come at a cost to local industry, as the province is an oil and gas producer and has even fewer coal mines than its neighbor.
In Saskatchewan the program will involve 10 new large-scale renewable energy procurements by SaskPower, under which the utility will also select the sites for development. The first of these competitive solicitations will begin this year, and while SaskPower says that these will involve at least 60 MW of solar, PV will be competing on price with wind power in the larger program.
Canadian Solar’s Rowbotham said that he expected these solicitations to be “pretty straightforward and very competitive.” They are also expected to involve indigenous Canadians through the First Nations Power Authority.
For distributed renewables, Saskatchewan is reviewing its current net metering policies under a new consultation.

Growing a market

These two policies will undoubtedly build substantial solar markets over time, which have not yet existed in Canada outside the province of Ontario. However, even with specific commitments to increasing the share of renewable energy, it is not clear how large these markets will be.
The level of deployment of wind and solar in both provinces will be tied to the phase-out of coal-fired generation. “There is no incremental new demand right now, it is a flat electricity demand in the province of Alberta,” noted CanSIA President John Gorman. “What we will be looking at here closely is what the coal phase-out schedule will be.” Additionally, solar will be competing with wind for the share of renewables deployed, and wind is expected to have an upper hand in both Alberta and Saskatchewan. “The initial comments from both provinces seemed to have a slant towards, or a bias towards wind, as it is less expensive,” Rowbotham explained. “However, they do generate at different times.” CanSIA is optimistic that price discovery will reveal competitive prices for solar, noting that Alberta and Saskatchewan have the best solar resource in Canada.
By 2030, CanSIA expects to see 4 – 6 GW of solar procured in Alberta, including 4 GW of utility-scale solar and 2 GW of distributed generation. The organization says that for Saskatchewan, forecasts are harder to make, but it notes that SaskPower will be procuring 60 – 100 MW “over the short term,” with the first procurement expected before the end of 2016.
“Longer term, it is going to depend very much on solar’s competitiveness with wind, and the ability of solar to complement wind in replacing coal,” noted CanSIA’s Gorman. Canadian Solar provided pv magazine with a more near-term forecast for the broader market. “Over the next five years we are hopefully looking about a GW in Alberta, and 200 – 300 MW in Saskatchewan,” said Canadian Solar’s Rowbotham.

Ontario moves away from solar

The policy news from Alberta and Saskatchewan is welcomed by the Canadian solar industry, but it is also needed. The overwhelming majority of solar deployed in Canada to date is located in Ontario, and after serving as the cradle of the Canadian solar industry, that province’s commitment to solar is winding down.
Ontario implemented a system of European-style feed-in tariffs through the Green Energy Act, which passed in 2009. For the first few years the price paid for solar PV was high, and deployment boomed. According to statistics by the International Renewable Energy Agency (IRENA), the Canadian solar market roughly doubled each year through 2011. In 2009, Canada installed a mere 65 MW of solar PV capacity, followed by 126 MW in 2010 and 276 MW in 2011. The large majority of this share was installed in Ontario.
Growth was more muted for the next two years; however, by 2013 Canada had reached 1.2 GW of installed solar PV. In May 2013 the ruling Liberal Party scrapped the feed-in tariff for projects above 500 kW, introducing a capped bidding program for larger systems, as part of an overhaul to bring the program in line with World Trade Organization (WTO) rulings that forbade domestic content requirements.
Ontario’s solar market has continued to grow nonetheless, and by the third quarter of 2015 the province had exceeded 2 GW of cumulative installed PV capacity. Another 867 MW is under contract through the MicroFIT feed-in tariff and auction systems.
Of this 867 MW, 280 MW has been procured through auctions under the Large Renewable Program (LRP). Canadian Solar notes that the latest 140 MW auction was twelve-and-a-half times over-subscribed, with “very competitive” pricing. “There will be so many viable projects, I don’t know how they are going to select the winners,” said Rowbotham.

Looking to the future

Similar to Germany, renewable energy has come under fire in Alberta for the high prices paid under the early years of the feed-in tariff. In both nations, there is an irony that political pressure on the program is coming at a time when both the cost of solar and feed-in tariff rates are much lower than when these costs were incurred.
CanSIA notes that the decrease in pricing is leading Ontario’s feed-in tariff rates towards retail electricity prices. “What is happening here in Ontario is a march towards a net metering market,” explained CanSIA’s Gorman. “And one that is very structured.” “Whether that is three years or four years or five years we will have to see as we go towards price discovery. And there are consultations going on with the industry and the systems operator in terms of defining what that net metering will be, and what that looks like, and what role everybody will play.” In terms of large-scale solar, Ontario has put the brakes on procurement. “It went from us building 200 – 300 MW a year, to us building nothing in 2016 and 2017 in Ontario, but that was the same across the entire market,” Rowbotham noted. “They just stopped offering new capacity.” Rowbotham and others see opportunity for utility-scale solar in the future retirement of nuclear power plants in Ontario, but this is still years off. As such, the new renewable energy mandates in Alberta and Saskatchewan gives Canada’s solar industry the opportunity to find greener pastures, even if the overall market volume is unclear.
Canada’s seven other provinces all have net metering policies. And while market volumes to date have been limited, there may be new opportunities due to both falling costs for solar and policy support.
“The fact that we are seeing the adoption of carbon pricing regimes across most of the major provinces in Canada is going to have an accelerating impact on the adoption of solar,” said CanSIA’s Gorman. “I believe that we are soon going to see a federal support mechanism, whether that it is an ITC or some other program.” The form of any federal solar policy is only one of the many questions that remain as Canada’s solar industry enters this new phase. What is clear is that the strong commitment to shuttering coal-fired generation in Alberta and Saskatchewan has created new opportunities that could lead to the spread of solar across Canada. “There is no turning back now,” Rowbotham added. “The change has to happen.” CanSIA cites a number of trends for its optimism. “I really see this as a tipping point,” said Gorman. “It really has to do with Ontario having started a program, and now the other provinces feeling confident there, it has to do with the carbon pricing coming in, it has to do with Canada’s new federal government and its commitments to being more active on the renewables side. We are seeing the results of that now, with these very aggressive commitments to phase out coal and to bring in renewables in Alberta and Saskatchewan, and the likelihood of a federal program. There is a very significant amount of momentum around solar here.” xAdvertisement