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Ontario pv market presentation see management team cb
1. Wir entwickeln Energie und Märkte
The Ontario PV Market:
Economics, Opportunities and Strategies
Christian Bogue
Monday February 7th, 2011
Hamburg, Germany
2. About Ontario
● One of ten provinces, largest by population with 13,167,894
inhabitants as of April 2010
● Home to:
● Toronto: provincial capital and most populous city
● Ottawa: national capital of Canada
● 80 MW Sarnia PV facility: powers 12,000+ homes
● Broken into Northern and Southern Ontario
● majority of population and arable land located in south
● Borders Minnesota, Michigan and New York states
● Toronto Pearson Int‟l Airport flys to Frankfurt and London
● ForEx: 1 EUR = 1.34 CAD (closely follows USD)
3. Ontario‘s energy mix - Mostly Nuclear & Hydro
● Nuclear
● 41% of generation in 2005
● 16 reactors in operation at 3 different sites: Pickering, Bruce and Darlington
● Total of 11,400 MW of generation capacity
● Gov‟t Policy: nuclear still has a role in energy generation through to 2025
● Hydro
● Ranked 2nd behind China in hydroelectricity generation
● Most major hydropower sites in Ontario already exploited
● 2000 sites still remaining in northern Ontario that may be utilized to
generate electricity in the future.
● The OPA is still completing feasibility and implementation studies for
many of these sites.
● currently accounts for approximately 21% of generation
● estimated to rise to 30% by 2025
5. Electricity Prices in Ontario
● Regulated by the
Independent Electricity
System Operator (IESO)
● Half of all users in the
province pay wholesale
prices
● Lower use consumers
(homeowners/small
businesses) pay regulated
rates
● Four different price
structures available →
7. Green Energy and Economy Act of 2009 – Key Points
● Passed into law on May 14, 2009
● Feed in Tariffs for renewable energy sources
● Systems sizes less than 10kWp considered “”MicroFit” and receive:
● Standardized regulations
● simpler application procedure
● faster turn-around time
● 20 year payment from Ontario Power Authority (OPA)
● providing small generators with protection against changes in
government policies
● “Local Content Clause” for materials and labor
8. Additional Renewable Energy Support Programs
● Aboriginal Energy Partnerships Program
● provides funding for many of the key developmental stages of First
Nations and Métis projects.
● Community Energy Partnerships Program
● provides funding to assist community groups with the developmental costs
associated with renewable energy projects.
● Aboriginal Loan Guarantee Program
● Worth $250 million, run by the Ontario Financing Authority, supports
Aboriginal participation in new renewable green energy infrastructure such
as wind, solar and hydroelectric.
● Municipal Renewable Energy Program
● The Municipal Renewable Energy Program will provide support to
municipalities for extra costs associated with new renewable energy
projects.
9. About the Ontario Power Authority (OPA)
● Independent, non-profit corporation
● Established through the Electricity Restructuring Act of 2004.
● Licensed by the Ontario Energy Board
● Sets electricity rates, enforces rules, and protects consumers
● Reports to the Ontario legislature through Ontario's Ministry of Energy
● The OPA is responsible for:
● Assessing the long-term adequacy of electricity resources
● Forecasting future demand and the potential for renewable energy
● Preparing an integrated system plan for conservation, generation,
transmission
● Procuring new supply, transmission and demand management either
by competition or by contract, when necessary
● Achieving government targets for conservation and renewable energy
12. Local Content Clause I
● Intentions, Perceptions and Accusations
● Intended as job-creation policy
● Seen as Canadian protectionism
● Charged by the Japanese of infringing WTO rules
● 60% total requirement
● Applicable to all components
● Includes design, labor and other services
● Can be broken down by element (see next slide)
● Few major producers have finished production lines in place
● Current suppliers of SunEnergy active in Ontario are restricted to:
● Samsung
● Schletter
● SMA
13. Local Content Clause II
Material Designated Activity Qualifying
Percentage
Silicon manufactured in an Ontario refinery 11%
Ingots /Wafers Cast in and wafers cut by an Ontario saw 13%
Cells Active PV layers formed in Ontario 11%
Modules electrical connection and encapsulation in Ontario 15%
Inverters Assembly, final wiring, testing 8%
Mounting Bending, welding, piercing, and bolding 11%
Wiring Wiring and elec. Hardware sourced locally 9%
Labor Construction and on-site labor 18%
Services Legal, technical and accounting work 4%
Total 100%
14. Present Market Size
● 168 MW installed in 2010*
● Less than California„s180 MW
● More than New Jersey„s 110 MW
● 2011 expected domestic supply of 386 MW
● 2011 demand forecast of 694 MW
● Result: Demand for Ontario-made modules will
exceed supply….
● …..and put upward pressure on prices in the local
market.
*DC installed power.
15. Current Market Segment Distribution
● 732 MW of solar FIT contracts approved since
October. Of this:
● 553 MW were utility scale projects.
● 169 MW were Capacity Allocation Exempt (CAE).
● Considered a close proxy for commercial rooftops
● ≤ 250 kW when connected to a line < 15 kilovolts
● ≤ 500 kW when connected to a line ≥15 kilovolts
● 10 MW were micro FIT projects.
● market is currently dominated by utility scale
projects--over 75% of executed solar FIT contracts
16. Predicted Market Segment Distribution
Transmission
Constraints in 2012
So:
Decreased approval
speed for utility scale
contracts
And
Commercial projects
don‟t connect to ON
transmission
system…
….They connect to
local distribution
networks w/o
capacity restraints
Thus
ON develops into a
largely commercial
rooftop market: 70%
of installation by
2015.
Market orientation
towards full building
envelope solutions.
17. Grid capacity and interconnection issues
● Lacking transmission capacity means FiT application enter a “reserve”
pool and await an ECT
● An Economic Connection Test (ECT)
● Occurs every 6 months
● Review application waiting in the pool
● decides if costs of grid upgrades for a project are justified based on:
● Already known, confirmed transmission upgrades
● other proposed generating facilities
● distribution system expansion plans
● While there is no official cap on projects…
the number of utility-scale (500kW +) projects that may now connect to
the grid has arguably reached a de facto cap for the immediate future.
18. Selecting the right market segment
● For developers flexible in their approach, opportunities can be found where
projects are:
● capacity allocation-exempt; (commercial roof-tops)
● microFIT; (systems of 10kWp or less)
● In close proximity to planned transmission expansion (see next point)
● Strategic project placement
● Examination of anticipated grid expansion plans
● Secure locations for potential projects close to major lines
● Example: Hydro One has announced a new 430 km, single circuit 230 kV
transmission line in north-western Ontario from Nipigon to the Pickle
Lake area. Projects on/near this line will see faster ECT approvals
19. Canadian building standards and the CAE market
● Building restrictions are important constraints in the
commercial rooftop market
● Neither building codes nor rooftops in Ontario were
designed with solar power in mind
● Rooftop size is a limiting factor and energy density/m2 is
desired
● Thus, two primary value drivers in this market are:
● low-weight equipment solutions that work well within
existing codes and structural limitations
● Technologies that maximize output
20. Ground Mount Projects: The Canada Land Inventory (CLI)
● Categorizes agricultural land into seven classes
● Maintained and managed by the Ontario Ministry of
Agriculture, Food and Rural Affairs (OMAFRA)
● Class 1 soils have the highest and Class 7 soils the
lowest capability to support agriculture
● Ontario Power Authority does not permit projects of
100 kWp or more on:
● CLI Class 1, 2 or 3 soils
● specialty crop areas
● Does not apply to First Nations reserve lands
21. CanSIA 2010 – December 6-7, Toronto, Canada
● 2 day annual trade fair for solar in Canada
● Organized by the Canadian Solar Industries
Association (CanSIA)
● Attended by Christian Bogue and Eike Dehning
● Planned “Gesprächstermin Programm” from the
German-Canadian Chamber of Commerce
● Individual appointments with potential suppliers,
developers, contractors, investors, banks, etc.
22. Results of CanSIA
● OpSun Panels
● Heliene Inc
● Photowatt Ontario
● Fronius Canada Ltd
● Satcon Technology Corporation
● SMA America LLC
● Schletter
● ASI Advanced Solar Investments
● Samco Machinery Ltd
● JCM Capital
● TD Canada
● Black and McDonald
● Dial One Wolfedale Electric Ltd
● Avacos Solar Energy Inc
● Solargy Solutions, Inc.
● Green Sun Rising
● Efan Green Inc
● Evergreen Power Solutions
● Horizon Energy Solutions
● CanACRE
● 9 suppliers
● 2 financing entities
● 2 project management firms
● 5 installers
● 1 service provider
Conclusion: We‟ve met a sufficient number of
qualified firms with whom we could work
together in developing the Ontario market.*
*A full evaluation of the value of these firms by both Messrs Bogue
and Dehning, including possible areas of cooperation are available in
full report form upon request.
23. Market Entry I: Positioned as pure EPC contractor
● Low risk, low yield: Sub-contract to Ontario-based developers
● Minimal amount of human and financial resources
● Not responsible for complete project financing
● No need for an equity stake in project
● Requires only a local, (possibly) externally sourced engineer
● No project sales rep needed
● Could yield high project revenues for large projects
● But….
● Slow time to market
● Shallow market penetration
● Engagement with limited number of firms
24. Market Entry II: Positioned as full project developer
● Higher risk, higher yield
● More resource intensive
● Sales rep, internal engineer, project manager
● Project financing
● Greater long term return
● Deeper market penetration
● Active project sales, rather than EPC inquiries from other
developers
● Total brand name recognition, not as sub-contractor
25. Market Entry III: Wholesaling
● Opportunity to serve the microFIT market
● Could build a retail “partner” network
● Entails warehousing costs (local content = not from HH)
● Component price fluctuations
● Insufficient understanding of core supply/demand drivers on
location
● Need to arrange new purchasing agreements w/ suppliers
Note: due to the youth of the market, a wholesaling option will only
work in a tight bandwidth – from suppliers with a floor on purchase
volumes that installers cannot reach.
26. Market Entry IV: SunEnergy does not enter the market
● Some things to consider:
● Attractive markets are not obligatory to enter
● Other promising markets will also emerge
● Internal capacities are the primary decision factor:
● Financial: operating budget, credit limit, etc.
● Personnel: additional overhead, controlling to SEE vs. SEA?
● Entry should be made with sufficient resources…
With the number of new firms moving into the market,
SunEnergy’s historical precedence of a small one or two man
team will perhaps yield sales, but will not be sufficient for
establishing a secure position in the market place.
27. From a seasoned professional
Dirk Morbitzer of Renewable Analytics in San Francisco and former Director of Global
Procurement at Trina Solar as well as S.A.G. Solarstrom, offered the following input
regarding the structure of a new market‟s team:
“the number of people depends on the market segment you go after. If you start a
subsidiary focused on selling modules you may be ok with 3 people: one in Business
Development, one in sales (hardcore) and one in technical support. But to really ramp
up revenues you want to hire additional sales people…up to 4 – 6 sales reps per
engineer. But you can not just hire sales people without local engineering / grid
connection knowledge.”
“If you want to go into the project market you need a minimum of 3 people, one in
Business Development / Sales, one Project Engineer and one Utility Connection
Engineer / Relationship Manager plus several outsourced functions – with legal
services being the most crucial and most expensive function.”
28. Recommendations (Next Steps)
● Management review of SEE 2011 business plan
● contributing factors include:
● Running operational costs of current business units
● SunEnergy Americas
● New office in Bologna?
● French market business plan?
● Project financing costs
● Simultaneous projects in DE, IT, UK, USA, ON….
● Reporting structure to Hamburg or Syracuse (SEA)
● Relative attractiveness of ON compared to other
markets