Ontario’s requirement for domestic content could create new risks for wind power developers

Ontario’s demand for domestic content may present new risks associated with insuring alternative energy sources such as wind power.
Panelists at the CleanTech in Canada Breakfast Seminar in Toronto speculated the province’s demand for domestic content might mean developers of clean technologies will face a potential supply chain risk.
That is, developers of wind power technologies will be more reliant on third parties to provide the domestic content they have been contracted to provide.
The CleanTech What’s New with Wind? seminar was held on May 12, and sponsored by Ogilvy Renault, Deloitte and the Toronto centre for innovation MaRS Discovery District.
Panelists frequently referred to Ontario’s new Green Energy Act, which includes a “domestic content” requirement.
The act calls on developers to ensure at least 25% cent of wind project costs and 50% of large solar project costs come from Ontario goods and labour.
Requirements for solar will increase on Jan. 1, 2011 and requirements for wind will increase on Jan. 1, 2012.
The requirement will make clean tech developers “reliant on third parties to do what they say they’re going to do, particularly the providers of wind turbines,” said panelist Thomas Schneider of Schneider Power Inc. “It’s not just the wind turbines, it’s obviously all of the services around it [i.e. blades, towers and assembly]…
“We acquire wind turbines based on the manufacturer reading those domestic content requirements.”   
This may mean obtaining signed agreements calling for financial compensation in the event that the legislation is breached, Schneider said.
Nicole Geneau of NextEra Energy Resources said the real issue is not being required to ensure domestic content, but rather the timelines in which to comply with the new act. “The issue is 2012,” she said. “To me, two years is a very short time frame, so that’s the struggle.”
In that time frame, developers will have to retrofit existing wind turbines (replacing some of their parts) to conform to the 25% domestic content rule.
Schneider said by the time he gains all of the proper assurances from manufacturers about the content rules, the earliest he would be able to build a new wind turbine would be 2011 Q4.
Timing of delivery, therefore, is very important, Schneider said. Delays would be an important risk exposure for companies developing wind power technologies.