By Ken Neumann
Detractors of renewable energy will no doubt hold up this week's World Trade Organization decision as evidence that Ontario's Green Energy and Economy Act is a failure. But the opposite is true. Japan's challenge is a clear sign of the act's success.
The WTO has ruled in favour of a challenge to the made-in-Ontario clause of the Green Energy Act, which requires wind and solar farms to use a large percentage of in-province parts and labour in order to receive preferential rates.
Japan's claim, which was backed by the EU, was that these requirements discriminate against foreign firms and therefore contravene the General Agreement on Tariffs and Trade. Ontario's position, supported by the Canadian government, is that energy is considered government procurement and therefore exempt from these international agreements.
Importantly, the issue was not whether domestic content requirements give an advantage to local companies. The content provisions were drafted with the express purpose of creating thousands of local jobs, seeding a whole new industry and giving a much-needed boost to the province's ailing manufacturing sector.
And although the Green Energy Act is not perfect, it has largely succeeded in this. An estimated 20,000 jobs have already been created in Ontario, and more will come. Billions of dollars have been invested in the province, and more than 30 manufacturers are now working here on the solar side alone.
It is this success that prompted Japan's challenge. What the EU and Japan understand is that renewable energy is the growth industry of our times. The world's energy systems are undergoing a profound transformation away from fossil fuels toward renewable energy. To be sure, we're not talking about flipping a switch overnight, but the larger trends are unmistakable: demand for fossil fuels is waning while demand for renewables is rising.
Japan and the EU challenged Ontario's legislation because they recognize that by giving local companies a break, we have also given those companies a leg up in this burgeoning global market.
Last year, the global renewable energy market topped $280 billion and it is growing at breakneck speed. Global investment in solar power grew by 52 per cent in 2011, not exactly the picture of a "floundering" or "scaled-back" sector often painted by its opponents. Think solar is overpriced and uncompetitive? Tell that to investment guru Warren Buffett, who recently sold $850 million (U.S.) in bonds to finance the $2.4-billion Topaz Solar Farm in California.
According to one of the most respected energy forecasters, the Paris-based International Energy Agency, renewables have already become an "indispensable part of the global energy mix."
Over the coming decades, there will be a pronounced shift away from oil and coal toward low-carbon sources like renewable energy, the IEA says. According to its projections, renewables will "approach coal as the primary source of global electricity" by 2035.
Why? Climate change is a major driver. Again according to the IEA, less than one-third of the proven fossil fuel reserves can be burned by 2050 if we hope to limit global warming to 2 degrees, the widely agreed target.
It's not just environmental concerns that are prompting this investment in renewables. Cost is another major driver.
According to consultants Ernst & Young, residential solar is already cost-competitive in countries like Denmark, Italy and Spain. And that's expected to be the case pretty much everywhere else within 10 years. Meanwhile, wind power is leaving nuclear in the dust and is strongly competitive with cheap natural gas - even without factoring in greenhouse gas emission costs.
Far from tilting at windmills, Ontario has chosen the right path with its feed-in tariff program. More than 80 countries use or have used a feed-in tariff to support green energy. In fact, Japan, the very country behind the WTO challenge, just approved a feed-in tariff a few months back.
Thanks to the Green Energy Act, Ontario is in a leadership position. We have had a four-year head start in establishing a North American renewable energy industry. It would be folly to give up this lead. And it would be a mistake for the federal government to do anything but appeal the WTO's ruling.
National Director for Canada, United Steelworkers
Board member, Blue Green Canada