The Real Reason Behind Japan's WTO Challenge of Ontario's Green Energy Subsidy Local Contect Requirements

Ontario,Canada is the first state in North America to implement a comprehensive Feed in Tariff Program for Renewable Energy.This Subsidy Scheme has already attracted a lot of investor attention and dollars with a large amount of solar and wind capacity already in the works.Though the FIT program has faced some problems with change in FIT rates and criticism of its expense,it as largely proven to be a big success.The province has managed to attract a lot of manufacturing investment as well due to its local content requirements which requires around 50-60% locally produced parts.This has made Solar Module companies like Silfab and Canadian Solar to set up module plants while companeis like Enphase,Schneider and SMA are setting up inverter plants in the province.Note the local content requirements for Renewable Energy Equipment are nothing new with China implementing a 70% requirement in 2005 for Wind Turbines.However China could justify this on its developing country status while Ontario has little grounds for this mandate.However this is the first time that a Feed in Tariff Scheme is being challenged under World Trade Organisation which in principle is against any favoritism of local companies against foreign ones.

Japan starts WTO dispute with Canada on clean power – Reuters

Japan has initiated a trade dispute against Canada related to renewable energy equipment in the province of Ontario, the World Trade Organisation confirmed on Monday.

The Japanese mission to the WTO said the dispute centres on guaranteed long-term pricing for solar and wind generators made with a certain percentage of locally-produced components.The request for consultations by Tokyo is the first step in a WTO dispute. If the two sides do not reach an agreement on their own, a WTO panel would be set up to arbitrate the dispute in a process that could eventually lead to retaliation.

Why is Japan miffed over Ontario’s Green Subsidies

While Japan is a big player in the Solar Energy Manufacturing Market,there are other significant players like USA,China,Germany which have not protested against this discrimination.So why is Japan so miffed as to approach the WTO over this issue.One reason that i can readily think of is the Huge  $7 Billion Contract given to Samsung by the Ontario government.The agreement with Samsung gives it the subsidies to set up a huge solar and wind energy capacity in the province.The government will support the company through preferential grid access,subsidies and  land.This has given a huge boost to the Green Ambitions of Samsung which wants to become a big player in the Renewable Energy Area.Samsung as part of the deal will also set up a Wind Turbine Facility and Solar Manufacturing in Ontario.It has already tied up with Siemens to set up the Wind Turbine Plant.Note this Deal was not a Global Tender or anything like that.South Korea’s main competitor Japan has been on the losing end in UAE’s $20 Billion Nuclear Power Deal as well.This was another loss for Japan’s Conglomerates like Sharp,Mitsubishi,Kyocera and others who are big players in the Green Energy Arena.

Ontario’s green deal raises ire of energy developers – Globe and Mail

His government signed a $7-billion deal yesterday with a consortium led by South Korean industrial giant Samsung Group that will cost every electricity customer in the province an extra $1.60 a year on their bill for 25 years.However, the move raised the ire of energy developers and opposition members, who argued that Samsung is getting a sweetheart deal. Mr. McGuinty is luring the company to the province with financial incentives over and above the generous guaranteed revenue stream his government pays green-energy companies.

But the Samsung deal could make it difficult for other companies to enter the market, because the province has limited capacity to transmit electricity to consumers’ homes. Transmission power will be held in reserve to support Samsung’s projects.Samsung also will be paid the feed-in rate of 13.5 cents a kilowatt hour for the wind power it produces and 44.3 cents for its solar power. Electricity bills are climbing in Ontario, because these generous contracts with green power producers are well above the market price of 3.31 cents for electricity.