Ontario bolsters green support as Europe backs off

A wind turbine feeds renewable electricity into the Ontario grid at the CNE grounds in Toronto February 18, 2007. Picture taken February 18, 2007.

VANCOUVER (Reuters) - The Canadian province of Ontario is becoming a magnet for global heavy hitters in the green energy sector, drawn by alluring subsidies at a time when incentives are being scaled back elsewhere.

Already this year, two prominent players -- South Korea's Samsung C&T Corp and Bosch Solar Energy AG -- have said they will set up shop, and more are expected to follow.

Provincial government support is attractive, but so is the prospect of manufacturing on the doorstep of the United States, Canada's neighbor and one of the fastest growing markets for producers of power from the sun, wind, and biomass.

"People are looking at the North American market as the next growth area," said Mehdi Hosseini, an analyst at FBR Capital Markets in San Francisco.

"In coming to Ontario and setting up manufacturing, the hope is to use that manufacturing and tap into the U.S. market. They will benefit from the Ontario market in the near future and long term...the U.S. market," he told Reuters.

While initially lagging Europe, where green energy sectors have flourished on government support, the United States is now the world's biggest generator of wind energy and is expected to leapfrog Germany, the leader in solar power, in a few years.

Ontario, which is phasing out its coal-fired power stations and looking for cleaner energy options, last October unveiled the richest set of tariffs in North America for feeding power generated by renewable sources into the grid.

The tariffs, which are above-market prices utilities are obliged to pay to clean power producers, were unveiled just as governments across Europe, including Germany, Italy and France, are trimming their support.

"I'm sure any major player in the clean energy space is looking at Ontario, now that they've put the sign out that they're open for business and willing to have attractive incentives," said Rob Mark, an energy analyst at investment firm MacDougall, MacDougall & MacTier.

"That Samsung contract is the early jewel in their crown."

South Korea's Samsung C&T Corp in January announced a C$7 billion ($6.9 billion) investment plan to build four wind and solar power generating clusters in Ontario, as well as four manufacturing plants to make the equipment needed for them.

The project, which will take about six years, will almost triple Ontario's installed wind power capacity of about 1,200 megawatts and boost its solar capacity ten-fold from 50 MW.

Last week Bosch Solar Energy, a unit of German engineering giant Robert Bosch, announced plans to tie up with small Canadian company Sustainable Energy Technologies, to build thin-film solar panels with inverters in Ontario.

Ontario, Canada's most populous province, "is very small at the moment, but growing very quickly, with great potential as well. It has loads of open space and good feed-in tariffs, which make developing more attractive," said Charlie Richardson, an underwriter at London-based GCube, an insurer of renewable energy projects globally.

To encourage companies to sink roots in Ontario and create jobs, the province's green energy rules require that a certain percentage of developers' project costs come from locally sourced goods and labor.

After a retrenchment by the once-flourishing auto sector, Ontario has a competitive advantage for green manufacturing with many empty plants and an experienced labor pool looking for work, MacDougall's Mark said.

Vestas, the world's biggest wind turbine maker, could be next to open its doors in Ontario. Company officials recently were scouting the province for prospective manufacturing sites, according to the Toronto Star, which quoted unnamed industry sources. Vestas declined to comment when contacted by Reuters.

Canada's Trillium Power Corp last month chose Vestas as its preferred turbine supplier for four large offshore wind projects it is developing in the Great Lakes region.

FPL Group Inc'S NextEra Energy Resources unit, the biggest wind energy generator in the United States, is also reportedly looking at investing in Ontario.

($1 = $1.03 Canadian)

(Additional reporting by Susan Taylor in Ottawa and John Acher in Copenhagen)