Ontario's green energy rate cut rattles industry

* Province proposes 27 pct cut on small solar operations

* Industry worries about similar cuts to bigger program

By Nicole Mordant

VANCOUVER, British Columbia, July 14 (Reuters) - Ontario's showcase green energy program is coming under fire after the Canadian province unexpectedly said it plans to slash the rates it will pay owners of some small solar energy systems.

The proposed rate cut, coming nine months after the launch of the microFIT program, could undermine confidence in the province's much-larger FIT (feed-in tariff) program for big producers of energy from sources like the sun and wind, analysts said on Wednesday.

"While the concept of a tariff decline is in lock-step with other FIT programs such as those in Spain and Germany, the depth of the cut, the speed with which it was enacted, and the lack of transparency in the decision has several stakeholders casting doubt on the future of the Ontario FIT program," said Dundee Capital Markets analyst Ian Tharp.

Last October, Ontario launched the richest incentives in North America for producers of electricity from renewable energy as Canada's most populous province tries to create jobs and eliminate the use of dirty, coal-fired generators.

Big foreign names like South Korea's Samsung C&T Corp (000830.KS) and Bosch Solar Energy AG BSLRF.PK have been lured to set up shop by the rich, 20-year contracts the province is handing out.

The Ontario Power Authority is now asking the industry for comments on its proposal to cut the rate it pays homeowners, farmers and small businesses for electricity they produce from ground-mounted solar systems by 27 percent to 58.8 Canadian cents per kilowatt hour.

"It paints the whole program negatively. It creates uncertainty in the minds of consumers," said Andrew McCormack, business development manager at Solsmart Energy Solutions, a small Toronto-based rooftop solar system installer.

The rate reduction will only apply to new contracts, not existing ones. Rates for rooftop solar projects smaller than 10 kilowatts remain unchanged at 80.2 Canadian cents per kWh.

The power authority said the rate cut is necessary, partly because of the popularity of the program, which is funded with public money. Since the microFIT scheme's launch, the power utility has received 16,000 applications, 10,000 for ground-mounted solar projects.

The proposed cut has positive aspects for the industry as it indicates that the power authority will not make changes on contracts that have already been awarded, said Jacobs Securities analyst Khurram Malik.

Shares of Spanish renewable energy companies have fallen in recent months on media reports the government may cut lucrative subsidies not just for future plants but for existing ones with set tariffs for 25 years of operation.

Malik also does not believe Ontario will make sudden changes to its more important FIT program.

"The bigger program is about job creation. There may be tweaks in there ... but nothing significant in our opinion until 2012 kicks in," he said, referring to a date the power authority has publicly revealed for reviewing the program.

($1=$1.03 Canadian) (Editing by Frank McGurty and Rob Wilson)