Ontario slashes Samsung RE deal

The Canadian province of Ontario has taken an axe to its massive renewables deal with Samsung, in a move that will see the Korean industrial heavyweight build significantly less wind and solar capacity there than originally planned.

In 2010, following the launch of Ontario’s Green Energy Act the previous year, Samsung revealed a blockbuster deal with the provincial government to build 2.5GW of wind and solar capacity in the province – as well as four manufacturing sites to comply with Ontario’s erstwhile domestic-content rules.

In exchange, Ontario pledged to spend C$9.7bn ($9.35bn) buying electricity from Samsung’s projects at generously subsidised rates.

In 2011 the terms of the deal were altered modestly. But yesterday Ontario’s energy minister, Bob Chiarelli, said the government had decided to seize the opportunity presented by slippages in Samsung’s build-out programme to renegotiate the entire package.

Samsung will now build 1.37GW of renewables capacity in Ontario – less than 55% of the original target – with the province on the hook to spend $C6bn buying clean electricity from it.

A Samsung spokesman in Seoul tells Recharge: "The current provincial economic challenges, the complex regulatory process and our vital work to engage our communities have impacted our original timelines. 

"Understanding these realities, we worked with the government to create a solution that allows us to deliver 1,369MW within realistic timelines.

"We strongly believe in the renewable energy sector in Ontario and wanted to be part of creating a realistic path forward."

The renegotiated terms do not appear to have affected Samsung’s plans for manufacturing capacity in the province. Three plants, in Toronto, Tilsonburg and Windsor, are already on line, with a fourth – in London, Ontario – due for completion by the end of the year.

In addition to hitting Samsung, the diminished size of its build-out programme could also affect its suppliers, a group that includes companies such as Siemens on the wind side and Canadian Solar on the PV side – both of which established manufacturing capacity in Ontario to comply with the domestic-content rules.

Earlier this year those rules were slapped down by the World Trade Organization.

The coalition government in Ontario, which in February saw Kathleen Wynne replace fellow Liberal Dalton McGuinty as premier after his nearly decade-long grip on power, appears to have finally bent to pressure regarding rising electricity bills in the province.

“One of my top priorities has been to look for ways to bend the cost curve [down] for ratepayers,” says Chiarelli, a Wynne appointment. “This was the single most significant step our province could take to do just that.”

The move may also be seen as a response to a backlash against wind turbines in some rural parts of Ontario, thought to have cost the Liberals some seats in the 2011 election. Opposition parties have long criticised the arrangement with Samsung as a “sweetheart deal”.

While Samsung may not have stuck to its original timescale, it continues to invest heavily in the state’s renewables portfolio.

Earlier this year it kicked off construction at the 270MW South Kent wind farm near Windsor – set to use 124 Siemens turbines – and it recently hired Canadian Solar to kit out and build a 130MW PV park.