Companies cry foul over Samsung deal

Under the $7-billion agreement with Samsung and Korea Electric Power Corp., the Ontario government will pay $437-million in incentives if the consortium completes four manufacturing plants in the province. These plants will make wind-turbine towers and blades, and solar inverters and modules.

In addition, Samsung's planned 2,500 megawatts of wind and solar power projects will get the same high electricity rates the province is paying to anyone who generates solar or wind power under Ontario's "feed-in-tariff" program in its Green Energy Act.

Many developers and manufacturers with plans to expand in Ontario expressed shock and surprise that Samsung is receiving hundreds of millions of dollars in extra incentives they can't get.

While the provincial government has said it wants to build a domestic green-energy industry, this private deal with a foreign entity has raised concerns among Canadian firms who expected a level playing field.

"It basically gives an unfair competitive advantage to Samsung because they have decided to be both a manufacturer and a developer, where as other manufacturers who are looking at Ontario and planning on making substantial investments and creating jobs... won't get the same benefits," said Kerry Adler, chief executive officer of solar farm developer SkyPower Corp.

The deal appears to discriminate against existing players such as SkyPower, Mr. Adler said. "We intend to buy [solar] panels from Canadian manufacturers, so shouldn't [we] also be receiving some form of economic [bonus] if we buy from Ontario? What's the difference? The only difference is that Samsung is doing both, when there is a whole community of manufacturers who just manufacture and a whole community of developers who just develop."

One Canadian firm that is considering setting up shop in Ontario is Bromont-Que.-based wind-turbine manufacturer AAER Inc. Chief financial officer Eric Phaneuf said he was surprised by the way Ontario's private deal with Samsung was negotiated, and suggested it isn't consistent with the "openness and transparency" of the program in place for other players.

Michael Carten, executive chairman of Calgary-based solar inverter maker Sustainable Energy Technologies Ltd., said he too is puzzled by the huge incentive being offered only to Samsung.

The Korean company is unlikely to be conducting any research and development in Canada, Mr. Carten said, so it may contribute less to the province's economic development than some local players who aren't getting an extra subsidy. "It mystifies me why it is a one-off deal."

Last October, his company announced it will build inverters for the North American market in Ontario, partly because it expects a surge in demand due to the local content requirements in the province's feed-in-tariff program. Now, Mr. Carten said he intends to write to provincial official to ask for the same kind of financial incentives Samsung is getting. "I would hope that the province would say to[us]: 'Yeah, you too.'"

Mr. Carten, like many other green-energy players, is also concerned Ontario is giving the Samsung group priority access to the electrical transmission grid in the province.

Limited capacity in the grid is a bottleneck slowing some renewable energy projects. "I'm not sure I go along with carving up access to the grid when there is not enough access to go around," Mr. Carten said. "I don't know how you explain this to other guys."

Tim Stephure, an analyst at Emerging Energy Research in Cambridge, Mass., said the Samsung deal appears to encourage companies to negotiate individual deals with the Ontario government, rather than play by the transparent rules set out in the Green Energy Act.

"[The Samsung deal] might provide the industry with a bit of a sugar high in the near term, but it doesn't provide a lot of confidence in the province... to administer the program it designed," he said.

Mr. Stephure also questioned Ontario's ability to compete with incentives put in place by the Obama administration to encourage green jobs in the United States. Those programs are more transparent and even-handed, he said, and actually add up to higher subsidies than what is being given to Samsung.