The jury’s still out as to whether or not our magazine’s vision is too utopian, but recent evidence suggests that both corporate and political culture is moving closer to our worldview. Former U.S. Treasury Secretary Larry Summers, a past enthusiast of banking deregulation, gave a speech in April extolling the virtues of inclusive capitalism in a speech titled “The fierce urgency of fixing economic inequality worldwide.”

A recent book by John Taft, the chief executive officer of RBC Wealth Management, billed itself as “an effort to pick [the brains of experts] at a time when many of the quasi-axiomatic assumptions underlying modern capitalism are being called into question.” It featured essays on “fiduciary capitalism,” “sustainable capitalism” and “regenerative capitalism,” but more than anything it showed that business as usual isn’t going to cut it for much longer.

Clever buzzwords aside, Taft’s book is emblematic of a corporate culture within Canada that is struggling to adapt to a rapidly-changing series of facts on the ground. Fears about income inequality and wage stagnation are sure to be front-and-centre in the upcoming federal election, and have begun to affect the public’s perception of the business community as a whole.

Mounting concern about climate change has fanned the flames of a growing fossil-fuel divestment movement, while an empowered civil society has successfully delayed efforts to build oil pipeline infrastructure. Faced with federal inaction on the climate change file, a number of provinces have started to move unilaterally on carbon pricing, effectively bypassing Ottawa.

Yet many members of the business community have also been acting as catalysts for change both within their respective industries and the country at large. While the Canadian business community should continue to face scrutiny and pressure to reform, one should look no further than the companies on this year’s Best 50 Corporate Citizens for the kind of leadership we need.

A number of these companies were signatories to a letter, crafted by the Council for Clean Capitalism, which strongly backs the Ontario Government’s plan to put a price on carbon. Others that didn’t sign still offered constructive feedback during the province’s consultation process. Some of the largest oil-sands producers have even adopted a “shadow” carbon price in anticipation of future regulatory action.

The top company on the Best 50 list this year is Tim Hortons, which completed a $12.5-billion merger with Burger King in December. “Tim Hortons finished first this year due to a strong tax payment score over the past five years and impressive resource efficiency performance,” explained Michael Yow, director of research at Corporate Knights Capital, our sister research division (see Tim Hortons Best 50 profile here).

Vancity and Mountain Equipment Co-op finished second and third respectively, continuing a tradition of strong disclosure practices and diversity in the workplace. Teck Resources, in fourth place, was the top company in the metals and mining industry, while telecom giant Telus rounded out the top five.

Despite the majority of indicators demonstrating limited year-over-year change, several notable data points did emerge. One of these involved compensation and Canada’s Big Five banks. Although the banks may stand out as having some of the highest CEO-to-average-worker-pay gaps on the 2015 list, the gap actually narrowed this year – to 106:1 from an average ratio of 112:1 in 2014.

Faced with pressure from activist investors and an increasingly skeptical public, the Big Five are taking steps that should reduce this ratio even further in the future. A study released by the consultancy McDowall Associates in April found that executive compensation packages for the four incoming Big Five chief executives were down 13 to 33 per cent compared to their predecessors. Targeted total direct compensation was down between 11 and 25 per cent.

Another area of improvement for Best 50 companies is diversity in the c-suite. The percentage of women on boards of directors rose to 23 per cent from 20 per cent, while the percentage of women in senior management increased to 24 per cent from 22 per cent. While far from the 50 per-cent-plus threshold reached by diversity leader Vancity, it nonetheless represents significant improvement. Consider, for example, that as recently as 2011 female representation on Best 50 boards stood, on average, at 17 per cent.

A decade ago, the call for this kind of progress was more easily dismissed as “unreasonable expectations” of what a company can and should do. Today? It’s looking increasingly like mainstream thinking within the business community.

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The coffee chain tops Corporate Knights’ 2015 ranking of Canada’s 50 Best Corporate Citizens. It owes its No. 1 spot less to a stand-out performance in any of the 12 categories used to compile the overall ranking, than to solid marks virtually across the board, from waste recycling to use of water and energy.

“They are a good all-rounder,” says Michael Yow, research director at Corporate Knights Capital, the magazine’s sister company. “They don’t excel, but they do well on almost all indicators.” Tim Hortons ranked fourth last year.

Carol Patterson, senior director for sustainability and stakeholder relations at the Oakville, Ont.-based company, has no qualms confirming that assessment. “It really is a long journey and taking small steps towards a big goal, and being very transparent about that,” Patterson says.

In one example of its tortoise-beats-hare approach, the Canadian coffee and doughnut icon – known affectionately to many as “Tim’s” or “Timmy’s” – scored 67.5 per cent for its waste re-use and recycling practices. That’s above average, but well behind some other companies with lower overall scores, such as Husky Energy and Telus.

It’s important to note that the method used to compile the rankings measures a company’s performance in each category only against others in the same sector.

Thus, Tim Hortons’ scores reflect its achievements against rivals such as Second Cup, rather than against Vancouver City Savings Credit Union, also known as Vancity, or Mountain Equipment Co-op, which overall placed second and third, respectively.

“Tim Hortons does perform relatively well when compared to most other restaurants, including McDonald’s, Yum! Brands, Chipotle Mexican Grill and the Wendy’s Company,” says Sarah Cohn, director of marketing at Sustainalytics, a responsible investment research firm.

All but one of the 12 categories that make up the rankings are based on specific numbers disclosed to investors, usually in companies’ annual sustainability reports.

The exception is the “paylink” category – that is, whether executive pay is linked to corporate responsibility targets, such as a reduction of greenhouse gas emissions, and/or health and safety standards.

The vast majority of companies in the top 50 – including Tim’s — maintain such a link. Exceptions on this year’s list include Hydro Quebec, WestJet and Husky Energy.

Phillip Haid, co-founder and chief executive of Public Inc., a Toronto-based social-impact marketing agency, says Tim Hortons has built itself into a powerful, iconic company by marketing itself as the community coffee shop. “It’s every person’s coffee shop. It’s part of small-town and big-town coffee culture,” he says.

Some of Tim Hortons’ social-responsibility initiatives are as much a part of the Canadian landscape as its 3,700-plus coffee shops. (It also operates nearly 850 outlets in the United States and 58 in Arabian Gulf states.)

The Timbits Minor Sports program puts up more than $3 million a year to sponsor kids’ sports teams, especially soccer and hockey. The program, funded by the company and local franchisees, supported over 300,000 youngsters last year. Sidney Crosby began his hockey career as a Timbits player in Cole Harbour, Nova Scotia, in the early 1990s.

On another front, the Tim Horton Children’s Foundation hosted more than 17,000 disadvantaged children last year at its five camps in Canada and one in the United States. The foundation plans to open a sixth Canadian camp in Manitoba this summer. Franchisees raised $11.5 million for the camps in a single day in June 2013 by donating their entire proceeds from coffee sales.

The company has also put in place what it calls “a meaningful, structured and long-term partnership” with aboriginal communities. Projects include an online training program that covers workplace diversity and greater awareness of aboriginal culture. Over 200,000 company employees have completed the training since 2009.

Its children’s foundation sponsors several thousand aboriginal youngsters each year to attend overnight “structured learning” camps. The camps are run with help from elders and community leaders, with an aim to promoting team building, confidence and other interpersonal skills.

Further afield, one recent thrust has been to address concerns surrounding production of palm oil in countries like Indonesia, Malaysia and India. Palm is the world’s largest source of vegetable oil used for making doughnuts, among many other consumer items.

But as demand has taken off, criticism has grown about widespread loss of forests and wildlife habitat, horrendous working conditions and threats to indigenous communities.

Tim Hortons says its entire palm oil order for 2015 will qualify for certification under the Roundtable on Sustainable Palm Oil, a non-profit seeking to implement global standards for producers.

“Palm oil is one of those emerging issues where we know there are environmental impacts associated with the production of palm in some parts of the world,” Patterson says. “As a company that is interested in sustainable practices, it was an area of the business where we saw an opportunity to make a commitment and work with our suppliers. Our ultimate goal is to source deforestation-free, peat-free palm oil.”

Patterson says the company keeps tabs on performance in faraway plantations by requiring suppliers to sign a code of conduct, which includes verification procedures.

Double double trouble?

In at least one respect, however, the company’s social-responsibility performance leaves much to be desired. Its score for diversity on its board of directors was just 25 per cent in 2013 (the most recent comparable year used for the 2015 Best 50), versus 56 per cent for second-ranked Vancity. Since then, the number of women on its board has dropped to zero.

The company also lacks a policy on working conditions, says Cohn, describing this as “troubling.” She says its supply chain standards, while reflecting industry best practices, still don’t address key issues in agriculture, such as living conditions and work hours.

While applauding many of Tim Hortons’ initiatives to date, Haid describes the company’s overall social-responsibility effort as “the old charity model.”

“Most companies are still in the mode of, ‘Well, we believe we should give back to our community, and we’ve got a charitable bucket of dollars’,’’ he says. “But most of them, I would argue, haven’t really tightly defined what kind of impact they want to create.”

Once again, it’s important to recognize that Tim Hortons’ ranking this year is based on its 2013 performance. In other words, before last December’s deal that saw the company acquired by Brazil’s 3G Capital Partners. The acquisition puts the Canadian chain under the same holding company as Miami-based Burger King, creating the world’s third-biggest fast food operator.

One big question mark that hovers over Timmy’s is how its social-responsibility efforts might be affected under new ownership. Many will be watching carefully to see if it can just maintain its reputation, let alone improve its sustainability performance.

Douglas Hunter, author of Double Double, a book about Tim Hortons, noted in an email: “It remains to be seen whether the new management will exhibit any of the corporate culture of the former company.” Indeed, skeptics point to 3G Capital’s reputation as cost-cutters and asset-strippers.

The Shareholder Association for Research and Education (SHARE), a non-profit “responsible investment” group based in Vancouver, said in a report last November that the transaction with 3G raised “some environmental, social and governance issues that may be of concern to shareholders.”

The concerns centre on the fact that the combined company is saddled with $10.4 billion of debt, which, the report warned, “could require either substantial cost cutting or increases in revenues.”

There are already signs that the company’s commitment to sustainability is beginning to fade, argue professors Andrew Crane and Dirk Matten, who both teach corporate social responsibility at the Schulich School of Business at Toronto’s York University.

In an April post on their “Crane and Matten” blog, they credit Tim Hortons for having “upped its game” over the past few years on issues such as sustainable sourcing, recycling, energy and water efficiency, animal welfare, nutrition, and disclosure and reporting. But efforts so far to cut costs have effectively shut down the company’s sustainability department, they write.

“In addition to jettisoning the dedicated sustainability team, the company appears to have also cut the budget for various corporate responsibility initiatives. There’s not much sign of a company aiming to be a sustainability leader any longer. Not unless you think Burger King is a leader, that is.”

Crane and Matten speculate that 3G Capital executives aren’t convinced sustainability initiatives were adding value to the company or share price, and are acting more on “gut instinct” – and perhaps ideology – than on hard evidence.

Patterson says the Burger King deal has turned 2015 into a “transitional” year, the balance of which will see the next phase of Tim Hortons’ sustainability strategy mapped out. “Sustainability is a journey,” she says. We’ll know better over the next year or two just how far along the company is on that journey. After getting this far, let’s hope the company doesn’t lose its way.

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Today, B.C.’s carbon tax has become a case study to the world for how to unlock the power of markets to deliver outcomes that are better for the environment and the economy. For his courage and clarity on this file, Gordon Campbell is the recipient of the 2015 CK Award of Distinction.

Corporate Knights recently caught up with the Canadian High Commissioner to the United Kingdom of Great Britain and Northern Ireland. Below is an edited excerpt of that interview.

CK: What was the inspiration for the B.C. carbon tax?

Campbell: In British Columbia, we felt some of the effects of climate change directly, such as the pine beetle epidemic. We felt it was important to take a leadership role on climate change, but to do it in a way that did not create a series of good guys and bad guys. Some people think business people aren’t supposed to care about the environment. That’s not true. They do – they care about it significantly. Too often we decide that we need to be for the environment or for the economy, but that you can’t be for both. Well, we found a way to be for the economy and for the environment at the same time.

CK: Do you recall the moment when you decided, ‘okay, I’m going to do this?’

Campbell: It was the fall of 2006. I went on a mission to Asia and saw the impact of thousands and thousands of individual decisions that can be both negative and positive. I had a conversation with [then California] Governor Schwarzenegger. And I was reacting to a book that I had read on dealing with climate change that seemed to miss the point, suggesting that climate change was about what other people could do. I thought the key to doing this is not to say what others should do, but what do you do, and then use yourself as an example, both individually and institutionally, to see what can happen. So all of those things came together as we were having a big discussion in cabinet about what we could do about climate change.

CK: What was the most surprising obstacle that you had to overcome?

Campbell: World oil prices reached their peak on July 1, 2008, which happened to be the same date the revenue-neutral carbon tax was introduced, so people tended to blame the carbon tax for gas prices that were through the roof.

CK: Is putting a price on carbon a political liability in Canada?

Campbell: The way that the revenue-neutral carbon tax worked was positive for us. I was still the premier when we ran and won in 2009 after the carbon tax. People who had been involved in environmental causes that probably had no intention of voting for our government before realized that if they didn’t support this kind of important long-term policy, then it would never be done again. And so they did support it.

CK: Why do you think it didn’t work out so well for Stéphane Dion in the 2008 federal election?

Campbell: One of the problems is that carbon tax wasn’t revenue neutral. It was about income redistribution. It was about a whole series of things that he was trying to do. It was a revenue generator, and frankly, people don’t feel like they’re taxed too low.

CK: The Economist has called the B.C carbon tax “a winner” that “woos skeptics.” What were the key ingredients?

Campbell: The key for us in B.C. was to say “we’re going to put a tax on something that’s bad, carbon emissions, and we’re going to reduce your tax on something that’s good, which is your income, and your hard work and your ingenuity.”

We listened to concerns from different industries and rural people, but there were no free riders. When you build a regime of exceptions as opposed to a regime of consistency and dependability and reliability you create a series of problems.

We didn’t try to do everything overnight. We put it in place and we allowed it to happen step-by-step. I would argue that [the B.C. government] should have continued to do that. The one thing I always said when I was premier was I take my hat off to the federal government for letting us do what we felt was the best thing to do for British Columbia.

CK: What words of wisdom would you offer from your political career so far?

Campbell: I always think that the best thing to do is act on the basis of what you think is right, not what you think is popular. That’s what we’re fighting for when we run. You better know what you want to do, not what you want to be, and what you’re willing to lose for. You say what is the most important thing that you could do for your grandkids, and then you’re starting to think in the right timeframe.

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For Gordon Hicks, it’s definitely the latter. In fact, lawns with weeds walloped by pesticides are a peeve. It’s just a small example of why Hicks, who leads Toronto-based real estate management services company Brookfield Global Integrated Solutions, is the winner of Corporate Knights’ Greenest Chief Executive in Canada Award for 2015.

It all started back in 2000, when Hicks was driving his kids to their elementary school in a municipality he’d prefer not to name, north of Toronto. As he pulled up to the school, Hicks noticed signs posted on the playground warning where pesticides had recently been sprayed.

“It dawned on me that this was so ridiculous. In areas that were known for where children would be playing, we were spraying these potential hazardous chemicals that could cause DNA damage. That infuriated me,” Hicks, 50, recalls in an interview.

In response, he and a handful of other parents approached local politicians and policymakers with their concerns. Nine months later, the municipality banned the use of pesticides across public spaces where kids play.

“It was a small win,” says Hicks, “but to me, it represented the fact there are things being done that don’t make sense. Until someone challenges them, they are going to continue. I thought … why shouldn’t it be me?”

The experience emboldened Hicks to keep up the fight against environmental hazards, using the company where he has worked since 1997 (until recently named Brookfield Johnson Controls) as a template for how organizations can and should be more sustainable.

Hicks, along with his team at Brookfield Global Integrated Solutions (BGIS), has been on a mission to lower its environmental footprint across the roughly 11,000 buildings, or more than 150 million square feet, it manages across Canada. That includes everything from office towers and courthouses to telecom data centres.

Commercial real estate is responsible for nearly 15 per cent of greenhouse gas emissions in Canada. Hicks sees it as his job to drive environmental stewardship across the sector and set an example for others.

Three months after taking the top job in 2006, Hicks introduced a policy to ban the use of pesticides for cosmetic lawn care across its entire client portfolio, among the first in the industry to make the move.

“We worked with our clients and, as it turned out, every one of them was supportive of the action,” Hicks says. “A dandelion on the lawn of a corporate office started to become a symbol of environmentalism, versus a symbol of poor maintenance. It was a bit of a paradigm shift, and something that we’re very proud of.”

Over the past nine years, through a wide variety of energy conservation and zero-waste programs, Hicks’ company has helped prevent millions of tonnes of GHG emissions from spewing into the atmosphere, conserved millions of litres of water, and kept thousands of tonnes of waste from ending up in landfill.

What’s also inspiring for Hicks – not to mention other companies he has influenced – is the millions of dollars in operating cost savings that result from such actions. It debunks the myth that business and society have to choose between the economy and the environment, Hicks says.

“We are constantly looking at ways to support our clients in reducing their energy consumption, reducing their carbon footprint and ultimately helping them to reduce their operating costs,” he says.

Geoff de Bruijn, vice-president of corporate services and sustainability at Vancouver-based Telus, says his company has seen “significant savings” as a result of some of the energy and waste reduction programs inspired by Hicks through BGIS.

For example, BGIS is working with Telus on a waste-diversion pilot program in B.C.’s Lower Mainland, and has offered its expertise to help the telecom company reduce the use of herbicides at some of its remote sites in the province.

Hicks is a hands-on leader who often gets personally involved in the programs his company puts in place, de Bruijn says.

“He’s convinced us to push the envelope in certain areas that we weren’t otherwise doing,” de Bruijn adds. “In my dealings with him, what becomes quickly evident is his passion for the environment and sustainability overall.”

Both on and off the clock, Hicks is also inspiring organizations to think about the environment as part of their overall business operations.

Shortly after Al Gore released An Inconvenient Truth in 2006, Hicks applied and became a Certified Canadian Presenter with The Climate Reality Project, founded by the former U.S. vice-president and environmental activist. His volunteer role has been to advocate and educate others about climate change.

Hicks has also lured high-profile environmental speakers such as Paul Hawken, author of The Ecology of Commerce, and Jeremy Rifkin, author of The Third Industrial Revolution, to talk at a speakers series his company hosts in Toronto called Inspired Future.

“We wanted to educate people on the fact that you can have a successful economy while being cognizant of what you’re doing with the environment – that the two could co-exist and in fact most businesses that were focused on waste reduction and efficiency … were outperforming,” Hicks says.

Hicks is actively involved in a handful of climate-focused organizations, such as the Council for Clean Capitalism, a group of companies that encourages governments to become more sustainable through long-term economic planning. He also worked alongside other environmentalists and business leaders to lobby the Ontario government to put a price on carbon emissions.

“Our hope is that some of what we’re sharing is resonating and being adopted,” Hicks says.

He’s also working with the World Wildlife Fund (WWF) on its annual Spring Things workplace campaign to help conserve the environment, animals and natural habitat. WWF-Canada president David Miller describes Hicks as a “highly principled” person and leader – someone who acts on his values.

“It’s exactly the kind of business leadership that we need, and that’s clearly possible,” says Miller, the former mayor of Toronto.

“He’s able to look at the medium and long term, not just the next quarter. Sometimes that’s the challenge in meeting a lot of sustainability goals, particularly with energy efficiency and carbon-reduction: Business leaders of public companies are forced to justify quarterly results, yet, we’re talking about things that produce long-run efficiencies, savings, financial rewards and planetary rewards. The economics are all there. It’s just not there in three months.”

While Hicks may have a long-term view, he’s impatient on what he sees is a slow adoption of sustainability measures and general awareness of how society is harming the environment.

“I think everyone gets it, and appreciates the need for some change. What’s challenging is being able to get people to take action and to take a stand on something,” says Hicks, urging stronger leadership.
“It’s frustrating for me that we can’t move more quickly, that we have to take precious little time to get more people on side versus more aggressively pursuing what we know we need to do.”

Judging Panel:

Corporate Knights launched its inaugural, bi-annual Greenest Chief Executive Award in 2013 to recognize the CEO of a major Canadian corporation who is doing the best job of earning profits while preserving the planet. In our search for this individual, we look for evidence of a genuine commitment to environmental responsibility and overall improved sustainability performance, as well as an understanding of the risks of not treating sustainability as more than an exercise in public relations.

The winner of 2013’s award was Alain Lemaire, who at the time was CEO of Cascades.

Corporate Knights accepted nominations for the 2015 award in February and March. A nominated CEO’s company was required to have a minimum of $500 million in annual revenue. Once all nominations were received, a short list of five finalists was determined based on how nominees performed against four key criteria: greenness of operations; greenness of CEO’s pay; green impact beyond the company; and greenness of company products/services.

A panel of respected leaders from the environmental community selected a winner from the short list. The award was presented at the Corporate Knights Best 50 Gala in June.

Judging Panel:
Tim Gray, Executive Director, Environmental Defence
Stephen Guilbeault, Co-founder, Equiterre
John Lounds, President & CEO, Nature Conservancy of Canada
David Miller, President & CEO, WWF Canada
Peter Robinson, CEO, David Suzuki Foundation
Ed Whittingham, Executive Director, Pembina Institute
Toby Heaps, CEO, Corporate Knights

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The accident gave new meaning to the term “dropping acid.”

By the time the dust settled, authorities determined that 386,000 litres of the nasty liquid had leaked out from damaged cars, more than the average Canadian household consumes in water over an entire year. Much of it found its way into a nearby creek and lake, killing fish and bottom-feeding organisms like snails, clams and insects. Regulators determined that “weakened track structure” and poor track inspection were largely to blame for the March 2000 accident.

The outcome could have been dramatically worse. That was made sadly clear by the 2013 rail disaster in Lac-Mégantic, where 47 people in the small Quebec town lost their lives after a train carrying crude oil derailed and exploded.

Fact is, a material needn’t go boom to make it dangerous or pose a serious harm to the local environment. Every day, across tens of thousands of kilometres of track, trains are transporting a long list of toxic and corrosive chemicals, often over vast distances and through densely populated areas; sometimes when less hazardous and just-as-economical options exist, such as on-site chemical recycling.

Public concern – and media attention – may focus on the risks of transporting petroleum products by rail, but harmful chemicals such as caustic soda, molten sulphur and sulphuric acid are among the most common dangerous goods rolling through a community near you.

Sulphuric acid, which can melt skin and lead to deadly gas clouds, has alone been involved in an alarming number of train derailments over the past 15 years. They include a May 2003 derailment that forced 50 residents near Orillia to evacuate because of leaking acid, and a January 2007 accident in which four railcars full of sulphuric acid hopped their tracks and crashed within a stone’s toss of a home in Montmagny, Quebec.

Four months later, 150,000 litres of sulphuric acid leaked into a river after 22 railcars jumped their tracks about 215 kilometres north of North Bay. Acidity in the river reached dangerous levels, with local farmers fearing for their livestock. More recently, a railcar filled with sulphuric acid slid off its tracks in Richmond Hill, a heavily populated town just north of Toronto.

There were no fatalities or injuries in these cases, as most have happened in relatively remote locations with low population densities. But for many the February 2015 derailment in Richmond Hill was too close for comfort. Regional councillor Tom Muench said luck might have been the only thing preventing a more serious accident. “It could easily have gone either way,” he told the local paper shortly after the incident.

A necessary evil?

Sulphuric acid – sometimes referred to as Hollywood acid – may be better known as a body-dissolving chemical used by the Sicilian Mafia than a key ingredient for the operation of a healthy industrial economy.

Last year, about 254 million tonnes of sulphuric acid were produced globally for a variety of purposes, making it the most ubiquitous chemical on the market. It is used to produce fertilizer, refine petroleum products, mine minerals, process metals, and manufacture synthetic materials such as rayon. It is also used to make higher-value chemicals in the form of detergents, dyes, pigments, drugs and explosives.

Own a car? The battery under its hood is filled with sulphuric acid.

“Sulphuric acid, people don’t realize, used to be an indicator of the industrial wealth of a nation,” says Merv Fingas, former chief of research at the emergencies science division at Environment Canada, where he specialized in the spill of dangerous goods.

But, he warns, it’s not an easy chemical to deal with. It’s generally colourless, making it tricky to identify in an accident. It can react violently with water and other chemicals, and beyond the severe burns it can cause to skin the inhalation of its vapour can be fatal. “You have to take the necessary precautions,” Fingas says.

As an essential ingredient in many industrial processes and products, sulphuric acid is transported in massive quantities – typically by rail, both across Canada and into and out of the United States. Canada exported roughly 14 times as much as it imported in 2014.

Of course, transport of highly flammable petroleum products is a major cause for trepidation, but drop dangerous and difficult-to-handle chemicals like sulphuric acid into the mix, particularly in the wake of the high-profile Lac-Mégantic disaster, and citizens say they have good reason to be nervous about what passes near their parks, playgrounds, schools and homes.

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Unnecessary transport?

“One thing the public wants to know is what (safety) improvements have been made since Lac-Mégantic, and what’s still to come,” says Kingston MP Ted Hsu, who held a community event on March 4 hoping to get some answers for citizens.

At the event, Kingston’s fire chief expressed concern that he doesn’t get a list of the dangerous materials on a train before it passes through the community. Individual railcars are labeled, but to see what’s in them requires getting close, which isn’t so easy when they’re on fire and the situation is still potentially explosive.

“If there’s a fire you have to put it out first to see the labels on the cars,” Hsu says.

In such a situation, problems crop up with spills that involve sulphuric acid, which violently boils and spits when it comes into contact with water. There are also big risks even if no fire is present. One of the first things emergency workers will do when there has been an oil spill is try to soak up the mess with sawdust or some other sorbent. Doing so in the presence of sulphuric acid, according to the International Labour Organization, can create “toxic gases which fume off,” putting first responders and those nearby unknowingly at risk.

The federal government and railway operators argue that real-time information detailing train cargo is both unnecessary and poses a potential security risk, if, for example, such information got into the hands of terrorists. “I don’t think we want that,” said CP Rail chief executive Hunter Harrison in March during a speech in Toronto.

Currently, emergency personnel can call a Transport Canada hotline immediately after an accident to get a breakdown of a train’s cargo. Ottawa considers this a reasonable compromise.

Speed and route choice are two other big sticking points for community leaders. In an unprecedented move, Toronto Mayor John Tory and 17 city councillors signed a letter in early April urging federal Transport Minister Lisa Raitt to consider lowering the speed of trains moving through urban areas. Transportation ministers from Ontario and Quebec made similar requests.

In response, Raitt issued a temporary emergency directive requiring trains to slow down to below 64 kilometres per hour when travelling through “highly urbanized areas.” It’s cold comfort, considering the train that derailed and spilled a large volume of sulphuric acid near Temagami in March 2000 was moving at 63 km/h.

CP Rail’s Harrison, meanwhile, has been critical of speed restrictions. He wants the ability to move his trains faster, arguing it can be done safely.

Use and re-use, locally

Re-routing trains carrying dangerous goods through less populated areas is an idea that big city mayors like, but that does little to ease the concerns of those living in suburban and rural areas. One option is to reduce the volume of dangerous goods that need to be transported. For certain chemicals, such as sulphuric acid, on-site regeneration and reuse offers one way to reduce the risks.

And it’s not just the risk of derailment. Chanier Mohamed, technical manager at industrial waste recycler Terrapure Environmental, says there’s a long chain of custody when transporting nasty chemicals like sulphuric acid. “You’ve got the risks in handling and loading, during transport, and unloading,” he says.

The sulphuric acid regeneration market is growing, particularly in the petrochemical sector where it is used to produce high-octane gasoline and remove impurities from other refinery products, such as jet fuel. After it has been used, this “spent” acid waste is increasingly regenerated back into its pure state for reuse.

The most popular method of doing this, however, is to ship the spent acid to a large, independent regeneration facility, such as the massive Dupont plant in Louisiana. It might eliminate the need to dispose of sulphuric acid, but it doesn’t eliminate the transportation of it. In fact, it can increase it.

It’s why the business case for on-site regeneration is finding some appeal. Transportation costs and risks to the environment and public safety are part of the reason why Irving Oil built its own acid regeneration plant at its refinery in Saint John, New Brunswick. The plant, which began operation in 2000, was a first for a Canadian refinery, and meant the company no longer needed to import fresh acid and export spent acid by train.

Matthew Viergutz, vice-president of licensing at MECS, the division of DuPont that handles sulphuric acid processing, says on-site regeneration tends to only be economical for large refineries, and mostly in developing countries with low construction and maintenance costs and poor transport infrastructure. “You really have to evaluate the economics of each situation,” he says.

Indeed, market advisory firm TechNavio Research says the sheer size of the fixed investment required to build regeneration plants has discouraged small and medium-sized users of sulphuric acid from adopting the technology on site.

However, “new production technologies are constantly being pursued in this space, and we predict the rise of small-volume regenerators over the next five to 10 years,” says TechNavio analyst Aditya Basu, who sees a “huge” business opportunity.

Pricing the risk

At TerraPure, that has been Mohamed’s observation as well – only to him the trend became noticeable 10 years ago as more refineries, water treatment plants and mining operations began to see the benefits.
“I’ve been working in this on-site business now for six or seven years, and it’s increasing every year,” Mohamed says. “Logistically they’re seeing transportation costs going through the roof. So (on-site) regeneration sure beats bringing in trainloads and truckloads of fresh acid. There are huge risks involved with that.”

Regenerated sulphuric acid only represents a small part of the global market for the chemical, and on-site regeneration is a small part of that, but there’s room for growth. Each 100,000 litres that is locally recycled represents a railcar that doesn’t have to roll through a community.

It may not be economical yet for smaller users, but Kingston MP Hsu wonders if that’s because the risk of transporting dangerous goods isn’t fully reflected in the cost. “If they are paying the full cost of the risk, then they will make a smart economic decision,” he says.

The post How to avoid an acid trip appeared first on Corporate Knights.

After all, who’s going to raise environmental concerns?

But there’s a certain irony to such projects. When the 7,700 solar photovoltaic (PV) panels installed atop the old Rutland landfill reach the end of their operational lives, they could ultimately end up buried in a landfill – or not, depending on what policies and programs are put in place over the next decade to make sure this clean source of power doesn’t become another dirty problem passed on to the next generation.

Fact is, solar panels are mostly electronic waste – a mix of semiconductors, wiring and power electronics. In North America alone about 20 gigawatts of solar capacity has been installed, working out to roughly 100 million solar panels destined to become junk in 15 to 30 years.

“As the PV market continues to grow, so will waste, even if it only appears after a relatively long time delay,” Queen’s University researchers Joshua Pearce and Nicole McDonald wrote in their still-relevant 2010 paper on solar producer responsibility.

By 2020, hundreds of gigawatts of solar systems are expected to be powering the globe, representing billions of panels, some containing heavy metals such as cadmium, lead and arsenic. To put this in perspective, that’s more iPhones and iPads sold globally to date, keeping in mind that as e-waste a single solar panel weighs 600 times more than a typical smart phone.

And it’s not just product waste. Green, renewable power may come out of solar modules, but many toxic materials and dangerous processes go into making them. Highly corrosive chemicals like hydrochloric and sulphuric acid, explosive silane gas, extremely toxic tetrachloride, arsine gas and the potent greenhouse gas sulphur hexafluoride are among the nasty ingredients in the solar cookbook.

Over the coming years, solar manufacturers won’t just be judged on whether their solar panels are recycled or not. How they manage and minimize waste, how productive they are with resources such as water and energy, and the importance they place on workplace safety, diversity and worker rights will increasingly reflect on the reputations of individual companies and the industry as a whole.

“The PV industry’s continued growth makes it critical that action be taken now to reduce the use of toxic chemicals, develop responsible recycling systems, and protect workers throughout global PV supply chains,” according to the non-profit Silicon Valley Toxics Coalition (SVTC), which reports annually on the sustainability performance of solar module manufacturers.

There’s no question of solar power’s green credentials. It is undeniably the world’s cleanest source of electricity, and the solid waste it produces is still tiny compared to traditional energy sources. But its record isn’t completely clean, and as the technology becomes more ubiquitous, it will become more important than ever to shine a light on the darker side of the sun.

Shades of green

Shining a light is what the SVTC’s Solar Scorecard project is designed to do. Five scorecards have been released so far. The latest, released last November, was based on survey responses from solar manufacturers and the information they make publicly available. In all, it ranked 37 companies that represent roughly 75 per cent of solar manufacturers.

Manufacturers are scored on 12 criteria, including recycling, water use, GHG emissions, chemical reduction efforts, use of conflict minerals and commitment to worker rights, health and safety. Transparency, in the form of public disclosure of key sustainability performance indicators, is given heavy weight.

Right off the bat, it’s clear that transparency is widely lacking in the industry. Only seven of 37 companies responded to SVTC’s survey questions, and the majority scored less than 40 out of 100 largely because of non-disclosure in public reports. Companies that have been critical of SVTC’s scorecard argue that the results are not a true reflection of their sustainability performance. If true, it’s a good argument for improving disclosure practices.

The highest-scoring manufacturer was Changzhou, China-based Trina Solar, which has occupied first place for three straight years. The company scored 80 per cent or higher on 11 of 12 criteria, and achieved perfect scores on eight, giving it a total score of 92 out of 100. Its biggest weakness was related to lack of disclosure around the use of conflict minerals – a major weak spot for the entire industry.

Second place went to SunPower, based in San Jose, California. The company scored 88 out of 100, scoring three points less than Trina on extended producer responsibility. Yingli, SolarWorld and REC came third, fourth and fifth, respectively, rounding out a group that SVTC calls industry leaders.

Corporate Knights Capital produced a solar ranking of its own, using a similar methodology applied to our Best 50 and Global 100 rankings. Tempe, Arizona-based First Solar came in first, compared to a still respectable seventh place on the SVTC scorecard. SunPower ranked second on both.

Trina Solar came fourth, just behind Germany’s SMA Solar Technology, which makes power electronics for solar PV systems, not modules, so wasn’t ranked by SVTC.

The complete excel with all 12 KPIs can be downloaded here.

The only Canadian-headquartered company considered by both reports was Canadian Solar, which is based in Guelph, Ontario. It scored only 14 out of 100 on the SVTC scorecard and was off the radar in the Corporate Knights Capital ranking.

Canadian Solar’s corporate social responsibility report could not be found on its website. When CK asked for a copy of the report, a company spokesperson asked why we wanted it – a strange question considering the mandate of our magazine. What we eventually received was a poorly written, error-filled, grammatically awkward document that didn’t disclose much in terms of data. “That is what we have,” the spokesperson said. “The pretty version is in Chinese.”

For socially responsible investors looking to put their money into solar stocks, or solar consumers looking for the most sustainable module manufacturers, it’s not an encouraging sign. Many companies in the industry could certainly do better.

Recycling realities

One move Canadian Solar did make back in 2009 was to join PV Cycle, a Brussels, Belgium-based organization that supports the take-back and recycling of solar PV modules when they reach the end of their lives.
“We continue to proactively take responsibility for developing effective recycling programs,” Canadian Solar founder and CEO Shawn Qu said at the time.

PV Cycle is focused only on European countries, and has set up a network of national partners that help module manufacturers comply with European Union e-waste legislation, which in 2012 was extended to include PV modules. Prior to that, PV Cycle was a voluntary industry program.

About 11,000 tonnes of modules, more than half from Germany, have been recycled since the organization became operational in 2010. To date, it collects modules from 20 countries through a network of 350 collection points. Its aim is to reach recycling rates of 85 per cent by 2020.

While companies such as First Solar and SolarWorld have voluntarily worked to recycle their solar modules in North America, there are no regulations or voluntary industry-wide programs available in Canada or the United States. In Canada, if you’ve got an old panel installed during the 1970s or a newer panel that’s broken, there are no municipal drop-off locations – the likely destination is the dump.

But where hundreds of solar panels might have been installed in the 70s, hundreds of thousands have been installed over the past few years, mostly in Ontario. The province’s energy ministry requires developers to submit a Decommissioning Planning Report explaining how materials will be removed from a site when a project reaches the end of its useful life – expected to be 20 to 30 years. In these reports, companies typically promise to responsibly dispose of materials or recycle them “where economical,” but no details or guarantees are given.

Some solar installers in Ontario, meanwhile, appear to be misleading customers. Corporate Knights reviewed the websites of several installers that had the same template response to questions about panel recycling. “Yes, programs exist to recycle your solar power system.”

What are these programs? Who runs them? How can a customer investigate this more? No details are provided – nor could they be.

“Stewardship Ontario isn’t involved in any programs for solar panels and there isn’t any legislation,” says Alastair Harris-Cartwright, director of communications at the Canadian Stewardship Services Alliance. “I’m not aware of any Ontario companies tackling this issue.”

The North American industry is acutely aware of the need for recycling. “Recycling has to be part of what we do,” said John Smirnow, vice-president of trade and competitiveness for the U.S. Solar Energy Industries Association, speaking at the Solar Power International conference in 2013. “For the solar industry to be truly sustainable, the whole supply chain has to be.”

But the industry’s position is that the issue, while important, isn’t urgent. “Solar PV is growing quickly, but it is in its infancy,” says John Gorman, president and CEO of the Canadian Solar Industries Association (CanSIA). “Even the earliest solar PV systems have more than a decade of operation remaining before decommissioning is required.”

Gorman was in Paris in late April attending an International Energy Agency (IEA) executive committee meeting for solar energy. One of the issues discussed was Task 12, a priority initiative that deals with corporate social and environmental responsibility practices in the solar industry.

Out of that initiative, a study to be released in September will look at international laws and regulations around lifecycle management and recycling of solar equipment. Gorman says release of that study will be followed by regulations, which will flow regionally and nationally. “The IEA work on this issue is timely, and will drive environmentally responsible recycling here in Canada,” he says.

Putting a European-style recycling program together, similar to what PV Cycle has done, means having enough material to make the investment economical. At the moment, absent of regulation, it costs less for a developer or manufacturer to send PV panels to a landfill.

It’s a classic chicken-and-egg dilemma, says Patrick Bateman, policy and research advisor at CanSIA. “Recycling programs, whether for glass, plastic, electronic devices or solar modules, require a business model with a level of profitability to become established,” he says.

“There is very little to recycle in Canada today apart from process rejection or customer returns, as installed modules last over 25 years and we just started deploying at scale.”

Consumers and electricity ratepayers, of course, are reasonable people –that is, when good reasons are given and easy to find. For the North American solar industry, the problem isn’t so much a lack of recycling infrastructure today but a lack of transparency and communications around what that recycling infrastructure might look like, and when it will be developed.

CanSIA, which represents the Canadian industry, doesn’t have this information on its website. Solar installers, the first point of contact with solar consumers, are equally absent from the discussion, while most manufacturers – compared to many other industries – get a poor grade on disclosure.

Simply put, an industry that thrives on the light of the sun shouldn’t have customers kept in the dark, whether the issue is recycling or sustainability performance in general.

The post Dark spots on a brighter sun appeared first on Corporate Knights.

As founder of the largest solar services provider, SunEdison, I had a hand in putting in place many of these subsidies. The argument was that with these subsidies we would be able to reduce costs through scale in local markets. This strategy has worked. Since 2008, an average solar electricity system has had a cost reduction of almost 80 per cent.

Today, solar subsidies in maturing markets like the United States and Canada are actually holding the industry back, not propelling it forward. In fact, popular solar markets like Germany have brought their solar subsidies down, and the industry has continued to grow, surpassing 38 gigawatts of installed solar capacity at the end of 2014.

Germany has done this by getting solar installed at far less cost than in North America, where investors like me manipulate solar subsidies to maximize returns. The truth is that installers in the United States can, and do, install solar at roughly the same cost as German installers – save for some increased soft costs.

The message here is that to achieve higher growth, we need to phase out the solar tax credits and other solar subsidies in mature markets and watch the price of solar fall.

Here’s one supporting fact: The cost of solar from the most efficient installers is now cost-effective without subsidies for ideal customers in over 600 utilities in 47 U.S. states. Those 600 utilities account for about 21 per cent of all of the electricity sold in the United States, according to the U.S. Energy Information Administration.

My experience is that declining subsidies lead to greater system cost reductions, lower-cost money, and greater standardization in the industry, which leads to an acceleration of solar PV deployment.
This conclusion is derived from the living laboratories of India, Germany, the U.K., and Australia. While I was initially skeptical that the elimination of high subsidies would be a shock that could be absorbed by the industry, my skepticism was abated through a clear review of the data.

Initially, my feeling was that competition alone wasn’t enough to drive prices lower. But high subsidies led to a gaming of the system by all of the market participants. About four years ago, when India, Germany, the U.K., and Australia began drastically reducing, or removing, their feed-in-tariffs, a curious thing happened – the cost of capital from investors came down. Solar installations continued to grow because the local solar industry cut prices throughout the supply chain to keep investors interested.

While most folks could understand how this transition might work in a mature market like Germany, younger markets like Australia, the U.K., and India were also able to replicate the cost reductions. Today, the average 500-kilowatt commercial solar installation in Australia and the U.K. can be installed for a profit of around $1.65 per watt (U.S.) – the same as Germany. In India, where the basic building block is a five-megawatt utility scale project, large international firms are building and investing in solar systems for less than $1.20 per watt.

Much of the policy design around solar subsidies relied on the principal that they would decline. In places like Ontario, these decline rates were tied to the calendar, or to political decision-making. As I warned in the period between 2008 and 2009, this clumsy approach cost the citizens of Ontario far more money than necessary.

California learned from those mistakes and set up their program to decline based on volume of solar deployed, a far more logical policy. The Ontario policy is still not set up to attract the level of talent and capital necessary to accomplish their goal of cost effective distributed solar power. Ontario should take their current feed-in tariffs and reduce them based on the amount of solar installed, as New York has done.

Outdated crutch

In the United States, while California’s state subsidies have been brought down to almost zero, the federal tax credit passed in 2005 has stayed constant at 30 per cent of system costs. At the same time, installation costs in the U.S. have come down to levels similar to those in Germany.

The persistence of this federal tax credit has kept commercial solar prices stubbornly high. This has resulted in a few puzzling outcomes. For companies like SunEdison that signed contracts in 2010, but are building in 2015, the excess profits that came from cost reductions in the intervening years are going straight to their bottom line. They have no obligation to pass those along to investors in the form of higher returns.

For project contracts that have been signed more recently, residential customers aware of the existing subsidies are now demanding that savings of 25- to 40-per-cent be reflected on their bills. I am sure legislators did not have those kinds of discounts in mind when they passed the tax credit policy. The good news is that the 30 per cent federal tax credit will be phased out at the end 2016, helping the U.S. solar industry transition to one that can achieve cost-competitiveness with grid electricity.

Besides, having that tax credit hasn’t helped the solar industry access affordable capital, despite the fact that the U.S. has kept interest rates very low. Even though low-risk certificates of deposit pay just 1.5 per cent, and Canadian energy trusts just 4.75 per cent, the U.S. solar industry routinely pays 10 per cent to investors. Why? Two words: tax equity. Tax equity structures require immense legal costs and are inaccessible to most investors because of arcane passive investment laws passed in 1986 – where oil and gas are of course exempted.

It wasn’t until SunEdison’s yield company offering, Terraform Power, and similar Yieldcos emerged that the solar industry was able to access this low-cost money. That’s because most of this money is held by institutions not permitted to monetize federal tax credits. Yieldcos have shown that when the investor pool is broadened, the cost of capital plummets. Yieldcos now return about 3 per cent dividend yields to investors, which make the 10 per cent returns using tax equity structures seem outrageous.

If the numbers work without tax credit subsidies, why not just invest today even if you can’t use them? The reason is basic human psychology: if the subsidies are available, people want to use them. If they can’t use them, investors would rather not invest than “leave money on the table.” This tax credit dilemma also prevents professional investors like Fidelity Investments from offering middle-class investments to baby boomers, many of whom are desperately looking for fixed-return products that also allow them to invest in their own communities.

In 2014, the U.S. solar industry employed almost 175,000 people and installed more than 6,500 megawatts of solar, attracting over $20 billion in investment. The solar industry is not small. It now employs more people than the oil and gas pipeline industry, coal mining and steel manufacturing.

In fact, the solar industry has created almost one out of every 80 jobs created in the U.S. since the 2008 financial crisis. By 2016, the last year of the 30 per cent federal investment tax credit, the U.S. solar industry will be installing two times the megawatts and employing well over 200,000 Americans.

This can only happen if we can find over $12 billion in tax equity – while the available liquid tax equity market is around $5 billion. When the federal tax credit for commercial solar projects goes from 30 per cent to 10 per cent by 2017, we could live below the $5 billion cap and continue our rapid growth rate.

The U.S. solar industry needs mainstream finance, lower costs, and greater standardization to maintain 12,000 megawatts beyond 2016. Germany doesn’t install much cheaper than the U.S.; they just have a lower price of capital because their solar industry is open to all investors.

One pushback I get is that coal and oil are still subsidized and so solar shouldn’t phase out subsidies until there’s a level playing field. That is a rational argument, but climate change isn’t waiting until politicians turn against fossil fuels.

Neither should we.

The post Are rich subsidies for solar holding the industry back? appeared first on Corporate Knights.

The Toronto-based company, founded in 2000, has built 45 megawatts of projects at over 200 school sites across Ontario. It’s working on installing another 45 megawatts at hundreds more, says Potentia chief executive Daniel Argiros.

The company’s business model is simple: lease the rooftops, equip them with solar energy equipment, and sell the clean electricity to the province through a 20-year contract with Ontario’s power authority. In exchange, the school gets its roof fixed or shares in the revenue.

“The school projects have been phenomenal,” says Argiros. “The school boards win financially, the students get an education about renewable energy generation and everybody is happy.”

Figuring out how to make solar energy lucrative for investors and affordable for consumers and businesses has been a big challenge for North America’s solar energy market over the past decade. But a combination of tax credits, rebates, mandates for utilities to buy more clean energy, and long-term leases, has led to falling costs and stronger growth.

At the same time, with solar slowly shedding its image as a risky investment, more banks are offering loans to homeowners for buying solar panels. Investment vehicles, such as green bonds or securities backed by solar energy installations with long-term power purchase contracts, have also emerged over the past year and are being marketed as reliable sources of income.

In Ontario, for example, a co-operative called SolarShare has sold $10 million worth of five-year community bonds that are RRSP-eligible and which return 5 per cent annually. Anyone can buy them, and proceeds have so far resulted in construction of projects totaling 3.4 megawatts.

“The RRSP eligibility has been a game changer,” says Julie Leach, community investment manager at SolarShare. “We’re pretty excited.”

Incentive question looms

The United States is third in the world when it comes to the annual installation of solar power generation capacity. China and Japan rank first and second, respectively, while Canada ranks 14th.

Annual installation of solar systems in the United States has jumped from a measly four megawatts in 2000 to 6,201 megawatts in 2014, according to GTM Research and the Solar Energy Industries Association. Cumulative capacity sits at 20 gigawatts – roughly equivalent to 40 mid-sized coal-fired power plants.

In Canada, solar energy development has been concentrated in Ontario, where pro-solar policies have been a major driver of growth. The Canadian Solar Industries Association hasn’t finalized country data for 2014, but between 2000 and 2013 total capacity grew from about seven megawatts to nearly 1,210 megawatts, with 445 megawatts added in 2013 alone. GTM Research expects that annual contribution will climb to 880 megawatts by 2020.

In the U.S., the fate of a generous 30 per cent federal tax credit that can offset solar project costs looms over the market. That credit is expected to fall to 10 per cent starting in January 2017. The solar industry is lobbying to extend it, but there’s no certainty Congress will do so.

As a result, developers are rushing to complete their projects by the end of 2016, even if their 20- or 25-year power purchase agreements don’t kick in until much later. In such a situation, they’ll try to sell the power through short-term contracts.

GTM Research is forecasting the annual installation in the U.S. will shoot up to nearly 12,000 megawatts in 2016 before diving 57 per cent in 2017. Projects built for utilities or to sell power to utilities will be the hardest hit. “The U.S. will undergo a transition over the next few years, moving away from relying on the investment tax credit,” said Adam James, a GTM analyst.

Growth, which should pick up after 2017, will start to depend more on state mandates that require utilities to buy more renewable energy and policies that make solar a financially attractive alternative to conventional energy for homes and businesses.

Bust that fueled the boom

A big decline in solar panel pricing is boosting market growth, too. But it has come at the expense of dozens of manufacturers that went bankrupt or sold their business cheaply. Those companies include Q-Cells, once the largest solar cell manufacturer in the world, and a slew of venture capital-funded startups trying to bring to market solar cells that use compounds other than the dominant silicon.

The most prominent of them all was Solyndra, which filed for bankruptcy in September 2011 after securing a $535 million federal loan and used most of it to build a large factory.

Solyndra’s demise was a warning sign that supply was exceeding demand in the global market. Declining government subsidies and a weak economy contributed to that imbalance. But the glut continued for several more years and led to trade disputes in the U.S. and Europe, which accused Chinese manufacturers of flooding the market with solar panels at below fair-market prices.

The U.S. government has since imposed different sets of duties, which reached as high as 250 per cent, on solar cells and panels coming from China and Taiwan. In March of this year, the Canadian government approved provisional tariffs as high as 286 per cent against Chinese manufacturers while it investigates claims that the companies are selling at below cost. Ontario-based Canadian Solar also faces the sanction because it has a big manufacturing operation in China, in addition to running factories in Canada.

“These artificial trade barriers, which we think are unjustified, will have to be removed if the government wants” to see the market grow, said Michael Potter, Canadian Solar’s chief financial officer.

The average wholesale price for solar panels worldwide plunged 40 per cent from $1 per watt in 2011 to $0.60 per watt in 2014, according to GTM. The market research firm expects that price will fall to $0.50 per watt by the end of 2018. The tariffs, however, have pushed up the price of Chinese solar panels sold into the U.S. by 14 per cent over the past two years, from $0.63 per watt at the start of 2012 to $0.73 per watt during the first quarter of this year.

Despite the tariffs, Chinese manufacturers remain the top suppliers to the world and North America. Half of the top 10 solar panel makers hail from China, including Trina Solar, Yingli Green Energy and JA Solar, according to IHS Technology. Canadian Solar is on the list, too.

Manufacturers: their own best customers

Canadian Solar has shifted over the past six years from being solely a solar-equipment maker to also being a project developer. Its transformation reflects the evolving identity of many well-known solar panel manufacturers globally that sought to diversify as competition intensified and profit margins began to thin.

China’s launch of the “Golden Sun” initiative in 2009 kick-started the country’s solar energy market and prompted many of its domestic manufacturers to expand into the project development and construction business. SunPower and First Solar, the two largest American solar panel makers, had become project developers before that.

Canadian Solar has set sight on the U.S. for its project development business and bought Recurrent Energy from Sharp for $265 million. The acquisition came with four gigawatts of projects under development, three gigawatts of which are expected to be completed within three years, Potter said. Canadian Solar is interested in large projects that have at least several megawatts of generation capacity, so it’s not so keen on rooftop installations.

That doesn’t mean the rooftop market isn’t a shining light, at least in the United States. Residential solar, for example, has enjoyed a growth spurt over the past five years and is set to make up a greater portion of the U.S. market starting in 2017. The use of power sales contracts, in which homeowners pay for the solar electricity but not the equipment, has been a big market booster. Many consumers like the idea of not having to spend tens of thousands of dollars on a solar PV system, when all they really want is the solar power it generates. Depending on the state, the cost of that solar power is equal to or less than what the consumer pays for grid electricity.

About 1.2 gigawatts of residential solar projects in the U.S. were completed in 2014, the first time a gigawatt has been exceeded in a single year. Over 50 per cent of that market is covered by just five companies: SolarCity, Vivint Solar, Sungevity, Sunrun and Verengo Solar. SolarCity, a public company, is the largest and takes up 34 per cent of the share in this segment. Vivint Solar follows at No. 2 and went public on the New York Stock Exchange last October.

SolarCity, whose chairman is high-profile Tesla Motors founder Elon Musk, has excelled in buying and developing technology, such as racks for mounting solar panels, to reduce the time and money it takes to sign up customers and complete installations.

The California developer is also a trailblazer at creating financial products to attract investors. It completed the first securitization of rooftop solar assets in 2013, selling notes to investors and paying interest with money generated from long-term power sale contracts signed with homeowners. Last year, SolarCity launched an online portal that allows it to sell “solar bonds” directly to consumers.

Solar’s storage boost

SolarCity is also ahead of its main rivals in testing the emerging energy storage market. The company has been marketing lithium-ion battery systems assembled by Tesla Motors to home and business owners. As part of a pilot program, the companies have already equipped 300 homes and introduced a solar-storage combo to 11 Wal-Mart stores in California.

At an event at the end of April, Tesla and SolarCity officially announced the new storage product – two, in fact: one for homeowners and one for utility-scale projects. Musk has said that within five to 10 years every solar PV system installed by SolarCity will be combined with energy storage, which will come from a massive new battery manufacturing facility Tesla is building in Nevada.

Competitors such as SunEdison, which purchased the startup Solar Grid Storage in early March, are also moving in this direction. It signals a new phase of growth for the solar market and potentially a major threat to utilities.

The International Energy Agency (IEA) predicted last fall that the sun could be the world’s largest source of electricity by 2050, generating 27 per cent of the planet’s power. Enabled by energy storage and benefitting from economies of scale that continue to lower costs, that forecast is far from an exaggeration.

On the contrary, based on the IEA’s miserable record of predicting the growth of renewable energy, its forecast is likely low-balling the potential of solar.

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