Here's more from the AB reasoning in Renewable Energy/Feed-In Tariffs:
5.174. In the present disputes, supply-side factors suggest that windpower and solar PV producers of electricity cannot compete with other electricity producers because of differences in cost structures and operating costs and characteristics. Windpower and solar PV technologies have very high capital costs (as compared to other generation technologies), very low operating costs, and fewer, if any, economies of scale. ...
5.178. In our view, not only should the Panel have defined the relevant market at the outset of its benefit analysis, but, in its analysis of the relevant market, it should also have considered that in Ontario the government definition of the energy supply-mix for electricity shapes the markets in which generators of electricity through different technologies compete. We recall that Canada had argued before the Panel that the relevant market for the purpose of the benchmark analysis should be the market for electricity produced from windpower or solar PV technology. Had the Panel more thoroughly scrutinized supply-side factors, it would have come to the conclusion that, even if demand-side factors weigh in favour of defining the relevant market as a single market for electricity generated from all sources of energy, supply-side factors suggest that important differences in cost structures and operating costs and characteristics among generating technologies prevent the very existence of windpower and solar PV generation, absent government definition of the energy supply-mix of electricity generation technologies. This, in turn, would have lead the Panel to conclude that the benefit comparison under Article 1.1(b) should not be conducted within the competitive wholesale electricity market as a whole, but within competitive markets for wind- and solar PV-generated electricity, which are created by the government definition of the energy supply-mix.
I take the AB to be saying that because the costs of solar- and wind-produced electricity are higher than for other forms of electricity, solar and wind electricity must be considered a separate market from wholesale electricity more broadly.
But is that right? Are solar and wind a separate market, or are they simply uncompetitive products in the electricity market?
I can imagine that supply-side factors would sometimes be relevant for market definition in the antitrust/competition policy context, but I'm not sure how well this approach translates to the SCM "benefit" context. It may be that the role of market definition is different in each. In the SCM context, the issue is the terms on which a financial contribution was provided, rather than a determination of all the players in the industry for antitrust analysis purposes. (I'd be curious to hear the views of any antitrust/competition policy experts out there).