By: Tiffany Richmond
On July 2nd, 2010 the Ontario Power Authority (OPA) quietly lowered the rates paid to ground mounted solar projects from 80.2 cents to 58.8 cents per kilowatt hour under the Provincial’s microFIT Program.
The OPA stated that they adjusted the price due to a glitch in the program. With unexpected popularity of ground mounted solar projects the power authority dropped the rates in order for ground mounted solar installers to get a comparable return on investment than those that rooftop generators receive.
Installation rates for ground mounted solar, compared to solar panels are much lower, which the OPA believes allows for a greater return on investment. Under the 80.2 cents per kilowatt program profit margins are forecasted in the 25-30% range. By dropping the rate the return on investment is in the 10-11% range.
Since the start of the program the OPA has received over 16,000 applications, with roughly 10,000 of those being for ground mounted solar projects.
So why the sudden drop in price? Did the implementation of the harmonized sales tax have an impact? Rising electricity prices? The large volume of applications for solar projects? Or did the OPA simply renege on its promise to pay out at 80.2 cents per kilowatt?
Under the 80.2 cents per kilowatt program, panels with tracking (panels that turn to follow the sun) costs approximately $90,000 to install and can produce 16,600 kWh annually. This would generate approximately $13,300 in revenue annually for installers. Under the 58.8 cents per kilowatt program, panels with tracking cost the same, produce the same, but the return is $9,800 annually. A difference of $3,500. When multiplied by 10,000 applications, it’s a fair amount. But compared to the billions spent on electricity per year, its peanuts.
The microFIT Program is designed to encourage homeowners, farmers, small businesses and institutions to develop small renewable energy generation projects of 10 kilowatts or less. Project owners are paid a fixed price for the electricity they produce, with prices set to recover costs as well as earn a reasonable return over the 20-year term of the contract.
The OPA says applicants who have already executed a contract or received a conditional contract with the OPA will receive the original amount of 80.2 cents per kilowatt hour.
Many solar industry producers say this change could have multiple negative effects, such as job losses, fewer ground mounted solar panels installed and stalled solar generation. Most solar installers have already ordered inventory, put down deposits and hired trained staff to meet expected demand. If people walk away from the program solar producers will feel the after effect.
So what’s really making the industry mad? It may be about price but it’s also about consistency. If the FIT and microFIT Programs were designed to assure installers by offering stability of policy and price, then this sudden price adjustment clearly undermines that objective.
Can we expect further price slashes? Only time will tell.
Tiffany Richmond is an enthusiastic marketing guru and is responsible for online marketing strategies at Energy Advantage Inc.