Feed-in Tariff rates change, but the program still offers investors an attractive ROI
As of March 15 2012, the Ontario Power Authority set new tariff rates for its FIT and microFIT programs. The solar installation industry breathed a collective sigh of relief as manufacturers and installers are finally able get back to work after months of delay caused by the tariff review process. With the first tariff review complete, the new rates see a reduction of 30%. Does this dramatic drop in revenue render Feet-in Tariff programs untenable?
New Feed-in Tariff rates for Ontario
A 30% decrease in tariffs may seem like a giant leap for some, but the incredible drop in panel prices helps to absorb most of this reduction. The reduction helps to create a renewable energy plan for the province that is sustainable and offers fair compensation for renewable energy. Rooftop mounted Feed-in Tariff systems of 10 kW or smaller will now receive 54.9 c/kWh and ground-mounted units of 10 kW will receive remuneration of 44.5 c/kWh. See a full table of pricing here. All applications submitted after September 1, 2011 will be subject to the new tariffs.
The 60% local content stipulation for those who wish to participate in the FIT and microFIT programs has meant that a growing local industry has been created. This industry of panel manufacturers and installers has floundered in the months it has taken the government to review the Feed-in Tariff programs. Thousands of jobs have been created and millions invested in the province to meet the demand created by these programs. The OPA has to price the programs fairly so that this burgeoning industry is able to survive. Tariff cuts may seem drastic, but they reflect the massive reductions in panel prices and the Feed-in Tariff programs remain viable for prospective applicants.
Prospective Feed-in Tariff applicants can still look forward to a 15% yearly ROI on both rooftop microFIT and FIT projects and 12.4% on a ground mounted tracking systems. If you are considering a unit, it may be pertinent to remember that the government will be reviewing tariffs every two years. It’s best to act now while tariffs are at a premium.
Feed-in Tariff in action
When SolarLine Power was asked to install a microFIT system on an apartment block, they met with some challenges. The 2.5 story building contained 6 apartments on three floors and the challenge was to maximize the total kW amount to the microFIT 10kW maximum. Other tenders were unable to design systems over 5kW due to weight limitations on the roof which could only safely sustain a total of no more than 5 pounds per square foot. The full quota of panels needed to be installed for the project to be financially viable.
SolarLine Power, a local Ontario solar panel installation company, designed a system for the flat roof that consisted of 36 solar roof panels (9kW) with non-penetrating ballast weighing approximately 3000 pounds over 855 square feet resulting in an average additional load of less than 3.6 pounds per square foot. Additional pales were mounted on a custom awning attached to the side of the building.
Solar System Size
11.4kWh DC – 8.78kWh AC (77% derate factor)
AC Output Average Over 1 year
Daily: 36 kWh
Monthly: 1,098 kWh
Yearly: 13,148 kWh
1 Month: $879
1 Year: $10,545
5 Years: $55,383
20 Years: $221,439
With a 15% ROI, the solar installation pays for itself in no time at all and then goes on to make the property owners a tidy sum. If you are considering a Feed-in Tariff install, it’s still well worth it. With the nest OPA review scheduled in two year’s time, its best to act soon.
The solar industry has helped Ontario stay afloat during the financial slump. Private investment in the industry is expected to reach $12.9 billion by 2018. The success of this burgeoning industry is largely due to the province’s FIT and microFIT schemes. These schemes give incentives to home and business owners as well as farmers who set up solar arrays on their properties and sell the energy generated to the province at preferential rates.
A recent study showed that the solar industry had invested $2 billion in the province in 2011 alone, creating an estimated 8,200 jobs. A number which will increase to 11,400 in 2012 with 25 jobs created for every megawatt of energy installed by 2018, the solar industry is proving to be a real boon to the province.
Although many home and business owners are committed to switching to renewable sources of energy for the benefit to the environment, the FIT and microFIT incentives do make solar affordable to many who would not otherwise be able to install such a system. The ecoENERGY program provides rebates for the home owners who use solar technologies. These rebates are part of the government’s long-term energy plan which aims to reduce consumption by 14%.
The growing need for electricity will require the province to create new facilities and refurbish many of the old ones. By 2030, 70% of our electricity will be generated by new or refurbished nuclear facilities. The cost to the tax payer will be profound. Two nuclear reactors are already planned for the Darlington plant while 10 are being refurbished at Darling and Bruce power stations. The costs of these refurbishments will double hydro bills in the province by the time the project is complete.
Fall 2011 will see a review of the FIT and microFIT systems with an adjustment to tariffs issued to electricity producers. With an election looming in October, some political figure are blaming escalating hydro bills on the microFIT and FIT tariffs, threatening the future of these incentives and, as a result, the solar industry in the province. A study by ClearSky Advisors Inc shows that the cost of the FIT programs to residents of the province is expected to rise to 70c for a typical household bill by 2018. This amount is negligible when compared to the forecast of bills doubling thanks to refurbishments during the same time. The cost of installation and maintenance of solar systems is borne by the home or business owner making it one of the cheapest sources of electricity for consumers.
Solar energy becomes cheaper as technology advances and demand grows. The Ontario Power Authority also enforces a 60% local content law which stimulates growth of the solar design and manufacture. A recent breakthrough by the University of Alberta team (based on research from the University of Toronto) has lead to the viability of spray on solar technologies. Without the market interest in these technologies, Canada will not be able to be a market leader in the field.
The study shows the tremendously positive influence that the solar industry has had on the Ontario economy. The FIT programs have contributed to the growth of the solar industry in the province. Although revisions and adjustments of FIT tariffs is the natural progression of such projects, the programs themselves are well worth the investment. If you would like to take control of where your energy comes from, contact your local MP and voice your opinion. You should also investigate installing a solar system of your own. Use energy you can be proud of.
How Germany’s Feed-in-Tariff System has Saved Over 52 Million Tons of Carbon Dioxide
There’s more to Germany than beer and bratwurst ̶ it is also the greenest country in Europe. The German government had enough insight to start a feed-in-tariff system in the late nineties. The feed-in-tariff system, also employed in Ontario, provides subsidies for business and home owners who install solar power systems. The property owner contacts a local solar installer to fit a 10kW photovoltaic solar power system to their roof. The solar power system is connected to the grid and the property owner is paid handsomely for the energy their system provides. Feed-in-tariff schemes boost local solar installers (in Ontario, 60% of the solar power system must be locally manufactured,) which drives solar prices down. In 2010 alone, new solar power systems contributed an additional 8 gigawatts of energy to the German grid. The feed-in-tariff scheme has been a huge success in Germany which now produces 12% of its energy from renewable sources. This is expected to increase to 20% by 2014. The industry has created a quarter of a million jobs locally. Towns compete to be the most eco-friendly. The town of Freiberg (population 200 000) alone produces as much energy from solar power systems as the whole of Britain. It’s not even the most solarific town in Germany ̶ the town of Ulm has that distinction. This kind of competition has led to the cost of solar power systems being halved in the last seven years.
On Thursday, Germany announced that it will cut its feed-in-tariff rates by up to 16%. The proposed cut in subsidies will see a boom for industry in the first half of the year as Germans scramble to take advantage of the subsidies before the cuts become effective July 1st. Participants in the feed-in-tariff system sign a 20 year contract with the government, thereby ensuring the rates over that period. The cut in subsidies will see a reduction in the number of solar power system installations leading to the closures of local businesses and the loss of jobs. This boom and bust cycle created by subsidies in the green industry places the government at the centre of a delicate balancing act.
The fledgling feed-in-tariff (or microFIT) subsidies in Ontario have been equally well received. The generous rates offered for electricity produced by solar power systems, as well as a reduction in the costs of these systems, makes it a no-brainer for property owners. The government has, however, made it abundantly clear that Ontarians will not enjoy the subsidies for long. Plans to curb Ontario microFIT rates could be implemented as soon as next year.