Recommendations for MicroFIT Review

The Provincial government is undergoing the planned 2 year review of the FIT and MicroFIT program. The objective is to review everything from price to policy, to design a program that keeps the industry growing, while offering best value for ratepayers. These issues are of course tough to balance.


Background:

Today, there are only 80 MW of microFIT projects operating, and roughly 120 MW that are in the pipeline with contract offers. The total cost of the connected projects to ratepayers is about $65 million annually, or less than .04 cents (4 100’s of a cent) per kWh of electricity consumed in Ontario. Clearly our problem isn’t that we have too much.

Of the projects connected, a little over half are rooftop, and the balance are ground mount, mostly the trackers you see in rural areas. The average size of rooftop installation has been 7.7 KW. The average ground mount is almost 10 KW, the current maximum allowed under the program.

Recommendations:

1. Today, only the owner of properties who are individuals, schools, utilities, farmers, or renewable energy co-ops are eligible to participate. This leaves out incorporated businesses, many of which would be small businesses who own their buildings. Corporations should be allowed to participate in the microFIT program.

2. The current limit for microFIT projects is 10 KW. As the price/kWh comes down, so too will the average contract value. And the microFIT was designed to make low value contracts easier to deal with. Some commercially used buildings, such as farm sheds, have limited their projects to the 10 KW limit, but have space to accommodate more. The microFIT limit should be increased to 20-30 KW for roof top only. Ground mount limit should remain at 10 KW, since it is difficult to scale up trackers.

3. Prices. The relatively large average size of projects suggests that the prices were not adequate for smaller projects. There are two ways to address this. You could offer a higher price for small projects (<5KW for example), and/or you could tackle the reasons for smaller projects costing more (the utility fee, which can only be described as excessive is the main problem). I suggest both. The unreasonable connection fees charged by utilities should be set at a flat $250, which is a reasonable price. Price for rooftop should be $.54 for 5-20 KW, and $.64 for < 5 KW. These prices will offer a reasonable but not excessive return to owners, keep the installations happening, and like the current program, cost ratepayers very little. The marquee price of $.80 cents would drop to $.54, a whopping 33%. Ground mount should get no more than $.54, a drop of 15%.

4. Prices can be further decreased, without reducing the installation rate, with two small changes. The first is the contracts should be extended to 25 years. Most people expect that solar installations will last 25 years, but today, people installing PV assume that the value of the system is zero at the end of the 20 year contract. They assume this not because they think the equipment won’t work, but because they don’t know what the use the system will have. Will off grid storage be viable by then? Will net metering rules work, and if so, what is the price of power? The second is indexation for inflation. The current contract has no indexation – it is a flat price for 20 years. But the media, PC’s, and opponents of renewable energy (advocates of conventional fossil and nuke) never give the government credit for this money saving aspect of the contracts. Having a source of supply that has no increase is a benefit for ratepayers. If the government won’t get credit for it, then better to simply offer a lower price, with inflation indexation. My previous post outlines where prices can be with 25 year contracts, and indexation for inflation.

5. The OPA should never stop contracting on microFIT. Solar installers operate on fairly short timelines with 4-6 weeks of backlog of work. The current freeze on offering contracts during the review has already resulted in layoffs. A simple way to keep contracts flowing would be to announce that new applications will be offered a floor price no lower than a certain level. If the price review comes in at a higher level than the floor price, then the contract price can be adjusted to reflect that. Sales work could continue, applications would flow.

6. The major problem today is restrictions on connection. Hydro One will not offer connections on feeders to any more than 7% of the feeder’s minimum load. California offers 15%. Germany 100%. This restriction has resulted in the rejection of at least 30 MW of applications, for no reason other than a silly rule that has no technical reason. Hydro One should be ordered by the Ministry to change this, and if the rate of application approval, and the speed of processing applications and connections doesn’t increase, they should fire people.

In short, it is time to adjust the microFIT program, to increase uptake, create jobs throughout the supply chain, while offering a dramatically lower cost for ratepayers, and only a very minimal premium. Remember, the day may be coming, perhaps in just a few years, where solar power will be the least cost source of new energy. Ontario wants to be at the forefront of the industry when this happens.

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