Ontario puts flesh on standard offer program

The details of Ontario’s new standard offer program were released this morning, confirming what the Toronto Star already reported last week — the province will pay 42 cents per kilowatt-hour for solar-produced electricity and 11 cents for wind, biomass and run-of-the-river hydro power for projects under 10 megawatts.

We knew this was coming. I first wrote about the government’s intention last August, and many people have been waiting anxiously for the details to be hammered out. I was out covering this story for the paper today and am just now, after catching my breath, getting a chance to post something here. Gotta say I’m proud of my government, of certain hard-working staff at the Ministry of Energy and the renewables community, of Energy Minister Donna Cansfield, for pushing through what is being called the most ambitious, progressive and important renewables program in North America.

Wind-energy expert Paul Gipe, who as acting executive director of the Ontario Sustainable Energy Association last year helped push through the program, called it an “historic” day for Canada. “This is the most progressive renewable energy policy in North America,” he told me today.

As expected, contracts will be 20 years in length. The government said it hopes to see up to 1,000 megawatts of new clean power generation come online over the next 10 years as a result of the program, but that figure could be much higher since there has been no limits placed on growth. Of interest is that renewable energy systems already installed since Jan. 1, 2000, could qualify for the program — a welcome surprise for many people who have already invested the upfront capital without any expectation of higher return.

Across the country environmentalists, clean-energy companies and industry associations applauded the program.

* Mossadiq Umedaly, chairman of Burnaby, B.C.-based power electronics leader Xantrex Technology Inc., said the program will have a “significant impact on the solar and wind market for years to come” and will “stimulate significant investment in the renewable power sector in Ontario and Canada.”

* “Standard offer contracts will diversify Ontario’s emerging wind energy industry and will provide a mechanism through which farmers, municipalities and community organizations can develop clean wind energy projects,” said Robert Hornung, president of the Canadian Wind Energy Association, which said Ontario is “setting an excellent example” for other jurisdictions.

* “Ontario’s move is good news for Canada,” said Michael Carten, president and CEO of Sustainable Energy Technology of Calgary. “We work in markets like Germany, Spain and Italy, which have over the past several years implemented standard offer contracts. As a result, those markets are booming. Thousands of megawatts have been installed, and thousands of jobs have been created.”

* Rob McMonagle, executive director of the Canadian Solar Industries Association, said “Ontario is now investing in building a world leading solar industry based in Ontario.” CanSIA predicted that 15,000 new solar systems amounting to 40 megawatts would result from the program in its first five years. By 2025 it predicts 3,000 megawatts of installed solar capacity in Ontario and the creation of 40,000 jobs, compared to a few hundred today.

* Melinda Zytaruk, general manager of the Ontario Sustainable Energy Association, called it a “striking policy” while executive director Deborah Doncaster said it will encourage locally owned and developed “community power.”

* David Robertson, president of the Toronto Renewable Energy Co-Operative (TREC), said the program will “kickstart numerous projects throughout the province.”

Perhaps the biggest endorsement came from environmentalist David Suzuki, who was on hand with Ontario Premier Dalton McGuinty and Minister Cansfield to make the announcement. They chose the manufacturing facility of Cambridge, Ont.-based Spheral Solar Power (now Photowatt Technologies) to formally unveil the program. Suzuki, who celebrates his 70th birthday this Friday and doesn’t look a day over 55, called it a “very significant shift” in government policy that bodes well for the future.

“I congratulate our government,” he said. “You’ve now joined what is the fastest growing energy sector in the world. You’re going to join some of the leading countries like Denmark and Germany. I think you’re going to force the rest of this continent to follow suit.”

Suzuki said it was nice to see a government looking beyond the short term and the quick fix. “It’s not an accident that megaprojects are favoured by our political process, because they give the illusion of attempts to deal with problems and create jobs in the short term. The problem is in that equation children don’t vote. Future generations don’t even exist, so too often they’re left out of the political equation. What I see today is a remarkable shift, a policy that sets us on a course, whether or not the premier or the minister of environment (and energy) are still here… this is more than just about the next election.”

He said farmers and small communities will benefit substantially. “It means an individual farmer can go to the bank and say, look, this is what government is offering… there are a number of banks now saying come to us with a proposal, we’ll give you loans on that. So I think this is an enormous opportunity… farmers are going to be able to harvest two crops now. The one they get from the ground and the other from the wind.”

In fact, Premier McGuinty emphasized the opportunity for farmers, who could easily use or lease out their land for wind turbines. “You’ve got a farm income challenge? You’ve got land? We need clean electricity,” said McGuinty. “Let’s make a deal. Forget that big, lengthy complicated process we have for bigger projects.”

There’s no doubt about it. While widely expected, this is big news and will hopefully trigger similar announcements across Canada and the United States. That said, I personally don’t think — on the solar front — this is going to appeal to the average homeowner. It would be nice to see rebates for home systems, or at least see the federal government eliminate tax on equipment and installation, or offer some kind of tax incentive until prices begin to fall.

I’d also like to see a major program that supports the use of geothermal and solar thermal technologies as a replacement for natural gas, oil or electricity for heating. (But more on that later). I’ll be happy if you’ve read this far.

7 thoughts on “Ontario puts flesh on standard offer program”

  1. Huzzah indeed. I did a few quick calculations, however, and you’re right to say this may not appeal to residential homeowners without some sort of tax break. From what I’ve seen, typical 1.5 – 5 kWh solar PV systems run from $20k – $40. Locked in at $0.42 /kWh for 20 years means the return on investment is still 20-25 years. Of course, the value of not buying electricity from the province is much greater, so the payback time can still be reduced if energy prices increase (safe bet?). If manufacturing process and material costs come down with increased capacity in the next few years, we may end up with more affordable, more efficient systems with a better return on investment. I’ll be watching the prices in the meantime!

  2. Yes congratulations on the bold, albeit late first move of the Ontario government. I have just recently returned from a review of the German Solar industry and I can say that is successful. But our government in Ontario has missed two critical pieces that made the German feed in tariff program work. In Germany they had a “take or pay” legislation and they started their program at 0.52euros or about 0.86c CDN for their SolarPV (the German price drops a few cents every year to provide incentive for installing SolarPV now instead of later) . Maybe this is the reason that Germany has the largest tracked solar array in the world which is currently 10Mw rising to 12.6Mw in the near future. (BTW I don’t count the 16Mw array in Nevada because was funded by the military). So if Ontario were serious about solar they would create legislation for a true (simple) feed in tariff (you can check with your lawyers on that one) and set a price that not only will allow for direct investment in large SolarPV arrays but also will stimulate investment for manufacturing in Ontario. There are a lot of jobs to be had in this industry if our government would simply provide the incentives. And one critical point that many people seem to forget is that the solarPV will be around for many years after the 20 year contracts expire. Lets build a future for Ontario!

  3. “I congratulate our government,” This is a step in the right direction. Now if only the different levels of our goverments can get on the same page and work for the common good of the enviorment and the tax payer. Waste to energy. Cogeneration.(BIOSOLIDS TAKE A SECOND LOOK!) Why not harness the heat energy from the burning of municipal sewage sludge a method of disposal already in practice and produce steam for heating/process and electrical power generation. Seems to me like a no brainer.

  4. The law is a nice step – but why set a project ceiling of 10 MW? In the end you’re going to get alot of developers trying to work around that limit, clustering projects, to leverage economies of scale while tapping the feed in tariff. This is what’s happened in France – decent feed in tariff decreasing over time with a 12 MW wind farm size limit. The small size made the sector less attractive for large players until recently when they started clustering projects and lobbying to lift the limit. The current dearth of turbines will make it difficult to get machines for a 10 MW project and the administrative costs of doing multiple 10 MW projects may make the model less attractive. All in good time I suppose.

  5. In reply to “value of not buying electricity from the province is much greater”.

    There is a vey big difference between producing your own power, and selling it on a standard contract.

    Why would I consume my own power when I can sell it for .42/KWH. It will be a long time before the consumer price gets that high.

    That said, I did a calculation of payback at current prices.

    A 6 KW system costing $50K Cdn, would generate monthly revenue of $310 (based on annual avg of 4.2 sunhours/day)

    The cost of borrowing $50K amortizing payments over the 20 year contract (at 5.5%) is $344/month.

    Does not seem like a winner to me !

  6. Hi Alan,

    I didn’t think to check in different areas, so my bad. For me, the real cost of electricity, including transmission loss and delivery fees, is 42.1 cents/kwh, of which only 5 cents is for the actual electricity. You are right in that I was saying I didn’t want to sell the electricity and now you see why! I’m currently trying to find out what the fixed costs in my bi-monthly bill are, and how the real rate changes as I increase or decrease usage. If my local delivery fees increase even a bit, I will save more money by reducing my energy purchases than I will generate in revenue at 42cents/kwh. If billing were on net usage I don’t suppose it would make a difference, but my understanding is that it is two one-way meters will be used and the buyback is locked at $0.42, while my utility company can increase their own fees.

  7. “For me, the real cost of electricity, including transmission loss and delivery fees, is 42.1 cents/kwh, of which only 5 cents is for the actual electricity. ”

    What ? look at the pricing info at http://www.hydroonenetworks.com/en/customers/residential/rates_pricing/default.asp

    The price per kwh varies from 9.11c to 10.35c.

    As far as locking in the price, I wonder if the contracts specify minimum production levels. If the consumer price was ever greater than the selling price, an extension cord would fix the problem 🙂

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