My quick review of Ontario’s much anticipated FIT Review

Snipped this map from the Ontario Power Authority’s two-year FIT program review. Here are some key takeaways from the review:

  • Solar prices are coming down, and in some cases way down. Small rooftop and ground-mount installs (under 10 kw) will see the FIT rates fall roughly 31 per cent . Large ground-mount systems of 500 kilowatts or higher will see rates fall by 21 per cent.
  • Wind of all sizes will see rates drop by about 15 per cent.
  • Other renewables, such as hydro, biomass and biogas, will remain the same.
  • Going forward, FIT prices will be set when contract is offered, not at time of application.
  • It’s being recommended that the government review supply and demand at end of 2013 and consider rising its green energy targets.
  • Up to 50 megawatts of contract capacity is being reserved for hydroelectric.
  • FIT rate reviews and adjustments will now take place annually.
  • Regulatory approvals are being streamlined in some areas.
  • Projects with a minimum of 15 per cent equity participation from aboriginal groups or communities will get extra points that give them priority in the queue. More points go to projects that have municipal or aboriginal council support.
  • 10 per cent of remaining FIT contract capacity will get set aside for projects that have a minimum of 50 per cent community or aboriginal ownership.
  • It looks like programs that offer supportive funding for community and aboriginal projects, such as the Community Power Fund, will get a boost based on recommendations from fund manager and program administrator.

A lot of coverage of this is making it seem like the government is reacting to rural protest against wind and solar farms, and unfounded public concerns about higher energy costs due to green energy. This is partly true, such as with the move to give communities more say, to encourage greater community participation, and to set aside capacity for projects with community ownership. These are all good moves. But the reduction in solar and wind prices, that was all to be expected. This is how FIT programs work — prices are supposed to come down over time. Even for solar, many in the industry seemed prepared to accept a reduction of around 25 per cent to reflect lower technology costs. The 15 per cent reduction for wind is also fair, in my view. My own opinion, however, is that large-scale solar should have seen greater reductions, and small rooftop rates should have seen lower reductions. MicroFIT solar installations, taken together, are still so small that they barely register in the overall price mix. Large solar projects benefit from economies of scale, do have a much greater impact on electricity prices, and should have taken a slightly larger rate haircut.  There’s also the fact that small rooftop projects aren’t controversial and make it possible for more citizens to participate in Ontario’s energy future.

What I didn’t see in this review was a much-needed call to accelerate transmission build-out and upgrade distribution systems with an eye to modernizing our electricity system — i.e. building a smart grid that makes the system more efficient and can accommodate more renewables. This entire area, in my view, has been neglected. There was also no talk of creating FITs for geothermal heating/cooling and solar thermal, and no talk of moving larger projects — particularly large wind projects, of say 20 megawatts or more — to the RFP model we used to use. Also, no talk of trying to work energy storage into the mix. At the moment, the FIT program discourages experimentation with solar because wind and solar producers aren’t penalized for producing energy during off-peak times when we don’t need it. The failure to come up with a FIT rate that differentiates between peak and off-peak times won’t lead to the kind of innovation we need.

One small note: It was good to see that domestic content rules are being created for concentrated solar thermal technology. The absence of these rules has made it difficult for Toronto-based Morgan Solar to participate in the FIT program.

6 thoughts on “My quick review of Ontario’s much anticipated FIT Review”

  1. Good quick analysis. Thanks.

    Regarding two points, transmission build-out and distribution grid upgrades, these efforts are outside of the FIT mandate, but are being acted on. I participated at the beginning of a Hydro One, GE, IBM project which is hardening the distribution system with smarter central management combined with smarter semi-autonomous substations for local grid power management. Similarly, there are existing projects to strengthen transmission within Ontario and to other jurisdictions. Have a look in Ontario’s Long Term Energy Plan.

  2. At first I thought that the microFIT pricing was too harsh, as well, but first indications from a supplier are that there is a decent return and a 7-8 year payback.

    The bigger problems from my point of view are what you mention about the 10-100kW, that there is not enough pressure to accelerate approvals and improve the connection delays and refusals, and that the price to be paid out will be determined at time of acceptance by OPA. That is, in fact, what has just happened, but what just happened was a somewhat reasonable response to the huge delays in approvals; now we will have a formal situation in which vendors are supposed to sell something for which they really don’t know the price…. That is wrong. The problem is slow approvals, not changes in prices.

    On the other hand, shortening the installation delay to 18 months reduces the risk of embarrassment to the government of paying too much for systems where the price has dropped drastically.

  3. Tyler, It is with great excitment that the biomass part of fit remains untouched including any bonus amount I assume. Also I have followed Morgan on it’s journey and had thier sales quote us for roof top solar in our product. For numerous reasons thier product should be supported as a “made in Ontario breakthrough”. Paul

  4. No problem headache, always happy to stick my neck out with an unpopular point of view it’s what makes life worth living.

  5. Tyler, Great Coles Notes version. I developed an even more abbreviated one primarily focusing on all the Committees, Task Forces, and Working Groups being proposed to support the development of strategies and eliminate duplication of effort and redundancy … ironic.

    Mike, Thanks for chiming in on who is doing what regarding the infrastructure. The complexity of the governance and control of the generation, transmission and distribution of electricity throughout Ontario is mind boggling; the average homeowner is typically only aware of their LDC, not MOE, OEB, ESA, OPA, OPG, and the fact that Hydro One is LDC on steroids, since they are also on the transmission side of the infrastructure. Many are also not aware that most LDCs are structured such that their sole shareholder is the Municipality.

    Regarding RFP model vs. FIT: The fact that as we move forward, prices will be set at contract award vs. project application, pretty much brings us back to the RFP model for project solicitation & development. The main differences being that there is no competitive bidding process and, barring constraint-related issues, one will be awarded a PPA. To comment on Mark’s concern, Yes – It is difficult to sell something for which the price has not as of yet been determined. Developers who have traditionally identified a buyer prior to developing a project will need to revise their business model to be more along the lines of the RFP-era developers.

    Speaking on FIT mandate, I believe that FIT is to encourage renewables-based electrical generation project development. As such, geothermal and/or solar thermal heating and cooling are not part of the programs mandate. I agree that these types of developments should be similarly encouraged, as they directly contribute through consumption reduction of electricity, oil, natural gas, etc. But trying to identify the nega-watts in order to develop FIT rates per KWh, though theoretically possible, could prove problematic.

    My final spin on the changes being proposed through the Report are that the FIT program is really trying to incentivise Municipalities and communities to address their looming waste management crisis through biomass/biogas/landfill gas-based project development! Yes, Paul, it’s all for you. How to kill two birds with one stone; not that I advocate the stoning of birds.

    P.S. My discussions with Morgan Solar suggest that market potential for their product, based on kWH/sq.m/day, is fair in Ontario, but that there are other markets wherein it is higher on which they are currently focusing.

  6. People should take their green glasses off, so that they could see what a monumental money waster and job killer in industry these programs are.
    This is great for green hustlers, but rising power prices are killing off manufacturing.

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