Ontario’s MicroGeneration Feed-Tarriff

Climate Change

FIT

A relatively unnoticed part of the McGuinty government’s Green Energy Act is the plan to establish a preferential feed-in tarriff (FIT) for renewable energy generation.  The FIT program provides incentives for homeowners to install rooftop solar and other renewable energy generation equipment (windmills, etc.). 

Homeowners who produce energy can tie into the Ontario electrical grid and sell their power at rates up to 10x more than their cost of electricity from the grid!  The rate for rooftop solar (80.2 cents) is double the previous fixed rate for purchasing power from home solar systems and 10x the average rate for electricity  during daylight hours (8 cents).  The approval process is also simplified and streamlined for home and small-business-scale systems that are less than 10 kW.

The rationale for the program is that it is cheaper to encourage consumers to install their own micro-generation capability than to spend hundreds of billions replacing the coal-fired generation stations that currently produce 20% of Ontario’s power (the current installed capacity at Ontario’s four coal-fired generating stations is 6,434 MW and this is used 15 – 30% of the time depending on the availability of other non-coal generating stations).

Each home that micro-generates its own power displaces demand for centrally-produced power.  Solar generation is especially valuable as an energy source because it produces power during peak periods of energy demand as shown below.

 Ontario Hourly Demand

Economics

The FIT price schedule is still being fine tuned pending final approval of the Green legislation.  The average price for most non-solar energy production is 13.5 cents per kWh.  Solar production is clearly favoured and ranges from 44 – 80 cents per kWh.

Suppose the average home installs a 0.32 kWh rooftop system costing approximately $4000. Typical PV Solar panels have a life expectancy of 20 – 25 years. These systems are virtually maintenance free and, because your extra power goes into the grid, you don’t need to mess around with batteries.  The expected efficiency of a grid-attached PV Solar micro-generation system is about 95% since the primary loss is only when the DC output is converted to AC by your onsite inverter.

According to Natural Resources Canada, Stittsville has a PV potential of 1201 kWh / 1000 kW installed generation.  So a 0.32 kW system x 1201 hrs = 384 kWh per year x .95% efficiency = $365 kWh x $0.802 = $293 per year.  A system costing $4K will pay back in just under 14 years. A good guide to calculating the economics of PV Solar in Canada can be found in the Photovoltaic Buyer’s Guide.

Under the FIT program, you get the benefit of this production even if you consume more energy than you produce. When a FIT micro-generation system is installed, your local power company will install a meter that measures it’s output and you will be give a credit for the energy produced based on FIT pricing.  Your electrical bill will reflect the cost of your power consumed from the grid (at an average of 8 cents during peak period) minus the credit for your power produced to the grid (at a rate of 80 cents during peak period).

If you plan on selling your house within the 15 year payback period, your buyer will benefit from the micro-generation and you should be able to negotiate that value into your resale price for your home. 

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3 Comments

3 Comments

  1. microchap  •  Apr 28, 2009 @5:42 pm

    At first sight it might seem a great idea to encourage individuals to install their own environmentally friendly generation technologies. However, take a second to consider the economics and the impact on the global economy. If these technologies cost 10x the current retail cost of electricity, that means you will consume 10x the resources to deliver the same result as more efficient central plant such as large scale wind. Somehow the solar industry has managed to con governments across the world into subsidising their basket case technology which is neither economically viable nor environmentally friendly (it is incredibly energy intensive to manufacture). German taxpayers alone have committed tens of billions of euros to produce a tiny fraction of their electricity from PV, contributing very little in the way of environmental benefits and diverting resources from some quite sensible technologies like CHP, wind etc.
    FIT is sub-optimal use of finite resources; solar PV (in Western countries) is a scam of obscene proportions.

  2. renaud  •  Apr 28, 2009 @9:33 pm

    The rationale for offering 10x the current retail cost of electricity seems to be based on 2 factors:

    1. The alternative cost of installing new nuclear generation is massive and would trigger a substantial increase in the cost of electricity. Even just maintaining and retrofitting existing plants has cost hundreds of billions of dollars. Paying more for PV solar does not mean that more nuclear capacity would cost less.

    2. Other forms of renewable energy do not peak their production during the same periods as peak demand. Wind is highly variable. BioMass and Hydro are constant. Stimulating solar production that matches demand more closely saves money in managing transmission and distribution costs.

    There are certainly more cheaper and cost-effective ways to generage renewable power. Given that the province desparately needs to retire 20% of its existing production which is coal-fired, a good arguement can be made for offering the same preferential rate to all forms of renewable power.

    The cost of current electricity does not adequately reflect the true cost to the environment and to our society of GHG. 10x is a small premium to pay for displacing coal IMHO.

  3. microchap  •  Apr 30, 2009 @6:25 pm

    I am not for a miunte proposing nuclear as an option; I am simply saying that given finite resources we should use them wisely not squander them on distracting, useless technologies like PV. In UK, and I suspect in Ontario, peak demand occurs in cold winter evenings when there is very little sun. That is my point; PV may make sense in sub-Saharan, off-grid applications, but it is palpable nonsense in developed nations with cooler climates.

    Large scale wind, together with other sensible, cost-effective sources such as CHP can deliver low carbon, relatively cheap power. In Ontario you even have the luxury of hydro to provide back up when there is no wind; it does not have to run baseload, in fact in UK we use pumped hydro as rapid response to back up conventional plant during peaks and outages.

    10x is not a small price to pay; it is a waste of money!

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