Solar MicroFIT contracts for homeowners: An overview of Ontario’s Green Power Initiative

WILL CROTHERS

microfit

In 2009, the Ontario government passed the Green Energy and Green Economy Act as a legislative measure to reduce its carbon emissions and to encourage adoption of renewable energies. Beside the environmental aims, the government’s response was in part due to the future challenges it would face on both the power production and distribution side.

According to the now-merged Independent Electricity Supply Operator (IESO) and Ontario Power Authority (OPA), the province’s total power production mix in 2014 was 62 per cent nuclear, 24 per cent hydro, 10 per cent oil and gas, and four per cent wind. The problem they face is that Ontario’s nuclear facilities are reaching the end of their intended lives, driving upkeep costs and energy prices upward. With this inevitability, to either maintain or retire the plants, Ontario must combine conservation of energy with replacing the loss of generation capacity, on an aged distribution grid.

Part of the government’s strategy to address this was incentivizing solar installations. MicroFITs are solar installations no larger than 10 kilowatts (40 standard roof panels). A kilowatt hour is a charge of one kilowatt absorbed for a full hour’s time.

Each year, the IESO/OPA has approved applications to contract with Ontario homeowners, nonprofits, farmers and places of worship under the MicroFIT (Feet In Tariff) program. In exchange for the building owner investing in a solar array, usually their home roof, MicroFIT contracts agree to pay a fixed rate for every kilowatt hour (kWh) fed to the local grid.

Larger systems typically start in the $30-$40,000 range, with a variety of factors including the installation contractor, roof type, panel modules and connection fees. Everything generated is sold to the grid for 20 years for that fixed FIT price, but the homeowner is still billed for their consumption at the going market rate. It is different from what is known as ‘net metering’, where no premium is paid, but solar panel energy production on your roof reduces or nets against your consumption.

Following the IESO/OPA offer to contract, the local power provider can also reject the application. Rejection is generally based on local grid capacity, therefore, only so many are approved in each neighbourhood. Once approved at that level with the offer to connect, the installation stage can begin, while observing other regulations such as local building permitting. Incremental costs can include insurance or the interest on credit taken out to finance the purchase.

The 2015 contract price is 38.4 cents per kilowatt hour generated. This is much lower than the 2009 rate of just over 80 cents, due to incentivizing the earliest adopters and to address more expensive panel and installation costs in the beginning. The panels can be thought of as renting your roof space out to your power company over the life of the contract, then netting against your power consumption afterward. From the homeowners perspective, it is both a financial investment and home renovation.

The local power supplier administers the payment process with their billing cycle, with monthly payments peaking over the summer months before falling over winter. Ideal conditions for sun exposure at any time of year in Ontario are a south facing roof with no tree/shadow issues. A young roof is ideal, or the willingness to renovate an old roof where the panels would be mounted.

A common criticism against the program has been that the above market price paid to homeowners would drive prices higher. The math is right, but the scale of its effect seems to be overestimated. The increasing costs to service the older grid and nuclear plants is a bigger cost driver.

The IESO/OPA website for MicroFIT information can be found on fit.powerauthority.on.ca

*** William Crothers is employed in the solar industry; the name of any company in which he is involved is not detailed in the article, as it is aimed at describing the MicroFIT program, its intended purpose, and to give readers a sense of what the application process entails.

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