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article imageOntario Power Authority suggests new price for micro generators Special

By Colin Beckingham     Jul 7, 2010 in Environment
The Ontario Power Authority (OPA) has decided it wants to revise downward the price it is prepared to pay for new grid-tied ground-based micro electricity generation, opening negotiations with a new suggested price of 58.8 cents per kWh.
In a press release issued on July 2, 2010, Colin Anderson, CEO of the OPA is quoted as saying "The OPA believes the new price category is fair, reasonable, more accurately reflects the costs associated with ground-mounted projects and maintains the long-term stability of the program. It enables the program to continue to meet its original goals and provides proper value to both generators and ratepayers."
The OPA, which operates under the auspices of Ontario's Ministry of Energy and Infrastructure, has the delicate task of encouraging new generation of green power, while at the same time paying as little as it can on behalf of consumers.
The MicroFIT (Micro Feed In Tariff) Programme is designed to enable homeowners, landowners, farmers and others to privately install Photo-Voltaic (PV) and other installations that would feed green energy from non-centralized locations back into the grid. This would reduce Ontario's dependency on fossil fuel-based generation capacity, replacing some of the energy requirement with non-polluting sources such as PV, wind and micro hydroelectric. The PV installations would be small (less than 10 kiloWatts capacity), and could be mounted on a roof or on the ground.
Initially, under the old RESOP programme, the price was fixed at about 42 cents per kWh (kiloWatt-hour) generated, guaranteed over the life of a 20 year contract. Subsequently, in the MicroFIT programme, the price was revised upwards to 80.2 cents per kWh to encourage more interest. This resulted in 16,000 new applications which placed a strain on the capacity of the authority to process applications, leading to significant delays in the approval process for potential generators.
The OPA clearly feels that at 80 cents it has overpriced the offer and is seeking a reduction in the price for ground-mounted systems. At 58.8 cents, the new suggested price is 25% lower than the price which attracted so many expressions of interest.
The programme has spawned an industry whose major stakeholders are the hydro power consumers (represented by the OPA), the individual producers, and a number of specialist technical companies who offer support to set up the generating capacity for the producers, providing various services including supply and installation of equipment to arranging inspections and permits.
The change in price has come as a pleasant surprise to consumers, but some potential generators on the waiting list are not very happy.
Steven Kayser, CEO of Greenworks Solar Power of Ottawa, Ontario, notes, "With the announcement of a possible new price category for ground-mounted systems, there has been significant concern from potential customers and we are happy to see that they are expressing their concerns to the Ontario Power Authority. If the OPA does decide to create a new price category, however, the onus will fall on companies providing ground-mounted systems to find ways of providing their customers with a system that can still provide them a reasonable rate of return. GreenWorks remains a strong believer in the microFIT program, and is prepared to take the steps necessary to be able to continue to provide their customers with an excellent investment."
In order to assist landowners to decide whether the investment is a wise one or not, organizations such as RetScreen International have developed freely-available spreadsheet applications which take various parameters such as geographical information, a database of the productive capacity of a range of solar panels and the price per kWh as input and provide an output summary of the benefits and costs, both real and economic, of the installation. The result is a picture of the profitability of the project, providing the payback intervals and the expected rate of return before taxes.
Given this change in one of the most important parameters, thousands of Ontario landowners, farmers and entrepreneurs will be revising their spreadsheets and also their opinions as to whether to proceed with their plans or not.
Some potential investors are finding that while the price of 80.2 cents compares favourably with a bond at 3%, the new suggested price does not. "Everyone can make up their own numbers" said one commentator; a critical point in the calculation appears to be how the equipment is valued at the end of the contract. Will the panels still be worth something or will some new technology come along to supercede them?
Others are caught in the unenviable position of having signed a contract for installation based on an expected revenue stream at 80.2 cents but do not yet have a contract with OPA for that price.
As reported in the website "MicroFIT solar systems are now installed & running with Hydro & ESA approvals but no contract from the uncommunicative OPA. We need to appreciate that no 2 systems will be installed at necessarily the same cost, & that a financial analysis based on an understood revenue stream is needed for a decision. Many have done this at 80.2 cents. "
A typical installation requires a capital investment of $50,000 to $100,000 depending on capacity, and is intended to repay through generation revenues both the cost of the installation and provide an economic return over the life of a the 20-year contract.
According to the OPA press release, the OPA will be holding webinars to discuss this new proposal and is inviting comments. Details are available from the microFIT website.
Some generators who are already signed up to the programme and have been generating power have yet to see any payments from OPA.
In a letter to the editor of the Frontenac News, Tom Kaemmer of Frontenac County in Eastern Ontario reports "One and a half years ago my wife and I put 14 solar panels on the roof of our house. We considered it a good investment both environmentally and financially. We keep hearing about the micro Fit program and all its benefits. To date it has only benefited Hydro 1, the OPA (Ont. Power Authority), the ESA (Electrical Safety Authority), the politicians and the installer of the system."
When contacted on July 6 Kaemmer confirmed that he is still waiting for his first cheque, and as a result of the appearance of the letter in the Frontenac News he has been contacted by others who are similarly waiting for payment, in one case for two years.
One Ontario resident, a participant in the MicroFIT programme who spoke on condition of anonymity, expressed the view that even at 58.8 cents there was still a fair return on investment for potential investors. He suggested that OPA was ensuring that cheques were going to those who signed contracts for the MicroFIT programme before those who switched from the old RESOP programme to the MicroFIT scheme in order to benefit from the higher rate.
More about Microfit, Hydro, Ontario power authority, Photovoltaics, Electricity supply
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