Category Archives: FIT

Ontario’s Feed-in Tariff 2011 Program Review

It’s been a WHILE since posting and for that I apologize. There’s been a lot of cool (and time-consuming) stuff going on here. Like this, and this. We’re also in the process of setting up our largest internal test site to date, in Southern California. Info to be posted once it’s available.

What I wanted to talk about: today’s the last day that the OPA is accepting feedback on its Feed-in Tariff Program, and even though it’s late in the game, I thought I’d share one of our recommendations.

It’s definitely not the most pressing program change that’s needed. Sitting in on CanSIA’s Small, Large, and Manufacturer Working Groups, I can appreciate that  it probably doesn’t even fit on the top 30 of the pressing issues that the Program Review is set up to address. Even for us, a Domestic Content grid for CPV is something we want to see posted before this.

But, if you’re thinking long term, and for policies that could work beyond the Ontario border, here’s a modest suggestion:

Disclaimer: all credit for this idea comes from Glen Schrader, of Bright Ray Solar, our distributor in Ontario. Glen’s a smart guy, and he’s based in Guelph – being removed from the everyday-running-around that happens at 30 Ordnance probably also helps to see the big picture.

Recommendation: Allocate a portion of FIT contracts for new, innovative renewable technologies.

  1. Along with timely decisions on Domestic Content rules, allocating a portion of FIT contracts for new technologies lowers the barriers to entry that exist for them. Local markets are easiest to develop and new technology companies can use them to establish credibility.
  2. There is considerable value to new technology companies locating in the province, including IP, high-tech jobs, and the potential for export. New technologies should in principle also offer increased efficiencies, lower costs, higher peak-use generation, or added capabilities such as energy storage.
  3. These new technologies don’t necessarily have to be invented here, but they should be primarily developed here – and this itself could attract companies to start up here (like us, who chose to locate here for a number of different reasons).
  4. A carve-out for new technologies ensures that grid capacity will exist for these technologies, which take more time to reach high market penetration.
  5. Other incentives could also be considered to encourage project developers and/ or customers to deploy new technologies. The Province may be best suited to determine the correct policy response, but these could include rate adders (for generation whose key feature is not lower costs, i.e. energy storage, peak-use generation), or accelerated approvals.

Ontario will find it tough (not saying  impossible) to compete with China on the cost of manufacturing traditional silicon solar panels. Policymakers already realize the need to play to the province’s strength for innovation – be it in efficiencies, costs, energy storage or time of day generation. In the way it was set up, the FIT program essentially guaranteed rates for generation projects using technology developed in 2009 – what we need is rates, and other policies, for 2015 technology.

As always, your thoughts welcome.

Electricity Prices Go Up Regardless

Ontario will be having an election this October, and the Green Energy Act is being raised as an issue.  I’ve decided to write this post before I know what different candidates are saying, because I’m not trying to favour one side or the other so much as discuss a point of view.

To start, I’ve heard people criticize the Green Energy Act on the basis that it will increase people’s electricity bills. It will.  But what that objection implies is that somehow, electricity prices would stay the same otherwise.  This is false.  Electricity rates are going up, period.

Why?  For starters, coal, oil and natural gas are all getting more expensive to mine or extract, and consumption for all three is increasing rapidly in China, India and other high-growth economies.  Demand for electricity is increasing in general, and where populations are growing it’s increasing even faster. In Ontario, our generation and distribution infrastructure is old, inefficient and in need of significant and expensive upgrades.  This means that it is getting more and more expensive just to keep things going at current levels, ignoring the fact that we’re already at the very edge of rolling blackouts every summer.  Added to that, some sort of cost for carbon emissions is starting to look inevitable (regardless of your opinion on global warming, that’s just political reality right now), and our current infrastructure still relies too heavily on coal.  I could go on, but you get the point.

NASA Satellite Images of the 2003 blackout in the North Eastern US and Ontario

The 2003 Blackout - The most dramatic recent example of how fragile our power grid can be.

To emphasize: No matter what we do, the price of electricity is going to go up. So, if you’re going to pay more, what would you like to buy with those extra dollars? There are many options, but here are two:

Option # 1: Invest minimally, keep electricity costs low (for now)

Some people will argue that we should spend and invest as little as possible, and our goal should be to keep electricity rates as low as possible now.  This means we don’t focus on any of the serious upgrades we badly need, and we keep importing extremely expensive power when we can’t generate enough in the summer.  This scenario assumes we don’t have to shut down any of the nuclear power plants, and we keep all of our current coal plants running. Electricity costs will still go up, but in the next few years, the increases will probably be slower. Once the growing costs of nuclear power plant maintenance, carbon taxes, rising fossil fuel prices and the long term health costs to the people living downwind from coal fired stations start to add up, things can easily very expensive, very quickly. In the long term, we’ll pay much more, and we’ll get little more than the status quo to show for it.  (And remember, all of the GTA and an overwhelming majority of the people in Ontario live downwind from Nanticoke, literally the most polluting coal plant in the Western Hemisphere.)

Option #2: Invest in a long term energy plan, stabilize and possibly reduce prices over the long term

The other alternative is to invest.  Reasonable people can disagree on the best way to invest, or even if that is a better course of action, and the Green Energy Act is absolutely not the only model for investing in a better energy future for Ontario.

With the Green Energy Act, we are paying more for electricity than we would otherwise. The extra money is used for several things: extensive upgrades to Ontario’s electrical distribution and generation infrastructure, aggressive efficiency and power reduction targets, and direct stimulation of renewable energy development via feed-in tariffs. Feed-in tariffs are controversial. They have been a disaster for Spain and Italy, but have had astonishing results in Germany and Japan.  The Ontario Green Energy Act was built with a specific set of long term goals in mind: job creation; increasing our clean energy supply; steadily lowering the price of renewable energy in Ontario by growing the market; eliminating coal-fired power plants; and, broadly speaking, avoiding instability in supplies and electricity price shocks, thereby keeping long term electricity costs low.

I can’t say if the all of the goals set out in Green Energy Act will be reached, and I certainly can’t say if it’s the best way to reach these goals.  But the goals seem worth trying to reach, and so far things seem to be working well. Unlike Spain or Italy, the OPA and the province have shown they can react quickly to make changes as needed in a timely and reasonably transparent manner. The uncertainty over the future of the Act is preventing a few companies from moving here or investing too much in Ontario operations, but in general, we’re seeing a fast growing solar energy sector.

Personally, I’d want to see strong evidence that the act wasn’t working, or that the added cost to electricity was having a clear negative effect on the province before I could be convinced it should be repealed.  Even then, there would need to be an alternate plan for our energy future, with clear goals and a way to reach them. It’s my opinion, but I strongly believe that doing nothing and focusing on the short term price of electricity without considering the bigger picture will be a bad strategy in the long run.

Relevant reading:

The International Energy Agency’s (IEA’s) World Energy Outlook 2010 Fact Sheet

OPA’s Q4 2010 Progress Report on Electricity Supply


Good News: OPA extends grid connect date for approved FIT projects

Yesterday the Ontario Power Authority (OPA) announced that it’s granting developers up to one year in extensions to grid connect renewable energy projects that have already received their Notice to Proceed. I see only upsides to this. Environmental assessments, public and aboriginal consultations, and other elements of the approvals process have dragged on in some cases, and the Ontario solar supply chain has not adapted to the local content rules as fast as expected. The extension means that many good projects that are taking longer than the 15 months originally allowed won’t have to go back to the drawing board. The full story from the OPA is here.

I spoke with Nic about the extension this morning, and he made the point that the OPA’s decision really highlights their reflexivity – one of the reasons he has confidence in Ontario’s FIT program.  Italy and Spain have ended up with huge headaches because of FIT programs that had to march full steam ahead into unintended and unwanted consequences.  These countries made a set of fairly inflexible rules at the beginning, and a few years later found themselves mired in trouble.  There was a small uproar over the ground-mounted microFIT rate cut this past July, but that decision, along with this latest one, demonstrate an ability on the part of the government to react in near real-time to prevent problems down the road.

The frequent rewriting of the rules may seem frustrating, but consider this recent Greentech Media article, “How Do You Say Colossal Solar Mistake in Italian (that would be “errore solare colossale).”  More than 50,000 applications have been submitted to Italy’s FIT program (as opposed to Ontario’s 4,400 to date), putting the Italian government on the hook for an approximately $60 billion dollar incentive burden – according to Vishal Shah of Barclays Capital – a figure “higher than the German/Spanish subsidy burden.”

Granted the issues at stake in Ontario and in Italy are different – Ontario is compensating for the delays in project start times due to the learning curve that both regulatory bodies and industry are going through; Italy more so needs to put a break on the pace that applications are being submitted. As well as to make sure the applications they’re getting are legitimate. The point is, as Eric Wesoff, the author of the article, notes, “that planning and regulatory diligence can make or break a renewable energy policy. Germany seems to have done it right, while Spain and perhaps now Italy are examples of how to get it wrong.”

We may wish that the Ontario government had designed a perfect FIT program up front, but the reality is that the program seems to be working as intended, and the government seems to be on point in allowing a degree of flexibility in seeing the program forward.