Changes to Ontario’s solar energy incentive program have applicants and manufacturers crying foul. In October 2009, hoping to stimulate investment in green energy, the province unveiled the micro feed-in tariff program (microFIT). Farmers, homeowners and small business owners could install small solar arrays (under 10 kilowatts) and sell the power to the Ontario Power Authority at a price that was guaranteed for 20 years.
On July 2, the power authority quietly announced that the price for power generated using ground-mounted solar arrays would drop from 80.2 cents to 58.8 cents per kilowatt hour. Smaller rooftop systems aren’t affected by the change.
OPA painted the change as fixing a “glitch” in the system when ground-mounted projects proved far more popular than anticipated. The government received 16,000 applications, of which 10,000 were for ground-mounted systems.
The change caught applicants and manufacturers of solar equipment flat-footed.
“This rate cut on the ground-mounted systems caused everyone that had an application in or a deposit in to cancel orders,” said John Hubman, president of H-Y Manufacturing, located outside of Elora.
H-Y Manufacturing makes tracking systems that allow ground-mounted solar arrays to follow the sun, maximizing their power output. They started building the tracking systems after the program was announced, investing $150,000 in machinery and another $150,000 in research and development.
In early fall 2009, still in the depths of the recession, Hubman had six employees. By November, with orders pouring in, he was hiring people back and soon added a second shift. The company went from building one or two systems a week to building between eight and 10.
Now, customers are cancelling or putting their orders on hold and they aren’t building anything. The investment and the jobs created are now in jeopardy.
“Money aside, the worrisome part is the effect it’s going to have in laying people off. It’s back to the gloom days of the middle of last year,” Hubman said.
Paul Parker, a professor of geography and environmental management at the University of Waterloo, welcomed the program when it was announced. He’s had solar panels on the roof of his Conestogo home for the past five years. Through a net metering system he gets credit for his electricity costs, which works out to between six and 10 cents per kilowatt hour. At that rate, it will take him 50 years to pay off his investment.
Few Ontarians were willing to shell out tens of thousands of dollars and wait 50 years to recoup their costs, which is why Parker was happy to see the government making solar power more attractive. He believes the new price of 58.8 cents per kilowatt hour is appropriate, given that the costs of equipment have come down substantially.
“To my mind, how it’s implemented is the problem,” Parker said. “I can understand the frustration, if you make your decision based on one price and then find out you’re getting a different one.”
While many applicants and suppliers were taken by surprise by the price change, John Hogg has been waiting for something like this to happen. Hogg is president of Green Grid Solutions of Waterloo and has been in the renewable energy business for 10 years. He says that 80 cents per kilowatt hour is an unheard-of price; in Europe, governments offer between 60 and 70 cents and people can’t believe it when he tells them Ontario was offering 80 cents.
“It was almost disappointing that the number was so high because it just created a frenzy and from experience with OPA, you know they’re going to claw back at a certain point.”
The biggest problem is that OPA intends to make the price cut retroactive to early 2010. People who submitted their applications and went ahead with securing financing and ordering the systems are now caught in the middle.
“It would make sense to say from this day forward we’re going to cut rates, but to make it retroactive … to go out to the communities and promote renewable energy, promote 80 cents and then make it retroactive to before they started this publicity campaign, that’s a bit disappointing,” Hogg said. “The confidence people had in OPA is completely dissolved.”
Hogg pointed out that the rate cut disproportionately affects rural areas, where people have the space to install ground-mounted systems. Farmers, already skeptical of anything involving government, will be even more so now, he said.
Hogg believes that when the 30-day comment period for the change expires, the government may compromise a bit and settle on a price somewhere between the 58.8 and the original 80 cents per kilowatt hour.
Hubman isn’t optimistic. He’s waiting for Aug. 3 when the comment period closes, but he’s afraid that he’ll be laying off employees again.
“I think it’s a forgone conclusion,” he said. “They hoodwinked a lot of people in Ontario saying that we’ll pay you 80 cents, go ahead and develop all of this and create jobs.”