On Monday, Dalton McGuinty’s government confirmed what many in the renewable sector knew was coming: a review of the province’s lucrative feed-in-tariff (FIT) and microFIT program that rewards those who produce renewable energy with premium prices.
Energy Minister Chris Bentley announced that the review would be led by deputy minister Fareed Amin in conjunction with the Ontario Power Authority. Aside from reassessing the program rates, Bentley also confirmed that the review would consider new technology and fuel sources not included under the current plan.
“We’ve had an enormously successful start to the FIT program,” he said in an interview Tuesday.
“We signed contracts for enough green energy to power 1.2 million homes and those contracts have already generated or will generate 20,000 direct or indirect jobs.”
Under the review, any FIT contracts signed prior to Aug. 31 and any microFIT projects in the application phase before that date, will not be affected by the new prices.
Bentley said the review was planned when the FIT program was first introduced back in 2009, and is designed to increase efficiencies and balance costs across the whole sector.
“We want to ensure that we continue to grow green energy sources and jobs, and get those at the right price. That’s what this review will enable us to do,” he said, adding that he did not know what the new prices could be.
Bentley would also not go so far as to confirm that a drop in premiums paid to those generating the power would necessarily lead to a drop in prices paid by consumers.
“They’re related, but one does not necessarily lead directly to the other.”
Under the old program, solar projects could net a return of up to 80.2 cents per kWh, wind saw returns of 13.5 cents per kWh, and biogas projects could be paid up to 19.5 cents per kWh. The FIT program applied to commercial projects while the microFIT projects were those on residential properties.
The program was a contentious one during the recent provincial election, and PC leader Tim Hudak pledged to scrap it, calling it “unsustainable” for ratepayers across the province who couldn’t afford the subsidies.
Critics have also blasted the program in recent months by saying that despite the fact that costs to install and operate solar systems have dropped dramatically, the amount being paid by the government for each kilowatt of energy has not.
Bentley said that this review was another step in the natural progression of the green energy program in Ontario, and that these sorts of reviews were common across Europe, which has a longer history with renewable energy, and would help bring prices more in step with the true costs of producing the energy.
He also said he doesn’t think the review, which isn’t expected to be complete for at least a couple of months, would lead to stagnation or concern in the renewable sector.
“That’s why the review has been directed to find the right price,” he said. “We’re trying to get the right balance.”
What does this review mean for companies in Waterloo Region? As anyone who has driven along the countryside can tell you, renewable energy – in particular solar and wind – has become very popular as homeowners and businesses looked to cash in on the high prices paid out by the government in an effort to get the green energy sector off the ground during the uncertain economic climate of 2009.
Elmira Stove Works made the move to begin designing and assembling fixed ground-mount and roof-mount solar units ranging from 10 kilowatts up to 500 kilowatts in the middle of 2010.
Since then, the cost of building and installing the units has dropped due to more manufacturers and more efficient production methods, and the company said that the incentive prices paid by the government through FIT or microFIT need to be adjusted as well to reflect that reduction.
“It’s almost too good of an investment now and the government was not planning on having the rate of returns to be as high as they are at this point,” said vice-president Brian Hendrick, who estimated that some of the packages they sell have fallen by up to 20 per cent in price.
He said that the difference in price for the energy produced should be made up by the less costly systems, meaning that renewable will remain a good investment.
Good investment or not, some installers are unhappy with the way the review was handled by the government. Jim Bolger, one of the partners in Waterloo Energy Products in Maryhill who specializes in solar as well as geo-thermal energy, said it should have been dealt with much differently.
“I’m disappointed to a certain regard with the lag to get the review done,” he said. “I anticipated that some of the consulting process would have been a work in progress.”
Bolger fears that the public will shy away from renewable energy until they know for sure what the new rates are going to be and what the new program will look like, and that could mean two to three months of lost or reduced business for his company.
“The delays to do this process, which could have been done ahead of time, will adversely affect contractors in this province for sure,” he said.
Rather than announcing the cutoff date for the contracts under the old program after that date had passed, which the government did by announcing the Aug. 31 deadline on Oct. 31, Bolger suggested that they could have been conducting the review process earlier and made an announcement ahead of time in order to provide customers with a clearer idea of when the deadline for the old pricing would be, and to give a better idea of what the new prices will be.
“There has been a substantial investment in the manufacturing side (of solar power) in the province, and this really puts that sector in limbo.”
Yet as a distributor of geothermal systems, he is also optimistic that the energy source could be included under the government’s green energy plan, though there are challenges with that as well, he said.
Since geothermal does not produce electricity, but instead reduces consumption, it does not fit under the current pricing scheme that rewards energy production and not energy conservation.
That would have to be changed, he said.
“Conservation can easily be quantified and tracked, and it’s just as valuable to reduce energy as it is to produce it,” he said.
“If you reduce enough of the demand for kilowatt hours, then it alleviates the need to expand the grid, which comes at a significant capital cost.”
While both Bolger and Hendrick have concerns that the lag between the end of Aug. 31 and the announcement of the new FIT program – whenever that might be – could have a negative impact on their business, Hendrick is confident that it will only be a blip in the long-term success of Ontario’s green energy economy and should not take the wind out of the province’s renewable energy sails.
What’s more, Hendrick said the drop in prices should lend more credibility to the program and more credence to its stability in the future.
“It might be more acceptable to some of the naysayers of the program (if premiums drop).
“(The government) have their finger on the pulse of the industry and they won’t reduce prices to a number where people just throw up their arms and say ‘Ok, I’m out, this doesn’t make any sense”.
And for Bentley, who’s only been on the energy file for about two weeks after taking over from Brad Duguid, he reaffirmed the Liberal party’s commitment to the green energy act, the green economy, and following through on their pledge to shut down the province’s coal plants by 2014.
“We have done a lot of work in the past eight years modernizing a transmission system that didn’t have the attention it needed before, building a lot of new generation, launching and building a green energy economy.
“A lot of work has gone on and some important decisions will be made over the next several years.”