Brickmoir Farm
To say that the Ontario Power Authority’s proposed rate changes to the microFIT is unpopular is somewhat of an understatement. From nearly every corner of the province, critics have decried the proposed price cuts, organizing en masse to protest the Authority’s unilateral decision.
The majority of arguments have focused on what could potentially happen if the changes actually go through. Homeowners and businesses will have to revise their financing agreements and expected ROIs for ground-mounted solar PV systems, thus, causing severe delays in the province’s rapid green expansion. However, the mere fact that the OPA has temporarily suspended its approval process has already started to make waves within the industry. The ripple effect is not some hypothetical future scenario - the consequences of the OPA’s decision are being felt now.
The following story documents how one Ontario family’s months of planning, researching, and spending has already gone to waste because various lease and financing deadlines expired during the prolonged wait.
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The microFIT Fiasco
The third week of June, my husband and I signed a contract to install a 10kw microFIT system on our 96-acre farm. Our Ontario Power Authority application was put in on March 17, and our conditional offer was expected any day. As with many others, we spent countless hours researching and interviewing contractors and arranging financing. We struggled with insurance issues that resulted in our changing to another company after 33 years and had been waiting for our conditional offer for over 15 weeks.
When we applied, we were told that it would be a little longer than 30 days for our conditional offer to arrive. At the time we arranged for financing we were able to get a very good rate that was guaranteed for 120 days, which takes us to July 28. For the last few weeks we had been eagerly awaiting our conditional offer and looking forward to getting started with our project as our contractor informed us that one of his other clients had received his conditional offer in early June and his application had been made on March 18.
At that point, we expected to hear any day. We now understand why we did not. The OPA obviously had virtually stopped issuing conditional offers to any application that stated that the installation was ground mounted some time ago. If we were to venture a guess it would be around the time where conditional offers slowed to a trickle, likely January. Our application went in March 17 and never had a hope as we indicated that we would be installing a ground mounted system. That means that even prior to our putting our application in, it was likely doomed. All of the research, time, financing arrangements, contractor interviews, very costly insurance change was for nothing from the get go.
That is infuriating for us, for all the others in the same boat, and for the businesses that invested in this so heavily. The fact that the OPA continued with this as if all was going along and that the only problem was not enough staff to go through the applications is as close to criminal as we can see. Maybe not in the legal sense but certainly in the moral one. We had as recently, as June 24, been in touch with them regarding our submission and only received following generic form message.
From The Ontario Power Authority Date June 24th, 2010
“Hello Mr. & Mrs. Shane,
Thank you for your inquiry regarding the status of your application to the microFIT program. We regret any frustration the delay in response has caused.
Individuals and businesses from across the province have truly embraced the idea of generating green energy. As a result, the number of applications to the microFIT Program has far exceeded all expectations – the OPA has received more than 13,500 applications to date, and we are working through them as quickly as we can. We recognize that applicants are waiting longer than originally anticipated for their conditional offers, and we have hired a number of new staff to expedite this process.
Due to the very high volume of applications, we expect it will take until the fall to process all of them. If your application was submitted before March 31, 2010, you can expect to hear back from us by August. If you submitted your application by May 31, it will be processed by September. We are unable to give you an exact date in August. but we are doing all we can to get through the applications as quickly as possible.
We want to emphasize that the Ontario Power Authority is committed to the success of the microFIT program for the benefit of the province’s ratepayers. We encourage you to periodically check your My microFIT home page for the status of your application.
Thank you for your interest in the OPA’s Feed-in Tariff Program.
Regards,
FIT Communications
Ontario Power Authority”
On Friday, July 2 at approx 5:00PM, the Ontario Power Authority announced that it would be cutting the rate for ground mounted microFIT solar projects from 80.2 cents/kilowatt hour to 58.8 cents/kilowatt hour. This was done late in the day on the Friday of an extended long weekend when they knew that many including MPP’s would be away. They also closed down their website on that day until 10:00PM in order to make changes and prevent people from getting into the site and seeing their plan.
This was to be a huge investment for us in excess of $118,000.00 for what we thought seemed like a great program - a win-win situation that would create clean energy while stimulating the Ontario economy. We could understand that the OPA might at some point need to review pricing but to do so after having so many people (approximately 11,000) had been waiting for so long and not honour the pricing to those who have had an application in for months is just wrong.
The price we were all told was to remain at 80.2 cents/kilowatt hour until October of 2011. This would provide an opportunity for companies to make business plans and for people to proceed with their budgeting and forecasting. There is no way that we will go ahead now with this new pricing as it no longer makes financial sense for us. For those such as Brad Duguid, our Minister of Energy and Infrastructure, who stated in a recent article that the rate of return for a ground mounted project is 30% to 40%, let us assure you it is not. The reality in our case, as it is for many, is approximately 13.5% and that is not including financing costs, insurance, extended warrantee or service plans, all of which would reduce the rate of return by at least 3%. At 58.8 cents/kilowatt hour, it is not even close to allowing for a reasonable rate of return.
Knowing that many of the conditional offers that have already been made will never reach fruition is also very frustrating for people like us who already have signed contracts and are ready to go. With the conditional offers allowing for up to one year to complete installation it will be quite some before it is known how many installations will actually take place.
In the meantime it seems to us that people who have the space available for ground mounted systems are being penalized whereas the roof mounted systems will find themselves on industrial building rooftops in cities across the province. It looks like the small guy or farmer loses out again and the businesses win. From what we have heard, one of the grocery chains should be enjoying their microFIT installations on over 120 stores at 80.2 cents/kilowatt hour before long.
The OPA should have made the new pricing effective for any new applications after July 2nd at the very least. In our case, the 30-day comment period will take us beyond our guaranteed financing rate, and that will change things for us even if approved at 80.2 cents/kilowatt hour.
To add insult to injury the OPA held 2 very well attended Webcasts, during which they were repeatedly told that roof mounted systems were not more costly than ground mounted - in fact, it is the opposite. They were asked to be transparent about their numbers and on July 14th they released their rationale.
There are convenient mathematical errors in their calculations. The OPA shows their ROI for a typical tracking system as 23% when it is actually 15% ($13,300 / $90,000 * 100 = 14.8%). If this is simply a math error why not correct the error and repost the numbers? They also left out their costing of the roof mounted systems which was critical information, after all, the issue as they see it is that ground mounted system generate a much higher return than roof mounted systems. They have been informed of the error in the ROI for the 80.2 cents/kilowatt hour pricing and asked why they have not included the rooftop pricing, and as of July 22, they have still not made a correction. It is obvious that there is no way for them to make the numbers justify their position.
We are not as well versed on the business issues with this rate cut, but there is an issue of a 40% Ontario content requirement, which will change to 60% on January 1, 2011. With all of the delays caused by the Ontario Power Authority, this puts the installers in a very difficult position considering they are not able to do installations at the most ideal time of the year. The OPA has stated that they are not looking at extending the content rule.
They claim that they are doing this to make the program sustainable, but it is obvious that all it will do is make the program unworkable. 58.8 cents/kilowatt hour does not produce even close to a reasonable rate of return. 80.2 cents/kilowatt hour did, and that is why the program was such a great success.
Our government is trying to kill a program that could have brought clean energy and jobs to Ontario. But even worse, they have lied to and mislead honest hard working citizens and businesses that they actively encouraged to jump on the bandwagon. During both Webcasts it was very sad to hear story after story of people and businesses that believed in our government and who as a consequence will be left in financial ruin if this goes through.
Louise & Mike Shane
Almonte, ON
