Serendipity

This week, Ontario’s new Feed-in Tariff (FIT) program kicks in. The program sets specific prices that the province will pay to people who develop their own renewable power sources and sell the energy back to the grid. The key idea is that it sets up a guaranteed return on investment for people to build renewable capacity, and at a premium price, too.

The prices are set at different levels for different types of power generation and for different sizes of installations, with each price point designed to make it attractive for people to invest (with presumably some weighting in favour of the power mix the province would like to aim for). For example, a homeowner who puts solar panels on the roof will be paid 80c per kilowatt hour ($0.80/kWh), with the price guaranteed for 20 years. That’s for installations lower than 10kW; the price goes down for bigger installations (e.g. for 44c/kWh for rooftop solar larger than 500kW).

Current electricity prices in Ontario are around $0.08/Kwh, so the province is paying 10 times the current market rate for small-scale solar generation. Which makes is a pretty major subsidy. However, the entire program is intended to be revenue neutral. The creation of a large network of small suppliers may prevent the province having to build so many new power stations (the province recently turned down bids of $26 billion for new nuclear plants), and allow it phase out the existing coal plants within the next few years.

So what does this mean for the homeowner? A typical household solar installation will be well below 10kW. I grabbed a few ballpark figures from the web. A small household solar installation might generate about 12kWh per day, i.e. about $10 per day, or about $3,500 per year at the FiT rate; while the average household consumption is about 12,000kWh per year, or about $1,000 at current market prices. So the panels will pay for themselves within a few years, and then become a source of revenue!

The idea of a Feed-in Tariff program isn’t new – they’ve worked well in Europe for a number of years, and indeed the province of Ontario has had one in place since 2006. However the old program was criticised for setting rates too low, especially for small-scale generation; the new program increases the rates dramatically – for example the new small scale solar rate is twice the old rate.

Full details of the new program are at the Ontario Power Authority’s site.