The solar grid tied industry in Ontario is currently on the edge of its seat in anticipation of the new rates that OPA will release shortly for the MicroFIT and FIT (feed in tariff) program. The rumour mill is running three shifts a day as there is no shortage of possible scenarios that could be revealed with the new rates in February. The common belief is that the rates will drop, and the program will continue on as its overwhelming response from Ontarian’s will drive its future success.
For anyone following the program this drop in rates should not come as shocking news as the plan all along was to review the rates at the two year mark. The drop of rates coincides with the pattern in other countries that have adopted similar incentives i.e. Germany, Britain, Denmark etc… to gain insight on renewable incentives from Europe and how rates change over time click here and here.
Typically, Feed in Tariff programs will give the most generous rate during the earliest first stage of the incentive, as we have seen in the first two years here in Ontario. One reason for this is that the incentive came with domestic content rules. These rules were put in place to make sure that equipment used for the incentive such as solar panels, racking, inverters, etc… had a certain degree of “made in Ontario” content which would encourage investment from corporations and help create green collar jobs in Ontario. Costs of building facilities, hiring and training new employees, all the way to installers learning the trade all come at a premium in an immature industry. Now we find ourselves at a point where rates will be lowered and everyone from the manufacturer through to the installer will have to operate leaner and with increased efficiency sourced from the experience they have gained through the past two years. The success of this incentive remains paramount and that success is dependent on keeping an attractive payback period for the solar system owner. Thus, as rates drop the overall system cost must drop to maintain an attractive payback period of 7-10 years out of 20 year contract with the OPA.
Over the next several years this incentive and its rates will continue to decline, but it is the success now that will help create long term jobs that I hope will stay long after the incentive disappears. Although, most can only guess at what the new rates will be for the FIT program, the focus of the industry will be to adjust to what the new rates are to stay competitive in a tightening business.