First a little background.
In 2009, the OPA launched the feed-in-tariff (FIT) program to entice large businesses and developers to install renewable energy projects throughout the province. Clean energy generated from these projects could be sold back into the utility grid at a profit. Wanting to democratize the process and make solar and wind adoption more affordable for homeowners, small businesses, and farmers, the OPA introduced the microFIT program for renewable energy projects generating 10kW of clean energy or less.
Aggregate energy output from microFIT projects was never expected to exceed 1% of the province's green energy mix, and thus, the OPA set its microFIT rates artificially high to encourage adoption. But then an interesting trend emerged. Businesses that lease rooftop space and land from individuals to develop multiple renewable energy projects had a decisive advantage over other microFIT applicants. In effect, they could leverage superior economies of scale to affordably apply for and build renewable energy projects. This was especially true for ground-mounted solar installations that made use of the province's abundant, undeveloped land. Known as "commercial aggregators" these companies accelerated a system that was designed to slowly attract homeowners, small businesses, and farmers. Absent a radical price adjustment, the OPA feared that its microFIT program would quickly run out of funding.
Early in July, the regulatory agency announced that for ground-mounted solar projects, it would cut the microFIT rate from 80.2 cents to 58.8 cents/kWh - a 27% decrease. Moreover, the proposed change would have been retroactive, essentially forcing thousands of applicants to revise the ROIs and payback periods that they had spent hours and untold thousands in legal and financial fees to carefully calculate.
The OPA is still reducing incentives under the microFIT program, ROIs may still have to be recalculated, and the province's solar growth potential is not what it was under the original microFIT arrangement.
So why the collective sigh of relief?
First, the reduction for ground-mounted solar installations is now from 80.2 cents to 64.2 cents/kWh - a far cry from the price adjustment originally proposed. When you compare the profit potential under Ontario's revised incentives to those offered in other solar hotspots around the world, the province still remains in the top five rankings. To wit, the economics of solar energy are still difficult for the average business manager or homeowner to ignore, even with the rate reduction.
Second, the change is no longer retroactive, meaning those who had applied by July 2 under the original guidelines still qualify for the higher rate. While this is probably of little consolation to anyone who just missed the cut-off, more than 50% of the 19,000 microFIT applications already sent in will not require revised payback periods or ROIs.
Third, the OPA's announcement clearly reflects that it listened to the wave of complaints that dominated much of July and early August. Opposition to the pending decision was swift, organized, and passionate, with representatives from nearly every stratum of Ontario's solar ecosystem. There existed legitimate concerns that a program that had yet to celebrate its first anniversary (let alone a two-year review) was already undergoing changes - unilateral changes at that.
In short, the OPA listened, and in many ways, this is perhaps the most important aspect. Once opposition surfaced, the OPA took proactive steps to engage the people. In addition to a month-long open comment period and three Web-enabled teleconferences, it sent representatives to liaise with solar stakeholders directly. At a town hall hosted by Ontario Solar Network (OSN) and co-sponsored by the OPA in late July, the discussion was spirited, but the overall process remained constructive.
Event organizer and OSN President, Jacob Travis, comments that, "Any price change is unfair to those who have already applied in good faith under the original guidelines, but due to the overwhelming response, the continued solvency of the microFIT program demanded a price adjustment." He adds, "There were no easy solutions for either side, but through open discourse and sincere cooperation, we managed to find common ground."
Travis, who was recently invited to sit on the OPA's microFIT Advisory Panel, remains optimistic about the industry's continued growth. "The OPA wants the same thing we all want - a cleaner and more sustainable future." He adds, "With Ontario Solar Network, CanSIA, the OPA, and tens of thousands of solar stakeholders working together, I'm confident the [microFIT] program will continue to be wildly successful for many years to come."
MicroFIT Compromise - Solar Death Sentence or Lifeline?
When the OPA first announced its plans to cut back the microFIT rate by 27%, many would-be solar converts canceled their contracts, some PV businesses enacted hiring freezes, and several plants temporarily scaled back production capacity - and this just over a 30-day period. With faith partially restored in the microFIT program, experts hope that any investment uncertainty surrounding the original rate change will be short-lived.
Early signs suggest that this may indeed be the case. Founding member of OSN, Ontario Solar Academy (OSA), has enjoyed steadily rising enrollment for its 5-day PV Design and Installation course over the past six weeks - an indication that demand for "greener, cleaner, and more sustainable" is not entirely subject to the vagaries of government.
OSA's Marta Michalek believes that her school's enrollment numbers are reflective of much larger trends - trends beyond the direct purview of regulatory agencies. "The microFIT and FIT programs are important pillars of Ontario's Green Energy Act, but the Act itself is a manifestation of the people's will. Michalek adds, "Much of the excitement surrounding renewable energy would still exist in Ontario, even without legislation."
In this regard, Michalek may have a point. One cannot overstate the positive impact of the Green Energy Act, but even before the microFIT and FIT programs first launched last year, CanSIA conducted a detailed study, surveying solar firms across the country. It found that demand for solar professionals far outstripped supply, with more than 41% of companies reporting labour shortages and more than 50% predicting the labour imbalance would only worsen by 2012. Keep in mind that this survey took place during a global economic recession with rising unemployment.
Lessons Learned, Alliances Forged, Future Secured
It is difficult to argue that a reduction in incentives is optimal for continued solar growth in Ontario. Numerous manufacturers and installers had to tighten their belts while losing business and contracts during the July microFIT standoff. And although "commercial aggregators" may have exploited the program's original intent, they did help boost solar energy development throughout the province. However, to focus solely on these examples is to miss the larger picture.
The people spoke and the government listened. The microFIT program was in danger of dying, but through cooperative and constructive problem solving, a solution emerged. Perhaps most important of all, Ontario's success in saving its promising solar industry can serve as an example to other governments around the world as they explore how best to leverage limited public funds to erect a cleaner and greener future.