Rethinking Energy Conservation in Ontario – Results:MicroFIT
| In November, 2010, the ECO released volume 2 of its Annual Report on the progress of activities in Ontario to reduce or make more efficient use of electricity, natural gas, propane, oil and transportation fuels. Click here for more information on this report, including videos and communications materials. | |||||
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Feed-in tariffs are an important tool that can be used to develop renewable energy sources. Quite simply, they are a guaranteed payment to renewable energy generators for every kilowatt-hour of electricity produced. Through these payments, they make renewable energy competitively priced with non-renewable energy sources.
The original form of a feed-in tariff is often attributed to the United States’ Public Utility Regulatory Policies Act, enacted in 1978. Since then, the policy surrounding FIT programs has evolved and over 75 jurisdictions worldwide have or are considering some type of feed-in tariff.
Ontario has been a North American leader in developing a comprehensive feed-in tariff program. It has developed a tariff program with payment amounts differentiated by factors such as size, technology, and application. This current system has evolved from a more straightforward approach.
In 2005, the Minister of Energy requested that the OEB and OPA collaborate and develop a standard offer program that would remove barriers (e.g., financial and administrative) to small generators of renewable energy. As a result, in March 2006 the OPA and OEB announced a Renewable Energy Standard Offer Program (RESOP). The program was designed to help Ontario increase its renewable energy supply, while providing a streamlined pricing process for smaller generators (under 10 MW in capacity) using clean and renewable resources such as wind, water, solar photovoltaic (PV), and biomass. The program offered stable pricing for a 20-year term and it had some success: over 1,400 MW of renewable energy was contracted under the program between November 2006 and March 2009.
As of October 1, 2009, the RESOP was replaced by the Feed-in Tariff (FIT) Program, as introduced under the Green Energy and Green Economy Act, 2009. The Act facilitated the introduction of the feed-in tariff program by allowing the then Minister of Energy and Infrastructure to direct the Ontario Power Authority to develop an advanced renewable tariff program for biomass, biogas, waterpower, landfill gas, solar photovoltaic, and wind power. The program has two separate streams. One is called microFIT and applies to projects that are 10 kW or less in size, which is intended to attract small business, organizational, and residential participation in Ontario’s green energy sector. The FIT program applies to projects greater than 10 kW in size. For the FIT program, no size limit is placed on projects, except for hydroelectric facilities, unlike the 10 MW project size limit that existed under RESOP. Both FIT and microFIT are forms of advanced renewable tariffs because they pay different tariffs based on the technology and size of a generation installation. Our report addresses the microFIT portion of the Ontario program. The primary difference between the RESOP and microFIT programs is that microFIT contract prices are differentiated by size and technology and the microFIT pricing is generally higher than what was offered through RESOP. Existing RESOP contracts with a capacity of 10 kW or less that had all of the equipment purchased before October 1, 2009 were eligible for transition to the microFIT program and the corresponding tariffs.
The tariffs paid for the program are designed to provide a renewable energy project developer with a reasonable rate of return on investment while covering the cost of purchasing, building, and maintaining the project. Prices are set so that each technology would receive the same rate of return on investment. However, the tariff amounts provided are different because each type of technology has different capital and maintenance costs.
The increase in renewable energy resources in the province through RESOP and now through microFIT will help Ontario phase out coal-fired electricity. Ontario currently has 4,484 MW of coal-fired capacity and is in the process of phasing out coal-fired electricity by the end of 2014. It is also intended to spur job creation in the province through domestic content
Table 11 provides information on progress made for the first three months of the microFIT program.
Table 11: 2009 Performance of microFIT Program
| Energy Source | Number of Applications | Capacity of Applications Submitted kW (MW) | Number of Conditional Offers | Number of Contracts Connected to Grid | Capacity Connected to Grid kW (MW) |
|---|---|---|---|---|---|
| Solar Photovoltaic | 1,745 | 13,403 (13.4) | 866 | 43 | 191 (0.191) |
| Wind | 13 | 70 (0.07) | 5 | 0 | 0 |
| Renewable Biomass | 4 | 40 (0.04) | 4 | 0 | 0 |
| Landfill Gas | 0 | 0 | 0 | 0 | 0 |
| Water | 1 | 1.5 (0.0015) | 1 | 0 | 0 |
| Biogas | 0 | 0 | 0 | 0 | 0 |
| Total | 1,763 | 13,514 (13.5) | 876 | 43 | 191 (0.191) |
| Note: In 2009, the application form did not distinguish between rooftop and ground-mounted applications Source: Ontario Power Authority, letter to the ECO, September 24, 2010. |
The microFIT program has sparked interest in the province: homeowners, farmers, small businesses, First Nations and community groups are investing in Ontario’s green energy production.
Table 12: 2009 Tariffs for microFIT Projects
| Renewable Technology | Price (¢/kWh)** | Contract Term (years) |
|---|---|---|
| Solar PV | ||
| 80.2 | 20 | |
| 80.2 | 20 | |
| Wind | 13.5 | 20 |
| Waterpower | 13.1 | 40 |
| Biomass | 13.8 | 20 |
| Biogas | 16.0 | 20 |
| Landfill gas | 11.1 | 20 |
| Note: *This new price category was proposed on July 2, 2010 and finalized on August 13, 2010. Although this was not applicable during the ECO’s reporting year, it is shown above for completeness. Please note that successful applications made prior to July 2, 2010 for eligible solar PV installations will fall under the ‘Rooftop’ category regardless of installation location. |
| ** Prices are shown in ¢/kWh units, 80.2 ¢/kWh is equivalent to 802 $/MWh. |
| Source: Ontario Power Authority, microFIT Price Schedule – revised August 13, 2010 |
Issues and ECO Comment
The microFIT program, although growing rapidly, is still in its infancy and its true effectiveness cannot be measured until the program has fully established itself.
The ECO commends the OPA on its decision in August 2010 to establish a microFIT program advisory panel that will provide advice on program development. The ECO suggests there are two priorities that the panel should address and provide advice to the OPA: (1) public education of the contribution that microFIT in particular and renewable generation in general makes to Ontario’s total province-wide electricity bill; and (2) the evolution of microFIT tariffs. For the latter, the panel could review the experience of other jurisdictions’ feed-in tariffs. For example, some include a degression factor in the tariff, whereby rates are reduced to reflect declining costs of the technology over periods of time. The panel could also examine the role of time-differentiated pricing to help align renewable energy generation to system-wide and localized peak demand.
