Let the sun shine in
Here at our farm we stare transfixed at the meter on our newly installed solar panel as it efficiently, quietly and greenly produces kilowatt-hour after kilowatt-hour.
My brother, an urban man and an economist in the energy sector, thinks it is ludicrous that the government is paying 80.2 cents per kilowatt-hour to small solar electricity producers, and collecting only 10 cents from the users. The difference is borne by taxpayers, and that makes poor public policy, he says, and will not significantly help the power problem in our province.
Meanwhile, here at our farm we stare transfixed at the meter on our newly installed solar panel as it efficiently, quietly and greenly produces kilowatt-hour after kilowatt-hour. Trying to ignore our guilt, we wait for the cheques to arrive.
How can we can we reconcile these two positions?
My husband and I are neither economists nor entrepreneurs. We are a retired teacher and farmer – as much as a farmer can ever be retired. We want to stay on our land in Mulmur for as long as possible. That means creating value and an income in ways other than the traditional ones of raising livestock and growing crops.
We have always been interested in solar power. We envied and admired those idealistic souls who live off the grid, but knew we could not afford to convert our old farmhouse to a system of batteries and double-digit R-factor insulation.
For years we have been going to events where farmers gather – the International Plowing Match, the Royal Winter Fair and the Outdoor Farm Show. There we have met brave entrepreneurs trying to convince us that wind and solar power were the way of the future and that we, as stewards of the land, should get involved. We agreed with them, but the costs were always too high to expect a payback in our lifetime.
Then, in 2008 we started reading about the government’s Standard Offer Program. This first-generation stimulus program offered a guaranteed market at a guaranteed price for electricity produced by small solar, hydro (water-powered) or wind installations.
We watched and waited to see what would happen. In 2009, soon after the provincial government passed the Green Energy Act, the Standard Offer Program morphed into the FIT (Feed-in Tariff) Program and, finally, for us, the microFIT Program.
When reputable farm publications such as Better Farming and OFA Today started carrying articles and advertisements about how to “harvest the sun,” we knew our time had come.
Under the microFit program, the Ontario Power Authority (OPA), as set out in the Green Energy Act, was offering to pay small (up to 10 kilowatt) producers 80.2 cents per kWh for power produced by solar. At last someone was offering a decent return on the capital investment required to become a power producer.
Why is the government of Ontario offering such an attractive price for electricity generated by small producers?
In the early 2000s, the government took the controls off the price of electricity causing the price to rise. The move coincided with one of the hot-test summers on record, which meant a possible shortage of supply. With the resulting public outcry, the Conservative government under Ernie Eves intercepted the market forces and froze the price at an artificially low rate. It was not a situation that could last.
In the 2008 election, the Liberals promised, in the interest of the environment, to get rid of Ontario’s coal-burning electricity generators by 2014. Nuclear and hydro would continue to provide three-quarters of Ontario’s power, but in order to fulfill the promise of cleaner power, Ontario would have to shift to more costly renewable energy resources, including wind, solar and hydro, increase use of cleaner burning natural gas, and encourage and reward energy conservation.
However, notwithstanding rising electricity bills and the outcry against the Green Energy Act (likely only to become louder), the microFIT program is responsible for less than 0.1 per cent of provincial power costs.
In fact, hydro bills are increasing for a variety of reasons:
- The HST immediately added 8 per cent to the sales tax not formerly paid on energy.
- The cost of all electricity production is rising as demand increases. This accounts for about a 5-per-cent increase to your hydro bill, of which a very small percentage could be attributed to the microFIT program specifically and renewables in general.
- The costs of delivering power are increasing as infrastructure is upgraded and expanded. This accounts for another 5-per-cent increase on your bill.
- Two final but significant factors contributing to the size of your bill are the debt retirement charges, mostly money still owing from building nuclear power plants in the days of Ontario Hydro, and the Ontario Energy Board’s recent decision to allow local utilities to raise prices in order to increase their profits.
Defenders of the microFIT program and the Green Energy Act point out that it has stimulated the development of valuable, environmentally friendly infrastructure that will exist long after the current contracts expire. Solar panels, for example, are being placed on rooftops, in backyards and in fields, like ours, all over Ontario by both urban and rural people.
Research and development is also flourishing in the solar industry. We know for sure that our panels will be obsolete before our contract is up. In fact, already there are smaller, lighter more powerful panels being produced by Sanyo and Samsung, two foreign companies that have recently opened factories in Ontario. Jobs are being created in manufacturing, construction, sales and research.
In the summer of 2009, we started to look seriously into becoming a small (10 kilowatt) power producer. We began by visiting farms already in the early stages of installing solar panels. These open houses were usually sponsored by newly formed companies, ready and willing to help us get started.
On December 21, 2009, we submitted our application for a contract to OPA. After some delays, our application was accepted in March 2010. Once an application is accepted by OPA, construction can begin. After investigating several companies we decided to buy a dual tracker ground-mounted solar panel system made by Deger from Fritz Renewable Energy Services, a division of Fritz Construction Company from Chepstow, Ontario.
The Fritz Group through their local agent Land and Sky Green Energy were responsible for installation, including positioning the solar unit for maximum efficiency. They also supplied a combined warranty, maintenance and insurance package.
We were responsible for dealing with Hydro One, our power provider. First they had to inspect the site to make sure it was safe and close enough to the grid. In our case, we needed to buy a transformer because we were hooking to a primary line at the back of our farm.
Next, Hydro One installed the meter, which is exactly the same as the new smart meter we received at the house a few months ago, with one important difference. The little lines moving across the bottom of the meter are going in the opposite direction to our household meter, indicating generation rather than use.
The only other thing we had to do was to come up with the approximately $102,000 required for the infrastructure and its installation. It should be noted that, after only six months, these costs have come down because of competition and availability of different products.
Perhaps a word about money is in order.
The potential income for small power producers like us is calculated using Environment Canada data relating to hours of sunshine in our area and determining the number of kilowatt hours a particular set of panels can produce, then multiplying that number 80.2 cents. The rate of return depends on how much a producer has borrowed for the investment.
In our location, if we borrowed the full amount, it is estimated that the capital cost would be paid off in seven years. Over the 20-year contract, that leaves 13 years of unencumbered income, excluding routine maintenance. If we’re still alive at the end of our contract, and recognizing that the efficiency of our panels will decline a little, we hope to realize a return on investment of 10 to 14 per cent.
As farmers we have some advantages. The most important is access to Farm Credit Canada. At the time of our project, they were offering loans for solar panel at one per cent below prime.
Although the fixed rate of 80.2 cents is high now, 20 years is a long time for a contract and there are many unknowns for the producer. If interest or inflation rates rise, our income will decrease. Also political energy policies can change, as can tax policies and land-use regulations.
The rate has already changed. By July 2010, the OPA had received some 16,000 applications for microFIT contracts, far more than they expected. At first they said they would drop the price to 58 cents per kWh, but after negotiations with those who had already started installations with the understanding the price for ground-mounted panels would be 80.2 cents per kWh, along with the many small companies that had started to support the infrastructure, they agreed to honour any contract submitted before July 1 at the original rate. Thereafter the price would be 64 cents per kWh.
While the paperwork and financing was complicated, our panels themselves are not. They consist of three main parts: an array of solar panels (made by Sanyo), a Deger Tracker, which allows the panels to rotate around vertical and horizontal axes, and two inverters that convert the sun’s power into electricity (more technically, it converts the panels’ DC current into AC current synchronized with the local delivery system). These parts are attached to a tall pole mounted in the middle of a large concrete pad.
The electronics are more complex, but the unit uses its own power to work. There is a wind sensor mounted on a pole about four metres from the tracker. If the wind gets up to 40 kilometres per hour the tracker goes into safe mode, or horizontal. Two prisms mounted on the top and side of the panels constantly track the sun, enabling the panel to adjust vertically and horizon-tally to get maximum exposure.
On a cloudy day it will remain in safe mode while still producing power, and at any break in the clouds it immediately moves to face blue sky.
We were worried about how the solar panels would work in harsh winter conditions. A build-up of snow can reduce production. However, a small contraption called a “snow dump” causes the panels to turn upright when a certain weight of snow is sensed. Ice can also build up, but one sunny day usually dispatches it very quickly. In fact the panels work better in cooler conditions, and although there are fewer daylight hours, a cold, sunny winter day is highly productive.
Our journey has been long and bureaucratic. By the time our panel was commissioned last May, we knew more about the process, regulations and paperwork required than many of the employees we dealt with at Hydro One and OPA.
Nonetheless, economists still claim that the microFIT program is poor politics. They argue the costs are not sustainable for the long term, questionable for the medium term and even suspect for the short term. It could, they claim, cause a ratepayer revolt, even potentially cost the government its mandate.
Furthermore, Japan has recently challenged the Green Energy Act at the World Trade Organization, be-cause of its domestic content rules. Starting this year, 60 per cent of the components of any solar installation must be made in Ontario.
It is discouraging to us to experience this negativity about the microFIT program. The positive energy (no pun intended) among our neighbours is palpable. Optimism is high. New enterprises and employment opportunities are springing up all over the countryside. And now we are told that rather than being part of the solution to Ontario’s power dilemma, we small producers could, in fact, be making the power problem in our province even more complex and difficult.
Our farm is a home farm. Like his father before him, my husband has never lived in another house, a remarkable fact in this day and age. In 1950, when he was a little boy, amid much excitement, his family got hydro – as all electricity was called then – in the house. Away went the kerosene lamps, the hand pump at the kitchen sink, and the total reliance on the wood stove in both summer and winter for cooking and heat. With the arrival of hydro, my mother-in-law’s first three purchases were an iron, a toaster and a bedside lamp.
Electricity immediately and forever changed everything on the farm for the better. At the time, no one in their wildest dreams could have imagined that a short 60 years later, power would be moving the other way down the lines and into the grid.
So, besides being a good investment for us, we believe that in the future what is now called “alternative energy” will become mainstream. It has to start somewhere and we see the microFIT program as the first step in a good investment for Ontario, not unlike planting trees.
A Short History of Power Generation in Ontario or
Ontario Hydro used to do it all: generate, transmit, distribute, supply and sell power to the citizens and businesses of Ontario. They were also responsible for encouraging conservation and parallel generation.
Ontario Hydro had a monopoly on everything to do with power and in the laissez-faire attitudes of the nineties, that was considered a bad thing. Some of their activities seemed to have contradictory objectives. What business, for example, encourages non-use (conservation) of the product it is trying to sell?
In 1998, the Conservative government passed the Energy Competition Act to deregulate the power industry and remove the monopoly from Ontario Hydro. The Act had two parts, the Electricity Act and the establishment of the Ontario Energy Board.
The Electricity Act split Ontario Hydro into five new entities:
1. OPG – Ontario Power Generation. Its focus is on generation of mostly nuclear and hydro power.
2. Hydro One. It is responsible for transmission and distribution of power. It controls the grid.
3. IESO – Independent Electricity System Operator. It connects generators with consumers, based on continual monitoring of supply and demand.
4. OESA – Ontario Electrical Safety Association.
5. OEFC – Ontario Electricity Financial Corporation. Its mandate is to deal with debt retirement, a debt incurred mostly from building nuclear installations and other infrastructure.
The Ontario Energy Board (OEB) was set up to regulate prices in the non-competitive section (transmission and distribution) and to oversee wholesale and retail markets to protect the public from uncompetitive practices.
When the Liberals came into power in 2004, they passed the Electricity Restructuring Act. Under this Act Ontario Power Authority (OPA) was formed and given the job of ensuring that that there would be an adequate long-term supply of electricity for the province. At the same time a Conservation Bureau was formed and the Ministry of Energy set targets for conservation and development of renewable energy.
In 2009, the Green Energy Act was passed.
The Purposes of The Green Energy Act
passed by the Ontario legislature may 14, 2009
Boost investment in clean and renewable energy projects such as solar, wind, hydro, biomass and biogas by:
- creating a feed-in tariff that guarantees specific rates for energy generated from renewable sources
- establishing the right to connect to the electricity grid for renewable projects
- establishing a one-stop, streamlined approval process
- overturning local barriers by eliminating a patchwork of local approval requirements
Create a culture of conservation by:
- strengthening energy efficiency in Ontario’s building code
- creating new financing tools to help consumers manage up-front costs of small-scale renewable energy projects
- setting conservation targets for local utilities
Create 50,000 jobs for Ontarians in its first three years by:
- providing certainty and clarity in the approval process for renewable energy projects
- enabling domestic content requirements for renewable energy projects and creating job opportunities here at home
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