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New Ontario energy feed-in tariff looks yummy (but might cause indigestion)

| September 24, 2009

This could be good.  Tasty even.  The Ontario government announced today a feed-in tariff program for green energy production. A feed-in tariff (FIT) is a system of financial incentives by governments to promote renewable energy. FITs have been used to great success in different places around the world and particularly in Germany to promote green energy production and jobs. Basically the government agrees to pay a "premium" price for renewable energy to promote growth and energy production. I say "premium" because the price we pay for power is in fact already super subsidized (including through massive corporate support to energy companies) and the prices paid in FITs reflect more actual costs it seems to me.  Producing energy is expensive.

The government announcement claims it is the "first" feed-in tariff in North America and the veracity of that claim depends on the definition of a FIT but more importantly how good is it? I spoke with green energy and building consultant Melinda Zytaruk who is cautiously excited about today's announcement (disclosure: I work with Melinda on a green building project).  "This FIT is probably the most aggressive in North America," Melinda said. "What i like about it on the surface is that there are multiple components here like a renewable energy facilitation office, it could be fabulous, or it could be bureaucratic hell. But right now, it looks like a great start ."

Not all of the final numbers are out but the numbers released today match the government's draft FIT price schedule .  Small (under 10KW) rooftop solar installations will get 80.2 cents/kw hour with a "price adder" for "local communities and First Nation and Métis communities  to build, own and operate their own renewable energy projects".  In theory this is great.  I'm excited.  Then again when was the last time there was a government project that actually supported Indigenous peoples?

So what else might cause people to lose their appetites? Well a few problems.  As Melinda pointed out while it is great to have a requirement, as the program does, that a "certain percentage of their project costs come from Ontario goods and labour at the time they reach commercial operation" it is unclear what this means in practice.  One challenge is that there are not many, if any really, solar manufactures in Ontario anymore.  And the plan states that  for "micro solar PV (10 kW or smaller), the requirement will start at 40% and increase to 60% on Jan. 1, 2011."   A search today of the Canadian Solar Industries Association website and Solar Buzz product manufactures listings for Canada reveals that most solar companies are installers not manufacturers.  In fact the latter listed only three, one makes a single part of the PV panel, one only works with heating swimming pools and one international company that has offices in Ontario so maybe they build them.  Some Ontario solar manufacturers have moved to, you guessed it, Germany.

This might not be a super challenge if the government commits to the plan to draw in builders (but that still takes time).  "How long will they be offering these contracts?" Melinda asks.  You don't entice major capital investment in a big plant if companies aren't confident that the FIT will keep being offered.  This might get addressed but again unclear.  Also, Melinda pointed out, the new rule to keep wind turbines 550 meters from residential properties is a much stricter standard than anything in Europe.  This could also spook manufactures and investors as it will, by definition, reduce the spaces that turbines can go up.

And finally, how does the FIT affect low-income people?  Greenpeace addressed this problem this week in a new report  arguing that the main argument against FITs is that they cause "an increase in electricity prices for households and industry as the extra costs are shared across all customers."  They rightly point out that conservation programs and progressive tax burdens should be put in to offset this issue.  I'm not going to hold my breath that, for example, the Liberals will put in a more progressive income tax to offset energy costs for low -income people.  There are some programs for low-income energy support, but a more systemic plan should go hand in hand with a green incentive program.

This is especially true because a FIT program will tend to benefit financially those with more cash/capital.  It will benefit the planet in some ways of course and general health with cleaner energy, but it is also a money making opportunity.  In fact the province argues you can pay off a PV investment in ten years and start making cash.  For those that don't have the means to get in on it though (even through community support "adders") lets take some of the cash that has been dumped on the nuclear industry and see some real support around low-income energy. 

Still, it looks like there will be exciting ways that people and communities can get together and work with this FIT to promote things like community owned turbines and other projects.  People are certainly hungry for it.



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