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Fading Fast

August 19, 2013

It's been a while since I commented on the future of solar PV in Ontario.

After a close brush with death in October 2011 (when the Liberals could have lost to the Conservatives) the FIT & MicroFit programs lurched on with lower rates - but only after an 11+ month delay! Literally hundreds of solar companies dissappeared in Ontario as a result of the delays, new rules and lower rates paid for the electricity generated by PV systems.

Now a second (some say third) wave of rate reductions has been announced by the OPA. These reductions - now by more than 50% of the intial rates offered less than 4 years ago, combined with the drastically reduced "Ontario content" requirements, will sound the death-knell for both PV equipment manufacturers and the majority of PV solar installers in Ontario. Only the really big players (read "international") will have the means to continue to play the game - mainly by bringing in equipment from their own operations outside of Canada.

MicroFit will now have lost its allure for the wealthy as the returns are now less than 5% after taxes due to the lower rates paid for the electricity by the OPA. Investing your capital to make 5% is one thing, spending your capital on hardware to make 5% is quite another.

I suspect the PV industry will fade very quickly in Ontario after the PV projects that have just been approved (at the older - higher rates) are installed. However with the prospect of next-to-no new business, the smart ones will be selling off their projects & equipment and getting out as fast as they can. Even the die-hards are seeing the PV solar pot of gold is fading fast. In a year there will likely be less than 100 PV companies in Ontario - down from over 600 three years ago.

Electricity rates are going to continue to rise. The irony with this is: in less than 10 years, the peak cost per kilowatt-hour of electricity is likely to exceed the fixed rates paid under the 20 year term of a MicroFit contract! PV system owners could be better off using their power rather than selling it - except - they can't use all the electricity that they generate because they can't store it when they generate more than they can use....