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Writing on the Wall - Part 2

July 2010

It's been a little over a week since the announcement that the OPA is going to reduce the rates paid for ground mounted PV systems under 10 Kilowatts. Various newspapers have published articles from solar companies stating how this is going to destroy, cripple, undermine (etc, etc) the solar industry in Ontario. Claims that the public has been mislead, farmers are being discriminated against, it’s all about the Liberal party being out of touch, etc, etc.

Hyperbole & gross overstatement - the ranting of panicking solar charlatans. Even if ALL of the 10,000 applications supposedly facing a reduction in subsidy were the maximum size allowed (10 Kilowatts), they would only add up to 100,000 Kilowatts of capacity, or 1% of the total amount of capacity already applied for under the FIT program (more than 10,000,000 Kilowatts). Also missing from the news articles is the fact that there are large blocks of the 10,000 PV systems (blocks larger than 1,000 systems) owned by individual companies who are renting or leasing the land from farmers for the 10 Kilowatt PV systems. This set up allows the owners to write-off the cost of the systems over 2 years and make a whole lot more money by selling the tax loss. In other words the electrical rate payers get screwed twice by the same project - they pay increased costs for the electricity so the owners can get 80.2 cents per Kilowatt hour, then they pay higher government taxes because some corporation gets a tax write-off.

Remember - farmers can still put up PV systems on their barn roofs - and still make the 80 cents per Kilowatt hour. One company is actually providing a "free" barn if the farmer installs one of their PV systems.

There is no doubt that the FIT program is poorly conceived & executed. George Smitherman should take the heat for that - but he has ducked the responsibility by quitting the provincial government and running for mayor of Toronto. George changed a program that was intended to support the development of the solar heating industry in Ontario, into a solar PV industry program. While unsubsidized solar hot water systems have 25+ year paybacks, unsubsidized PV systems have 60+ year paybacks. The biggest difference is scaling. You can't scale solar hot water easily from a $10,000 residential project to a $100,000,000 industrial project the way you can with PV - so the rapid-growth scenarios aren't there - and politicians all like rapid growth....

I've said it before and I'll say it again: the FIT program is going to end, or be severely reduced - soon. Probably on or by October 2011. All government programs end. This one has a short life because there is only so much room in the electrical grid to take the unpredictable and unreliable electricity provided by PV and Wind systems - and that amount, call it a "cap", has already been exceeded (in applications). If you think a rate reduction that applies to only 1% of the PV industry is a problem - wait until it applies to 100% of the PV industry.