MicroFIT (Feed-in Tariff) Solar Power in Ontario:
How to Generate Electricity from Renewable Energy, Make Money and Create a Sustainable Future
The more you learn about solar energy, and in particular what others have done with it, the better prepared you'll be with the right questions. As with anything new to you it is hard to know where to start or what questions you should be asking. Three main sources have helped me get informed enough to feel prepared to develop a plan for investing in solar energy:
The first has been books. Find books that provide examples of how people like you have implemented solar energy. The one I first read that convinced me that solar was the future of energy was The Solar Electric House by Stephen J. Strong. One of the great reference examples of a solar house in his book is the Main Solar House. Many other books with examples of home owners and a few with examples of business owners implementing solar are available. Find them at your local library or book store and start reading. Want a detailed account in ebook PDF format on the subject so you can start right now? Download the paperless ebook I wrote about my own experiences on this web site at www.naturallifenetwork.com/book.cfm. Check out the Ontario Sustainable Energy Associations (OSEA) Community Action Manual.
About fifteen years ago my family had the opportunity to purchase some second hand solar PV panels in the Dominican Republic. With the daily power outages experienced in this country the solar panels along with a bank of eight batteries provided an excellent solution for maintaining some power during these outages. Help from local experts with solar got everything hooked up and running. Annual cleaning of the battery connections was the only real maintenance required. Also, one of the older inverters that converts DC current from the panels to AC for use with lights and fans in the house failed and had to be replaced.
The third has been meeting with and touring homes and businesses that have actually installed and operated solar systems. An early example that inspired my sense of the large scale potential of solar was the Solar Living Center that I had the opportunity to visit and tour many years ago. A major turning point in our families collective desire to switch to solar came through a tour of the Toronto Healthy House in Riverdale Toronto. As it turns out we ended up hiring Martin Liefhebber, the architect of the Toronto Healthy House, to help us design and build our own sustainable home. Finally a tour of the Kortright centre for conservation before building our solar powered house provided insight into how solar PV works, different types of solar, and other renewable energy options like wind power. My wife Leigh also took a course on wind energy (which like solar typically produces DC and then uses an inverter to switch the generated electricity to AC).
Three main types of "solar" power exist. The first, is passive solar that relates to the ability of the greenhouse effect to store heat from the sun inside an insulated building.
The second, is solar thermal. This type of system uses the heat from the sun hitting dark panels to heat a liquid that can then be used to heat or preheat water. In a home these solar thermal systems can be used to heat water for your water heater or for your home heating system if it is a radiant water based system. They typically can reduce the demand for this type of energy by up to 60%.
The third,and the one which applies to generating electricity that will be the focus of the remaining pages, is solar photo voltaic (PV) or solar electricity generation. Photo voltaic refers to the technology, based on solid state (no moving parts), silicon that converts sunlight into electricity. Solar PV systems are typically composed of two main components linked together by wiring. First, the panels which are composed of many solar PV modules linked together during manufacturing. These panels can then also be linked together into larger "arrays" of panels in order to increase the generating capacity of the system. The second component, is an inverter that converts the direct current (DC) generated by the panels into alternating current (AC) which is compatible with the grid. To do this and allow for safely connecting your system to the grid and AC appliances the inverter ensures the quality of the AC conversion and provides automatic disconnect if the electricity grid fails (ie. when the electricity on the grid goes down) so that your solar electricity generating system isn't injecting into the grid potentially creating a hazard for line workers.
Let us start with the simplest case which is that you own a home or commercial building with a single consumption electrical service in place with a single consumption meter. Most residential homes are in this category. So far so good.
Who does what?
In order to get through the process of getting quotes from vendors and knowing who to deal with when different questions arise, some understanding of the way the electrical system works, and who does what can be important. So now we'll look at who does what.
The electricity you consume is measured by the meter attached to your house. In Ontario, a local distribution (LDC) company provides the meter and wires to get the electricity to your building. Generators are also connected to the electricity grid through these wires and provide the electricty you consume (ie. the generator in Niagara Falls that produces electricity from water turning a turbine, or a a coal plant that creates steam, that turns a turbine that generates electricity, or a nuclear reactor that creates steam that turnes a turbine that generates electricity, or a wind turbine where the wind turns the turbine that generates electricity). So, we have LDCs like Hydro One and Toronto Hydro that "distribute" electricity maintaining the wires and meters that get the electricity from generators to consumers.
On one end of the "grid" of wires are the generators that create electricity typically with a turbine and various types of fuels (like coal, uranium, or gas). In the case of water and wind generators the fuel is a renewable source, wind and water driven by natural renewable processes. The big generating company in Ontario is Ontario Power Generation (OPG) that operates the nuclear, hydro and coal plants. Other smaller generating companies exist as well.They sell the electricty into the grid so they also have a meter that measures the amount that they generate and supply to the grid. Although we say "sell" into the grid, they don't really sell it to the LDCs who operate the grid. We can be confused into thinking this way because the LDCs do the billing for electricity. However, the LDCs only keep the portion of the bill related to "distribution". The electricity portion, often called the commodity, is paid back to the generators.The generator gets the "cost" prices of the power they produce as measured by the generator meter.
(local distribution company)
(your house or building)
Keep in mind that the consumption meter and electricity you pay for is marked up and includes a "load factor" that accounts for the roughly 10% loss of electricity that occurs in the distribution process itself. The LDCs or utility companies end up billing you for the electricity you consume because they manage the meters. They do not actually generate the electricity, there business is solely to manage the wires, distribution process and metering and billing processes...at least in Ontario as of a few years ago when the market was deregulated partially.
Now, with solar panels that generate electricity you are interested in becoming a generator. In order to get paid like other generators you are going to need an additional meter to measure the electricity you produce. This is typically provided (Toronto Hydo has been providinig them for free while I had to pay Hydro One $800 for a new meter installation) and specified by the LDC. They'll be able to tell you what it will cost you.
One other important player in the process is the Electrical Safety Authority (ESA). Once a solar system is installed by a qualified installer the ESA will need to inspect the system before it goes live on the grid. You'll find a fair bit of information on what they require for solar installations and the FIT/MicroFIT on the Electrical Safety Authority (ESA) web site . Check it out and read through their various guide books at least as far as you can before they get too technical.
Since we are dealing with small scale solar on the roof environmental assessments are NOT required. For large systems an Environment Assessment is usually required.
Before we get into these details, a little history may be helpful. As of about two years ago the only connection option for small scale solar electricity generators was to "run the meter backwards". That meant that the solar system would run the existing consumption meter backwards when more electricity was being generated by the solar system than was being consumed in the building. The value of this type of electricity generation has been in the 12-14 cents/kW range (which is a combination of the electricity price and distribution charges that were being reduced by the amount of electricity being injected back into the grid as measured by the meter running backwards). Some concern existed with the ability of meters to correctly measure electricity when running backwards. So, some of the LDCs came out with a Net Metering program that required that the consumption and generation be measured separately, originally with two different meters but more recently with a single meter that has two registers (one for consumption and one for generation). The LDC would then, once you signed a Net Meter agreement with them, reduce the commodity charge on the consumtion bill by the amount you generated. Not quite as good as running the meter backwards but pretty close. Given the 75+ year payback on this type of configuration in Ontario there have been few of us who've gone down this path (I did, starting about eight years ago with a wind/solar hybrid system).
A couple years ago the Renewable Energy Standard Offer Program (RESOP), precursor to the new FIT/MicroFIT program, came into effect. Under this system solar electricity could be generated and every single kW (kilowatt, a measure of electricity) was paid at 42 cents/kW. This program required a new meter to measure the generation. Two connections options to the grid were typically available. There was series and parallel. Series made sense if this was the first and only generation system installed. Parallel would have been required if an existing Net Meter system was already in place (that is what I had). This type of system, RESOP, had a roughly 20 year return on investment profile.
FIT and MicroFIT
Finally, as of Oct 1, 2009, the new MicroFIT, is now in place and can provide, through a similar connection configuration as the RESOP, a twently year contract to pay you 80.2 cents/kW for every kW your panels generate as measured on a new generation meter. The one gotcha on this new program is that certain Ontario content requirements exist that will require that your solar system supplier provide written confirmation of conformance (40% up until the end of 2010 and then 60% after that). This option can provide a return on investment of less than 10 years potentially. The larger you scale your system, typically the better the return on investment as the generating panels represent a larger portion of the overall costs. This is the type of system that is the focus of this guide.
The Ontario Feed-in Tariff (FIT) system has been developed by the Ontario Power Authority (OPA) on behalf of the Ministry of Energy who enacted the Green Energy Act that precipitated this program. The OPA plans and provides electricity on behalf of the citizens of Ontario. For information about OPA, check out their web site - here. Specific to the FIT program and the MicroFIT program (MicroFIT is for systems rated at less that 10kW). The details of the MicroFIT program that pays 80.2 cents/kW in Ontario for a 20 year contract is explained and managed through a new service web site developed by the OPA. Go through this site thoroughly - OPA MicroFIT web site: http://microfit.powerauthority.on.ca/ .
As with anthing related to taxes you'll need to get professional advice to be sure you are handling your particular circumstance correctly. The main points are that your solar system installation makes you a business in terms of taxes related to the income generated by the solar system. This allows you to deduct expenses from your income from the system for tax calulations. Capital Cost Allowance (CCA) rules exist in Ontario that allow you to claim accelerated depreciation since solar falls withing "class 43.2" type assets for tax purposes. This essentially means that you can claim up to 100% of the income each year as depreciation expense up to the full cost of the system, less any insurance or loan expenses which may also be claimed.
Purchase of equipment for the solar system will include GST.
Under $30,000 per year of income and you are GST exempt. Once HST arrives it is expected to be the same as for GST except that the rate will rise from 5% to 13%.
For a good overview of tax considerations and legal issues, as well as a good general overeview of the process see:
About John Wilson, the founder of NaturalLifeNetwork.com
Wilson Natural Documentary DVD
A great companion to this resource is a documentary DVD produced by John Wilson. If this information interests you, you'll love the documentary about how John Wilson built the Wilson Natural Home. Check out the documentary video that describes the entire process - click here.
Toronto Star article - Natural dream
“When it comes to living green, you can't do much better than the Wilson family. On most days, their hydro meter even runs backward at times, as they export electricity to Ontario's power grid. It's a great example of what one family can accomplish in doing what's right for the environment.” Toronto Star, August 30, 2003
About the Author
JOHN WILSON is an award-winning owner, builder and producer of sustainable homes and lifestyle media. He is the producer of Natural Living: The Wilson Natural Home documentary and the founder of the Natural Life Network (www.NaturalLifeNetwork.com). He lives in the Wilson Natural Home with his family near Toronto, Ontario, Canada.
Meet the author, as featured on my house TV show
Want to learn and see more, buy the documentary video DVD
“Wow! Fantastic video, and a beautiful house too! I'm actually working on some straw bale houses myself right now, outstanding R-values. I'm glad you also mentioned that folks should look at savings first thru cfl bulbs, passive solar design, composting.... Great job! :)”
“Beautifully paced, well photographed, pleasant background music. And, most important, great information on how one family built an environmental house. 5 stars.”