OPA microFit rates reduction comments?

[Dave Farrell]

Any members have comments regarding the proposed rate reduction to 0.588 cent per Kwh for ground mount PV. They claim ground mount is less expensive to install them roof mount. Below is a excerpt from their email.

To help ensure the program remains sustainable the OPA has proposed a new price category for microFIT ground-mounted solar PV projects. Ground-mounted solar PV projects of 10 kilowatts or less will be eligible to receive a proposed price of 58.8 cents per kilowatt-hour (¢/kWh). Rooftop solar PV projects, as defined in the microFIT Rules, version 1.4, will continue to be eligible for 80.2 ¢/kWh.

The proposed new price category will better reflect the lower costs to install a ground-mounted solar PV project versus a rooftop project. It will provide a price that enables future project owners to recover costs of the projects as well as earn a reasonable return on their investment over the long term.

There will be a 30-day comment period on the proposed new price. microFIT application intake will continue during that time.

You are being advised of this change because you have applied for a microFIT solar PV contract but have not yet received a conditional offer. Consistent with the microFIT Rules version 1.4, if your solar PV project is a rooftop project, your contract offer will be at the original price of 80.2 ¢/kWh. A rooftop project is one that is being installed on the roof of an existing permanent building, such as a home, small business or other institution. Please review the definition of “Rooftop Facility” in the microFIT Rules, version 1.4. If your solar PV project does not comply with the definition of a rooftop facility, it is considered a ground-mounted project, and you will be offered a contract under the proposed new price category.

Hope not to many had ground mount installed without that conditional offer!
I see a requirement to resubmit your application selecting either roof or ground.

[Ralph Day]

I'd like to hear our owner/moderator comment on the ''ground mount cheaper than roof mount" statement from the OPA. My gut feeling is that the statement is incorrect. Rob has done roof installs, and I'm sure there are some greater costs here and there, but if you're not putting in bases, ballast, racking and such where would the cost differences be found?

My system, ground mounted, before panels, inverters and wiring cost between 10 and 12 thousand dollars. That included ground clearing, driveway, and concrete base. I think that a roof mount, without those costs would be considerably less overall.

Final comment: It appears the OPA has had to put the brakes on the microFIT program in a big way (pressure from government?). THeir statements about ground mounting being cheaper to do is just not believeable, if not an outright lie.

Ralph

http://www.greenpowertalk.org/showthread.php?t=11702

[Rob Beckers]

That message from the OPA took me by complete surprise. I do not understand where they are getting their numbers from: Compared to a sloped roof, I have to charge an extra $2K for a 10kW ground mounted installation. That is just to cover the additional expense of ground mounting, after it's all said and done I earn less on ground mounts than on rooftop installs despite that extra $2K.

Good ground mounts are very expensive (I'm not talking about some steel tubing stuck into the ground, these are aluminum and stainless steel, and the Ontario domestic content rules limit choices quite a bit). Then there's usually some leveling of the ground, foundation work, lots of concrete, underground cabling of usually significant length.

I would urge everyone to send comments to the OPA regarding the proposed changes. There's a 30 day window to convince them otherwise. In typical OPA fashion there is no simple Web form to submit objections/comments, instead they want people to participate in their upcoming webinars (where only a fraction of callers will actually get to speak).

For lack of a better place, please submit your comments to their MicroFIT E-mail address (microfit@powerauthority.on.ca). I know they read those. Please take a moment to send your comments, this is important!

-RoB-

[Michel de Breyne]

I've already emailed OPA to voice my displeasure over this proposed reduction and highly encourage everyone else to do the same.

From my observation, ground mounts are more expensive then roof mounts and I was very happy to read Rob confirm it. Furthermore, based on the provincial content requirements, the OPA rate the cost of the racking system to 9% of the overall cost but now are proposing to reduce the rate paid by 30% because they feel that component is less expensive ?!? If they thought it was 1/2 as expensive for ground mounts, they should reduce the rate by 4.5% not 30% !!!

With the delays introducing the program, then the provincial content rules that are hard to satisfy, then the exceedingly long application processing and connecting times and now this, you really have to wonder if the OPA is not trying to make this program fail.

[Rob Beckers]

Here are some E-mail addresses to voice your displeasure to the OPA to. The people listed below are the ones in charge of the OPA's FIT/MicroFIT program:

info@powerauthority.on.ca
ben.chin@powerauthority.on.ca
kristin.jenkins@powerauthority.on.ca
jacquie.davidson@powerauthority.on.ca

In addition, please contact your representative to put some political pressure on the OPA. Ultimately they do what the ministry of energy tells them to.

-RoB-

[Rob Beckers]

It took me a little time to get around to writing an objection to the OPA. Below is the E-mail message that I sent to them:


From: Rob Beckers <Rob@Solacity.com>
To: info@powerauthority.on.ca
cc: kristin.jenkins@powerauthority.on.ca, ben.chin@powerauthority.on.ca,
jacquie.davidson@powerauthority.on.ca
Subject: Proposed changes for ground mounted MicroFIT
Date-Sent: July 5, 2010 8:40 PM -0400

Dear OPA,

As a PV installer, I was sad to see that just as solar PV is finally taking hold in Ontario you are considering changes that will result in far fewer installations. While I do not dispute the need for 'reasonable' returns, as opposed to 'excessive' ones, I have several problems with your proposal, both from a content, and a procedural perspective. Let me explain.

The information you received; that ground mounted PV is cheaper per Watt than roof mounted, is patently incorrect! As an installer, I have to charge an additional $2,000 for a 'standard' 10kW ground mounted system (in comparison to a sloped roof mounted system of the same size). This is *not* extra profit, it barely offsets the additional installation expenses I have for a ground mount.

Often there are expenses beyond the standard installation depending on the specific situation (such as long cable lengths to the meter etc.). Ground mounted systems use far more mounting hardware than roof mounts, and those are expensive (for good ones made from aluminum and stainless steel). In addition there is excavation and ground work, gravel, form work, concrete, underground cable (often of substantial length), additional labour etc. Those items are never part of a roof mounted installation.

As a result, the home owner has a *longer* payback time to look forward to, even at 80.2 cents/kWh, for ground vs. roof mounted. If you wish I will be happy to provide you with a detailed breakdown of my expenses for ground vs. roof mounted installs, to back up my assertion.

Beyond the change in revenue, I strongly object to your "30-day notice" strategy! We have many leads in progress where the financial numbers for the customer are based on 80.2 ct/kWh. Those customers have already applied for a MicroFIT contract, which with the new numbers is no longer financially viable. You are changing the rules in mid-game, without giving those people a chance to complete their projects under the rules they believed to be true when they entered into them. Luckily we did not install any ground mounts pending a conditional offer, but there will likely be many installers who did (given the long time period you are taking to return conditional offers that is often the only way to proceed and not end up with dozens of fall/winter installations). Those that did install will be in immediate financial trouble, and have a customer relations disaster on their hands.

I would suggest you make small, incremental changes to the program rather than drastic ones, with a long enough announcement period so people that want to enter under the 'old' rules can apply and receive their conditional offers. Since the FIT/MicroFIT contract was modeled after the German program, you should take a look over there: They announce their changes long in advance, and people have a chance to enter into the program before changes take effect.

We need stability in this industry for it to grow and mature. Your current practice of sudden, unannounced rule changes, and 3 1/2 months to forward a conditional offer, are not providing that.

Please feel free to contact me at any time to further discuss this, or if you need additional information. I will be happy to be of assistance.
Best regards,

Rob
-/-

Solacity Inc.
Toll-free: 1-877-PV-PWR-4-U (1-877-787-9748)
Phone: +1 (613) 686-4618
Fax: +1 (613) 686-4622

[Ralph Day]

Bravo Rob,

Succinct, factual and to the point. We can only hope that someone will listen and understand. Of course, pressure from the top down (Ministry.to OPA) being what it is, the outlook is not good.

It helps to be pessimistic, things can only get better!

Ralph

[Rob Beckers]

The OPA info teleconference is in progress right now. They stated they want E-mail feedback to microfit@powerauthority.on.ca, with the subject line "ground mounted feedback" (or something along those lines, the slide has been taken away).

-RoB-

[Joe Blake]

Sad to hear about this happening, but you can at least be (slightly) comforted by the knowledge that you are not alone ... even down under the politicians are pulling "shonkies" too. (As I noted in my post in the "government incentives" thread.)

:confused: (Take this smiley as a "wry smile".)

Joe

[Rob Beckers]

I've been trying to pump my contacts to spread the word, especially amongst "those in power". Please do the same.

The OPA had a teleconference yesterday and, well, the comments they received can only be described as "ripping them a new one"... :mad: It just doesn't make sense. They sounded dead certain that ground mounted is cheaper than roof (it's not, by a long shot). They also sounded as this change being a done deal. While officially billed as a 30 day feedback period, I have a feeling they're just going through the motions with no intend to actually listen or make changes. While I was in the queue to speak, they didn't get to me when the 4pm end time arrived. Still, everyone else essentially had the same thing to say as I would.

The real issue, more even than the price change, is the arbitrary and sudden nature of the way changes to the program are handled. People interested in PV had one set of rules/assumptions to work with last week, maybe they signed a contract, while now they have a whole other set. With no chance to get in under the old rules. That creates great instability in the industry, and will no doubt put a chill on manufacturers. Who wants to invest great amounts of money if the OPA can and will change the game overnight. It's exceedingly bad program management. Not sure who's in charge of the program over at the OPA, but someone needs to sit this person down and have a good chat with him/her.

-RoB-

[Michel de Breyne]

From the webconference this really is a bit of a disaster. Government being government, I don't imagine much will happen from this and as mentioned by Rob, it really did sound like this is a done deal and they are just going through the motions with this '30 day comment period' but I really think someone needs to lose their job over this.

Several things really shocked me though.

First, it sounds like they were really truly surprised to hear that setting up ground mount was not a lot cheaper than roof mount. And they thought people were getting 30-40% returns on ground mount !!! They say they have industry contacts but I don't know where they could possibly have gotten those prices. These people are setting up policies for this business, they should really know more about it. It's pretty minor but still, they sounded genuinely surprised about this! One phone call confirms this! Logic confirms this (how much work and equipment is required to mount panels on a roof compared to prepare the land, digging for and building footings / slab, assembling a complete structure to support it, running cables underground, etc)

Second, the way this whole 'price update' has been handled is trully horrible. They didn't come right out and admit it but it sounds like they effectively stopped processing applications for ground mount installs around January 2010 - almost 6 months before they made the announcement of the revised price and the revised price is retro-active. This is for a program that was only introduced in October 2009 and they only started granting conditional contracts in mid Dec 2009 so basically 1 month after they started giving out contracts, they stopped and didn't tell anyone for 6 months! What makes this particularly bad is that on multiple occasions, they specifically stated that anyone that applied and that qualified to the program guidelines would be granted a contract and continued to do this even after they had placed this 'hold' on all applications (It was specifically asked as a question and answered during the information session in Ottawa in April 2010 by the OPA). They used the premise of the 'lower ground mount cost' but it was quickly very clear that the real reason was 1) in response to ratepayer complaints about the high payout (they didn't actually come out and say this but on multiple occasions referred to 'providing fair value to the ratepayers' (or something like that - which ironically enough, was never mentioned as one of the program guidelines)) and more importantly about keeping the program sustainable. That's pretty pathetic and has to be some of the worst planning ever if 1 month into the 20 year program (that they took years to finalize and release), they are already concerned about the sustainability and have to revise the rates. What were they expecting to happen? Had they setup this whole thing thinking that people wouldn't actually sign up? If so, what's the point? To avoid most of the chaos this has brought on, all they had to do was tell people in January that due to overwhelming response, they were temporarily placing all applications for 'ground mounted installations' on hold and would be reviewing the program - people would have been annoyed and dissapointed but wouldn't have spent time, energy and money on systems instead of being told that basically all qualifying applications would be granted. And this goes obviously affects not only would be generators but resellers and any company that is thinking of and / or has already taken steps to start production in Ontario. They offered an attractive program that business owners would base the opportunity on and then halted it for 6 months without telling anyone about it!

Third, and really not very surprising, this 'review' period really doesn't sound like a review period. While they seemed shocked that they seemed wrong about the costs, they repeated on several occasions that they were confident that the proposed rate was fair to generators and to ratepayers and necessary for the sustainability of the program and that anyone interested in pursuing their application at the new rate should let them know so that the application can get processed. Without actually coming out and saying it, it sounds like this is the way the program will be and nothing will change that - if you want $0.80, build a roof mount system, otherwise you're going to get $0.59.

Fortunately, for myself, other than time and energy, I really haven't invested too much into this so I'm not losing much but if I was someone who had setup a business, I would be looking at all my options for suing for damages. Obviously programs change and everyone has to factor for that but you can't do it retroactively and especially secretly like this. During their information sessions, they told people that until they say differently, everyone who applies and qualifies will get a conditional contract and on June 24 2010, in their newsletter, they stated that due to high volume, processing applications was taken much longer than expected (they had initially targeted 30 day response time) but that submissions before March 31st would be processed by August and submissions before May 31st would be processed by September - no mention of any problems or program change, business as usual.

[Rob Beckers]

Michael, I fully agree with your comments.
What's happening is very bad management all around. Now I know very well that no matter what an agency does there will be negative comments, but truly, in this case, if I look at it as objective as I can, there were/are much better ways to handle it.

One point I want to bring forward is that the underlying reason given by the OPA is that the "rate payers" can't afford the program at current rates. That has me somewhat puzzled, as my understanding is that the OPA currently already pays 80 cents and up for mid-summer peak-hour electricity on the spot market, when their regular production capacity falls short. As it happens, PV also produces most in mid-summer, in the early afternoon. From that it would follow that on the whole the FIT/MicroFIT programs are not nearly as expensive, nor as much of a give-away, as they would seem. I wish the OPA would enlighten us about this. What the actual cost is (and how much "per rate payer" this adds to the bill).

Another important one is that while the OPA keeps quoting the number of applications, this is a poor measure of systems actually implemented, as well as future systems that will be in production. I keep telling my prospective customers that even if they are not certain at all about MicroFIT, they should put in an application right now. There is no downside, it's taking 3 1/2 months (and up as we now hear) for the OPA to approve applications, and the rules are changing in 2011. I am sure other installers are doing the same thing, resulting in many, many applications that will never get implemented (even after approval). If my own numbers are anything to go by, I would say 60% - 80% of people ultimately decide not to go ahead. The metric of the program should not be applications, but actual executed contracts (systems that are in production).

Just in case anyone in power reads this: My proposal is that the application date of the FIT/MicroFIT customer should be the effective date that fixes the rules and the payout rate for the project. Regardless of what changes after that date. Doing so would bring stability for both the customers and to some extend for industry.

The CBC has a blurb about the changes in their newscast this morning, it's being repeated every half hour or so. As usual with the media they have their facts about 50% right, the rest is wrong, but it should put some pressure on the OPA.

-RoB-

[Michel de Breyne]

I'm glad you brought up the use of 'number of applications' as a measure. That's something that has bugged me to and one of the points I mentioned in my email to the OPA (hopefully someone will actually read those). They keep saying 16000 applications and over 11000 for ground mount (or something like that) but according to the last figures I heard (which I admit is probably not very up to date), they have something like 500 systems live! That's just 3% of the number of applications they keep referring too.

The change because of rate payers really bugs me too because I agree with you that if they only explained everything to rate payers, they'd realize that this is not a bad deal and not paying too much money. Rate payers might be balking at the $0.802/kw but many of them think that the province only pays $0.055/kw (or less) for the power it generates! I'm happy you mentioned the 80 cents or more for peak-hour, I actually didn't know it was that high (I suspected it was probably 30-40+ cents). If the public knew this, they probably wouldn't object to the rate as much. Also I suspect that many don't realize that if (when) the Hydro One needs to increase the power available by building more dams or nuclear station, there's a huge cost. If 20,000 microFit generators can bring 200MW of power to the grid, that's a 200MW generator that Hydro One doesn't have to build - what's the cost of that ? $1-5 billion? And what about the maintenance of it after ... It's the same rate payers that will have to foot that bill. This whole rate payer issue is just a matter of public relations on their part.

[Wilco Vercoelen]

http://www.thestar.com/news/ontario/article/833851--liberals-risk-rural-eclipse-with-solar-subsidy-cut

It is clear to me based on the comments from minister Duguid that the province had no other choice to hit the brakes very, very hard as they are unable to pay for it using a poorly constructed and totally inaccurate excuse. Clearly gross negligence and incompetence on the part of the province. I feel sorry for the OPA taking the heat.
Spain all over again.

Based on section 7 of the rules I think they are ignoring their own rules as the proposal is not yet defined as an amendment and can therefore not be active and used as such.

[Steven Fahey]

Hi Rob,
I'm stuck on the sidelines in Alberta, but if offering my support does any good you have it. I've been looking forward to policies like the FIT taking hold in other provinces, but if this turns into a legal mess then nobody else will pick up the hot potato.

Hopefully the trouble can be resolved calmly, with facts, and nobody needs to get "ripped a new one".

My own business involvement with government involves an explicit statement that the rules are "frozen in time" at the start of a project. The government (Transport Canada in my case) reserves the right at times of dire need or imminent threat to safety to force a change in the rules, but they can't tweak my budget on the fly.

[Rob Beckers]

Wilco, it is not clear to me at all that Minister Duguid had no other choice. That is the crux of the issue: Nobody is willing to publish actual, factual, numbers regarding the finance involved in MicroFIT. I am 99.9% certain that the $1 billion mentioned by the minister is pure political grandstanding, with no basis in reality. Just a nice, round, big number to overwhelm the electorate and tell all those against the program that he's doing 'his job'.

Steven, yes, the way you're interacting with the government regarding contracts makes sense, and should be the model here as well. I think I wrote this before; IMO it should be the application date that determines the pay-out rate, rules, and domestic content. Not the date that the OPA finally gets around to extending a contract (which as we now know can take over 6 months!).

I'm meeting Friday with an Ontario MPP who wants to have a chat with me regarding the brouhaha. He's in the Ministry of Finance. Hopefully that will help...

-RoB-

[Ralph Day]

Best of luck with that meeting Rob. Point out as you did here about the spot market price of electricity when we're producing most...and about how WE are building the infrastructure for this power, not the government/taxpayer (we are, but that's beside the point).


''Retroactive is not the way to go. When the Feds stopped the ecoenergy grant program, all applications up to the announcement were accepted. The fair process would be to accept all applications up to July 2 and announce revised prices starting Jan 1/11 when the new Ont content rules start. Should not assume that the tariffs should be lowered but do a proper study to determine.''

Quote above from another microFIT owner near me, John Thompson, councillor for Prince Edward County. Makes a good point.

Ralph

[Wilco Vercoelen]

During a conference call yesterday the majority has supported the idea of providing an economic model (averaged out and provided by a large number of reputable businesses) for the OPA to base their numbers on, including realistic production numbers, and not on a few quotes out in the field which we all know could have different impact such mounting it on wooden support structures???

The industry is partly to blame for this, that is why it is even important, that the membership qualifications requirements for CanSIA should be improved as well.
Hopefully the OPA will provide economic numbers as well next week, hopefully not taken from http://www.canadian-solar.ca/residential/ with bogus ROI.
The OPA is using "simple payback and return based on simple payback" to justify the 58 cents proposal, but on the web site of the OPA they want applicants to use RETSCREEN for more in depth analysis IRR over 20 years etc. There are not following their own advice, or probably do not have the time, they are very busy???

There should be an improved and stronger relationship between CanSIA and the OPA as the OPA is not in line with businesses on the ground doing the work.
I think the discussion on the cheaper cost of ground mounts is just a poorly chooses excuse. I have asked CanSIA to see if they can get or have budget estimates from the provincial Budget 2010 regarding the allocated sources for MicroFIT & FIT.

Another point was taken during the conference call to stick with the 30 day application period and not the proposed 60 days. We have to worry that the microFIT is becoming more and more a FIT program.

Section 7 much be changed to prevent actions like this in the future.

It is stupid that the OPA is talking about success of the microFIT program based on 16,000 applications only, not COD and a minute later to tell that they have to close a “loophole” and disregard 11,000 applications. Oh, the succes is a loophole?
Most of the applications for 58 cents will likely have to move forward to recover some losses as the equipment is already in the ground.

In my point of view the International reputation of Ontario and its green initiatives to attract (foreign) investment has certainly hit a roadblock as more foreign investors will be hesitant and likely wait longer to see if the government is credible enough to run this program. This makes the period after Jan. 1, 2011 even more difficult.

A big part of a feed-in tariff structure is a “long term sustainable program with overall price stability and predictability” with minor and/or predetermined rate adjustments downwards corresponding to market conditions such as pricing and availability. They clearly did not do their homework.

I also called my MPP and provided e-mails to the OPA, CanSIA etc.

[Wilco Vercoelen]

The OPA has posted their rationale on the 58.8 cents proposal here: http://microfit.powerauthority.on.ca/Program-updates/rationale.php

[Wilco Vercoelen]

How much I try to get to 24% ROI using the assumptions the OPA is taking at 80.2 cents for a fixed groundmount, there is no way. At the most I will get 15.1% for installed costs of 60K which is too low in the first place!
I also would suggest 1100kWh/kW/Year annual production based on average production number over 20 years, initial is higher, the end is lower assuming degredation is 0.5% per year.

It looks like their initial assumptions where not even taking into account.

Am I missing something????

[Michel de Breyne]

I share your concerns Wilco. I'm not sure if I'm not talking to the right companies but I haven't seen anything near $60k for an installed 10kw fixed ground mount system.

My other concern is that I do believe that come Jan 11, we'll see a 25%-50% jump in system prices (from the prices I've seen that's already the premium seen on 'Ontario' Enphase microinverters vs the same 'non-Ontario' Enphase microinverters). Even if the $60k price was accurate at the moment, IMO, it's going to be $80k in January and then we're nowhere near the 11% target returns.

[Rob Beckers]

Alright, time for a reality check regarding the OPA's "typical ground mounted cost and revenue" (http://microfit.powerauthority.on.ca/Program-updates/rationale.php).

First, let's skip forward in this story, and post the resulting tables that are much like the OPA's tables, but with real-world numbers. The rationale, where the numbers come from, follows right under the tables:

Ground Mounted PV @ 58.8 cents per kWh

|Tracking (10 kW)|Fixed - No Tracking (10 kW)
Cost to Install|$100,000|$74,700
Annual Production|14,193 kWh|11,300 kWh
Annual Revenue|$8,346|$6,644
20-Year Simple Profit|$66,910|$58,188
Simple Payback|12.0 Years|11.2 Years
Return on Investment|3.3%|3.8%


Ground Mounted PV @ 80.2 cents per kWh

|Tracking (10 kW)|Fixed - No Tracking (10 kW)
Cost to Install|$100,000|$74,700
Annual Production|14,193 kWh|11,300 kWh
Annual Revenue|$11,383|$9,063
20-Year Simple Profit|$127,656|$106,552
Simple Payback|8.8 Years|8.2 Years
Return on Investment|6.4%|7.1%


Now, where did these numbers come from? Read on...

Let's take a fixed 10kW ground mounted system first:

My pricing model (for my business) is based on cost plus 15%. I don't want to price every job individually, so I've done this exercise for an 'average' installation, and based on that charge $74,700 plus HST. This includes everything, soup-to-nuts (permits, meter fee etc.), and uses decent components (brand-name PV modules, aluminum and stainless steel racking etc). This price should be seen as a 'base' price, since often ground-mounted installations involve long lengths of cable, beyond the allowance in the base price, or special conditions such as hookup directly to a pole rather than an existing meter base. Those things are all additional costs that will lower the rate-of-return. I know there are some installers ground mounts this for less, and there are also those charging a whole lot more. This is a middle-of-the-road kind of price for this type of job. Note that this is $2,000 above what I would charge for a 10kW rooftop mounted system, simply due to the additional cost associated with ground mounts.

On to energy production. According to NRCan (https://glfc.cfsnet.nfis.org/mapserver/pv/municip.php?n=1408&NEK=e) this will reasonably produce 1198 kWh/kW/yr. While this may be true for new PV modules, it doesn't take aging into account. The number used by the OPA is 1130 kWh/kW/yr, which is very close to what I use for calculating returns for my customers; the panels will produce a little more the first few years, and a little less than that the last few years. It should give a number that is neither overly optimistic nor should it underestimate production. So, that makes 11,300 kWh per year for a 10kW system.

At 80.2 cents per kWh this makes for $9,063 per year, or $181,252 over the 20-year contract term.

At 58.8 cents per kWh this makes for $6,644 per year, or $132,888 over the 20-year contract term.

For simple payback we have a cost of $74,700, and annual revenue of $9,063, so that is 74,700 / 9,063 = 8.2 years in case of 80.2 cents per kWh.

In case of 58.8 cents per kWh simple payback comes to 74,700 / 6,644 = 11.2 years.

The word 'simple' as used above means that it looks at direct cost and revenue only, and doesn't take additional costs into account, such as financing expenses, lost opportunity cost, insurance, repairs, etc.

Simple profit over 20 years, in case of 80.2 cents per kWh, comes to 181,252 - 74,700 = $106,552.

Simple profit over 20 years, in case of 58.8 cents per kWh, comes to 132,888 - 74,700 = $58,188.

The definition of return-on-investment (http://en.wikipedia.org/wiki/Return_on_investment) (or ROI) is the ratio of the money gained (your profit at the end of the ride), divided by the money you invested. Divide this again by the number of years and you have annual ROI. Simple ROI is the return-on-investment when not taking additional costs, such as financing, into account.

An easy way to understand ROI is to take the case where you spend $1, and earn it back in 10 years. So, after 10 years you earned $1 - $1 = $0; you broke even. After 20 years you earned another $1 and now have a profit of $2 - $1 = $1, you doubled your money (100% profit!). Payback time was 10 years (not unlike PV), and annual ROI is the $1 in profit divided by the $1 investment, divided by 20 years, makes 5% annually (or 100% profit divided by 20 years = 5% per year).
So what do we have for the PV cases above?

Simple annual ROI for 80.2 cents per kWh works out to our profit, $106,552, divided by the cost, $74,700, divided by 20 years. This makes 108,156 / 74,700 = 1.43 / 20 = 0.071. In other words, that makes 7.1% annual ROI.

For 58.8 cents per kWh the simple annual ROI is 58,188 / 74,700 / 20 = 0.039 = 3.9%.
The real problem at that ROI is when financing comes into the picture (as most of my customers have financing for their PV installations). All that profit goes to the bank and there is nothing left for the home owner.

Now for a 10 kW tracking system:

A single-axis tracker can do (theoretically) 25.6% better in energy production than fixed mounted solar. So, all we have to do is multiply the production numbers by 1.256. That makes 11,300 * 1.256 = 14,193 kWh per year.

I do not install trackers myself, but the message from my colleagues is that those are around $100,000 installed (or more, realistically). So that is our cost. You'll be hard-pressed to get anyone to do this job for less.

At 80.2 cents per kWh the annual revenue is 14,193 * 0.802 = $11,383 per year, or $227,656 over the 20-year contract.

At 58.8 cents per kWh the annual revenue is $8,346 per year, or $166,910 over the 20-year contract.

At 80.2 cents per kWh simple payback is 100,000 / 11,383 = 8.8 years.

At 58.8 cents per kWh simple payback is 100,000 / 8,346 = 12.0 years.

At 80.2 cents per kWh the total simple profit over 20 years is 227,656 - 100,000 = $127,656.

At 58.8 cents per kWh the total simple profit over 20 years is 166,910 - 100,000 = $66,910.

At 80.2 cents per kWh the simple annual ROI is 127,656 / 100,000 / 20 = 6.4%

At 58.8 cents per kWh the simple annual ROI is 66,910 / 100,000 / 20 = 3.3%

And there you have it. The calculations are there for anyone to follow, and the starting numbers are realistic real-world ones. They are nowhere near the OPA's numbers. Unfortunately it looks like the OPA is using the same return-on-investment obfuscation that is so popular with most installers, where they conveniently leave out the cost of the installation (that is an expense, which takes away from the profit!). The OPA knows better, since they did produce 'reasonable' numbers during their presentation here in Ottawa (and those were in the 5% ROI range).

-RoB-

[Rob Beckers]

There is another note I would like to make, regarding the $1B in cost to the rate payers, according to the Ministry of Energy.

Now, please keep in mind that nobody has yet offered a decent explanation as to where that $1B comes from, other than being a nice, round, impressive number that will really hit home with the electorate. Such an explanation would have to include the offset in cost avoided by not having to purchase electricity on the spot-market during summer peak-hours for Ontario (at 80 cents a kWh and up). It would also have to include the benefits from additional business revenue and taxes from a whole new industry created by FIT/MicroFIT. Anyway, we're all still waiting (but not holding our breath).

Let's for a moment assume that $1B over 20 years is real, and realistic. The Ministry told us there are approximately 3,000,000 rate payers in Ontario. So we are talking about $16 per rate payer (household) per year. 16 Bucks!! That's All!!!

That makes a whopping $1.38 a month!
Isn't that little bit of money worth the development of a green energy infrastructure and a promising new industry?

-RoB-

[Wilco Vercoelen]

OPA has published Return on Equity definition as:

*Return on equity = annual revenue – annual debt repayment (70% of project costs) ÷ equity investment (30% of project costs)

[Rob Beckers]

Thanks Wilco, I didn't know what they were using...

The whole ROI concept does not make any sense what-so-ever when used with financing (other than for one's very individual case). As I have written in another thread, you can get 1000's of percent ROI by investing (for example) $1 and financing the rest. This makes comparison or even a meaningful discussion on "how much can you earn" impossible. Take the OPA's numbers: People not knowing where these numbers come from will latch onto them to make claims about unreasonable profits. Heck, even the OPA is playing that same game for their own justification. The ROI number does not say anything about profit, and financed installations typically end up with very little actual dollar profit at the end of the 20-year ride. The revenue largely goes towards servicing the debt.

It truly annoys me that the OPA is playing the same questionable game that installers have been playing, where dozens of percent ROI are claimed to attract customers. I would have hoped that that the OPA was above that.

Sad.... :(

-RoB-

[Wilco Vercoelen]

Rob, I totally agree with you, and as I said before, ROI can be manipulated to any form or number you want it to be.

The OPA formula totally neglects the bank loan itself but only focuses on the initial private investment funds.

If the system costs is $60,000 with a debt ratio of 70/30 @ 7%/15 years term your initial equity investment is $18,000 and $42,000 will be provided by the bank with annual debt payments of $4,780.
Yes OPA, the return of INITIAL equity is 9,100 – 4,780 / 18,000 = 24%, but you conveniently neglect the loan you pay at $4,780 for 15 years which equals to $71,700!!
Your total equity is not $18,000 but $89,700

OPA, this does not make any sense at all, and this is without the income tax and CCA!

[Rob Beckers]

The Green Party of Ontario has issued a press release, and held a press conference to object to the feed-in rate change. They asked if I was willing to speak (though I'm not a Green Party member). That happened last Friday, at Parliament Hill here in Ottawa (the federal government building) in one of their media rooms. Turnout by the media was disappointingly low; there were 3 camera crews, no journalists. The CBC was one of them, which is good since they have the ability to give this province-wide coverage. Without journalists there were no questions, the part I was looking forward to, so it all we did was give statements.

Here is a YouTube feed of the event. Pardon the somewhat shaky camera and sound, this was made using a hand-held device. The media had of course professional equipment, and were hooked up to the microphone up front.

In case you're wondering, I'm the (only) guy in T-shirt. Suits and ties is not my style. Besides, the text on the T-shirt reads "Solar Energy: 5 Billion Years of Trouble Free Service". :cool:

YouTube- Broadcast Yourself. (http://www.youtube.com/view_play_list?p=B4E25D82B6FA886D)

Here is the press release that was sent to the media by the Green Party of Ontario.
886

-RoB-

[Michel de Breyne]

Rob, thank you for posting the video. And thank you and your colleagues for participating in the conference. It's a shame that it wasn't covered or featured any better - this is actually the first I hear of it and I live in Ottawa. Haven't seen anything about it in the news or newspaper (although I don't follow either that much). Hopefully people see it on youtube too.

Not sure the impact it's going to have but it's actually the 2nd time I hear something about the rate cut recently so maybe (hopefully) it's going to make a difference (although as mentioned the conference, damage has already been done. If nothing else it was nice to hear someone actually say in a press conference that the provincial government had really screwed this thing up!).

Keep up the good work,
Mike

[Rob Beckers]

There is an online petition collecting names/signatures to present to the OPA, opposing the proposed rate change. Please take a minute (literally, it won't take more) to fill this out and submit:

http://www.microfitaction.com/

-RoB-

[Dave Schwartz]

I can post a summary for those who can't listen in and don't want to wait for the recording to become available.

[Dave Schwartz]

So that call's over and the introduction was basically a rehash of what's available from the website. The critical date is July 2 at noon... if your application was not clearly roof-mount, which continued to be processed and approved, then those applications became officially frozen at that time.

The frozen applications (10,700 of them) were unlocked and must resubmitted by the Sept 7 deadline in order to be grandfathered at 80.2 cents. [ I don't see why they just don't do that automatically because of course everyone is going to want to be grandfathered. Maybe its just to weed out the people who've lost interest. ]

Any new ground mount submitted after July 2 noon will get the 64.2 cent rate and if an unlocked application from before July 2 is not resubmitted before the Sept 7 deadline, the grandfather option will expire and a new app will have to be done (and at the 64.2 cent rate if still ground mount).

Resubmitted and grandfathered applications have until the end of May 2011 to be at the 'ESA contacted to inspect' and 'LDC contacted to connect' stage (don't actually need to be connected) to qualify under the 40% Ontario content rule. All other projects, including apps that were not frozen and any new apps submitted after July 2, still need to be fully connected under at least a conditional contract by the end of the year to qualify for the 40% - no flexibility on this.

They say that the approval process has become so streamlined that apps resubmitted before the end of July will have a decision by the end of September and 'early fall' for apps resubmitted after Aug 1. They are going to be sending weekly emails to pending applicants and posting information about how many apps they have outstanding, how many they processed that week and to what application date the queue has been cleared. This should help you determine what 'real soon now' means in your particular case.

A lot of the calls were about the 'aggregator' issue. They are honoring applications by aggregators from before August 13 but its unlikely that further contracts to aggregators will qualify under microFIT - the new 'advisory council' will hash that out and they are intending that CanSIA be the spokesperson for aggregators. They were really dancing around the definition of aggregator but it sounds like the relationship needs to be arms-length for it not to be suspected to be an aggregation. An individual with multiple properties who installs on their own properties (whether or not they incorporate for business reasons) would not be an aggregator. If you're owning or operating multiple systems (total >10kW) on properties you do not own then you are probably an aggregator and you won't get the full microFIT treatment.

[Rob Beckers]

The final rules are a strange 'compromise'.
I believe it has been shown abundantly clear to the OPA that ground mounted PV is not cheaper than rooftop, yet they maintain it is. It is also easy to show that real payback time and return-on-investment are nowhere near the OPA's numbers (which they maintain to be true), and that throwing financing into that, as the OPA does, will allow one to create any ROI number you desire (in other words, it is nearly meaningless to consider financing cases for ROI, unless it is very specific to your installation with your financing terms).

Not a word of apology from the OPA for their ham-handed approach to rate changes. Not a word from minister Brad Duguid of the Ontario Ministry of Energy to justify the numbers he has been throwing around for the cost of the FIT/MicroFIT program. The OPA does mention the appointment of an advisory panel to review future rate changes. Very little detail on the power of such committee, or its actual implementation though. The word 'advisory' seems to suggest that the OPA retains the right to continue to make changes as it sees fit.

I do agree with the new rules on aggregators, to exclude them from MicroFIT. The higher returns of MicroFIT were intended to jump-start small scale individual renewable energy. Aggregators, who are strictly in this for the money, have no place in that. They still have the FIT program to participate in.

The handling of this issue does not exactly leave me with a warm fuzzy feeling though...

-RoB-