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On the Political Climate

Solar runs on sun, but is filtered by regulation

by : Nov 1, 2015

Since the MicroFIT programme was established by the Ontario Government through its agencies Ontario Hydro and Ontario Power Generation, the other party in the production contract is a very powerful business partner. Individual MicroFIT participants are dwarfed by the size and capacity of the grid managers to change in subtle ways the way the programme is managed. There are economic costs arising from the uncertainty inherent in how the political climate will change in the future.

Uncertainty in the short term

Ontario Power Generation is breaking new ground with small scale local solar generation. Along with the producers, it too is learning as time goes by. They have to steer a narrow course to keep producers producing, and still control the adoption of the technology which could proceed at too fast a rate. It is inevitable that there will be adjustments to the programme as it develops in the early days. The result of many changes of policy has been to first encourage the formation of many small business enterprises to try to satisfy the demand for MicroFIT projects; this was followed by a major policy change that drove many of these new businesses out of the industry. One of the costs for some producers whose installer no longer exists has been to find a new professional to maintain a system that was installed by someone else. This is not always an easy task.

Uncertainty in the longer term

It is very unlikely that the OPG would cancel contracts for no good reason. This would leave a legal liability for compensation for costs incurred, particularly as very few installations will after 5 years have achieved even a simple payback of capital outlay. However, it stands as a reasonable risk with very low probability of actually happening. What is more likely to happen is a change in the details of the climate in which we produce power. Regulation might make it harder to produce power profitably, causing many owners to voluntarily switch power production from the grid to off-grid status. The tax situation might change, reducing income to producers, or making it harder for producers to deduct expenses against that part of their business income.

The longer it takes to generate income from an installation, the more distant the horizon for simple payback.

Zero export

One factor which is being implemented in Australia is that of requiring inverters and systems to be zero export capable. In brief, this means that the grid can control how much power can be sent into the grid from an individual array. It might be a really sunny day and the array is capable of putting 10 kilowatt-hours into the grid, but this can be throttled by the grid in conditions where renewable sources are producing too much in the aggregate for the local grid to manage. And a throttled delivery means that a definite crimp is put in the ability of a producer to get a payback from his investment.

The power is not lost, of course. Inverters which are "zero export" capable are generally also capable of diverting the surplus in other directions, such as battery storage, making the produced power available for domestic consumption, but not delivery, in a later time frame. But this requires additional investment in expensive batteries, increasing risk and also costs of monitoring.

Is it possible that we will see this in Canada? Anything is possible, but I have not heard anything at this point in time.