unFIT

Ontario may eventually gather the wherewithal to start redirecting the provincial power system away from parasitism towards responsible cost management. One agency is getting ahead of the curve with its sales pitch — don’t blame us.

On September 24, the IESO finalized the Feed-In Tariff (FIT) prices for small scale renewable power generators for 2016. The starting point for the IESO’s report is to point out that the whole FIT program is the Minister of Energy’s doing.

The April 5, 2012, June 12, 2013 and August 29, 2014 Minister’s Directions require the IESO to conduct an annual price review for the FIT Program (including microFIT)

The IESO’s second major point is to make it clear that FIT prices have nothing to do with the value of the power they produce.

FIT prices reflect a cost-based assessment of the investment required to implement a given technology • This contrasts with a value-based assessment that would reflect the benefits and costs incurred by electricity consumers as a result of implementing that technology

At the last round of price adjustments for 2015, prices were decreased slightly for solar and biogas, and increased slightly for biomass and on-shore wind. However, for landfill gas and waterpower, prices were moved up dramatically. Prices paid to landfill gas producers moved from 7.7 cents per kWh to 17.1 cents per kWh. For waterpower, the price moved from 14.8 cents per kWh to 24.6 cents per kWh.

For 2016, FIT prices for solar will move down as much as 42%. Where current prices range from 27.5 – 38.4 cents per kWh depending on size and rooftop or ground mounting, the new prices will range from 20.9 – 29.4 cents per kWh.

Weep not for the solar scammers.

Even with these reductions, solar power is still a parasite feeding on Ontario’s power consumers. Ontario’s solar generators only help serve peak demand on a handful of days per year. In addition, the afternoon ramp down in solar output occurs when the evening demand of consumers is rising, thereby driving extra costs from the dispatchable generators. Since all solar generators have nearly identical output behaviour, what positive value a particular solar generator could provide to the grid is diluted by all the other installed solar capacity.

Many residential consumers in Ontario now pay more for power than the lowest solar FIT prices for 2016. My June/July bill from Toronto Hydro worked out to 24.4 cents per kWh. With an exciting consumer price jump coming in 2016, millions of Ontario consumers will soon pay more than the solar FIT prices.

So-called “grid parity” has been achieved.

Although a popular benchmark in many energy policy discussions, “grid parity” between the cost of solar and the price of delivered power is a junk comparison. Delivered power has reliability characteristics vastly different than the raw output of fickle solar generators.

For solar power to be cheap enough to make its unfavourable characteristics worthwhile for consumers, its costs would have to be substantially less than that of reliable generators and less still relative to reliable, dispatchable generators.

A unanimous talking point among the extended solar sales force is that because solar can be generated where the power is consumed, this makes solar power especially valuable. This junk claim clutters many energy policy discussions. The reverse is true: power produced on the small consumer’s premises is worth much less than grid power. A major driver for rising distribution costs is the so-called “smart grid”, the re-engineering effort required to make the grid capable of receiving solar generation at the consumer’s premises. The inherent safety and cost advantages of a one-way distribution system are being replaced by a riskier, much more costly two-way distribution system, largely to accommodate junk solar power. Distribution utilities love solar power because it creates an excuse for them to spend capital dollars, increase their rate base, and screw consumers.

As of the end of June, there were 1,823.5 MW of these solar parasites on-line across Ontario with a further 610.3 MW under development.

The FIT price reduction appears have caused a general uproar among solar generation interest groups. An unconfirmed rumour suggestses that SunEdison laid off significant Ontario staff numbers last week and will closing an office. Staffing cuts and office closures at other developers are expected to follow soon. Expect to see the solar PR departments ramping up their screeching.

At the end of this round of Liberal friend buying, the fair weather subsidy tourists may be heading home.

The history of the FIT program has been all politics all the time. From the beginning, the government has ignored advice from the OPA on how to contain the costs of FIT and to maximize consumer value. Instead, the government interfered over and over again to create windfalls for targeted constituencies, always at the expense of consumers. The initial FIT prices for solar were as high as 80.2 cents per kWh for 20 year contracts. Many existing solar contracts have price escalators. There has been no limit in the FIT program on the amount of nearly useless junk it has procured.

As of June 2015, 23,928 solar contracts have been signed. That’s a lot of special Liberal friends.

The consequence for consumers of having the likes of Ontario’s electricity system CEO Bob Chiarelli — the guy who claims Ontario give-away power exports are profitable — making all the decisions?

Since 2009, the inflation adjusted revenue requirement for the entire power system per unit of sales to Ontario consumers has escalated at a compound annual rate of 4.7%. The introduction in 2011 of cost shifting to shield the largest industrial customers from a large portion of the overall power bill has accelerated rate pressure on residential and medium-sized businesses. In 2016, residential rates will increase by approximately 13% adjusted for inflation.

The government’s decision to reign in the solar scammers appears to indicate some level of recognition of the drastic impact on consumers of adding junk generation costing at wholesale multiples above the cost of delivered commodity power.

From the beginning, the purpose of the FIT program was to use electricity ratepayer dollars to buy constituencies supportive of the Liberal government’s agenda. Recent FIT program changes indicate that the Liberals have shifted their friend-buying intentions away from solar interests to new constituencies. These include various conservation authorities who are candidates for a lot of the small hydro development opportunities left in Ontario like this and municipalities that can host landfill gas generators. The saving grace for consumers about small hydro and landfill gas is that the damage of the outrageous FIT prices is limited to a few hundred potential MW.

When the time comes to clean up Ontario’s electricity mess, one useful step will be the cancellation of FIT contracts held by government entities. Hospitals, schools, police stations, conservation authorities, public arenas and other government operations have no business being in the power generation business. Their duties to serve the public interest, whether to heal the sick, educate the young, enforce the law, protect low lying properties from flooding, or provide sporting opportunities do not include a mandate to promote harm to energy consumers.

7 Comments

  1. Pingback: unFIT | Colder Air

  2. This is the way that political constituencies for renewable energy were built in Europe. Bring different renewable energy groups on-board.

  3. It appears to me that the clever aspect of RE FIT’s from a gov’t/stakeholder persective is that if you jam enough expensive, disruptive, unneeded generation onto the grid, it causes the public system to become so expensive and inefficient that the costs encourage consumers to open their wallets, buy their own systems and either net meter or jump right off the grid.
    At that point you get another negative feed back of shrinkage and unprofitability for the utility and the remainng consumers. All electricty consumers ultimately lose. As well our super clean nuclear/hydro supply mix has as lower life cycle emissions than solar in On., so the environment loses too. But happy day for the RE vendors and the gov’t can say “look at the growth in the RE sector we created”.

  4. SunEdison is laying off people – it’s confirmed now.

    http://fortune.com/2015/10/05/sunedison-layoffs-solar-stock/

    Not only should FIT contracts by government entities be cancelled, but also those with generation development subsidiaries of LDC’s. They build out solar junk, which requires build out of distribution assets, so they earn big bucks from the FIT contracts and an incremental rate of return on an ever expanding asset base, and the rate payer is jammed with the bill – it’s a scam.

    • Very interesting point about LDCs scamming consumers with solar junk. Once upon a time, when public utility regulation was taken seriously in Ontario, the OEB worked long and hard to try to keep regulated and unregulated businesses separated. The concern was that by commingling regulated and unregulated businesses, the owners would have an incentive to shift costs to the regulated business and revenues to the unregulated business. Trying to track dollars flowing through large complex parent companies is very hard work that regulators and intervenors are not nearly as good at as utility execs.

      Now, Chiarelli and Wynne have changed all the rules to encourage regulated utilities to get into unregulated businesses. It is almost as if Chiarelli and Wynne don’t mind if ratepayers get screwed.

  5. Wall Street Journal, Oct.13, 2015

    ‘New England looks north for power boost’

    “New England’s most populous states are looking to Canadian dams and rivers for more of their electricity, a change that officials say would help cut greenhouse-gas emissions and help keep some of the nation’s highest power prices in check.”

    http://www.wsj.com/articles/new-england-looks-north-for-power-boost-1444777186

    This article requires a subscription but there are other internet links to the full news article.

  6. This analysis would be more credible if the author were not so politically biased. It is ridiculous to make the assumption that the program was implemented in order to benefit liberal friends, as implied by the sentence “That’s a lot of special Liberal friends.”

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