Incentive For Solar (16)-Feed-In-Tariff, Canadian Friend Maury Markowitz’s Advice for Americans/Floridians
Dear Friends, Family, and Interested Solar Fans,
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During Fall of 2010, I was visiting my friend Julia in Canada and decided to try to learn from the Canadians about their experience with Feed-In-Tariff. Ontario, Canada (or course), introduced a feed-in-tariff in 2006, and revised in 2009, which increases from 42 c/kWh to 80.2 c/kWh for micro-scale (<= 10 kW) grid-tied photovoltaic projects. Ontario’s FIT program also includes a tariff schedule for larger projects up to and including 10 MW solar farms at a reduced rate.As of April, 2010, several hundred projects have been approved, including 184 large scale projects, worth $8 billion all together. It was wonderful to find out that so much business opportunities/activities were generated for their local community as a result of the feed-in-tariff program. I met so many enthusiastic Canadian solar entrepreneurs, fully energized by this program. Below, you will see/hear an edited interview with Maury Markowitz, President of InPhase Power, Inc., for the vivacious Maury is not only full of wealth of information and insight, but his enthusiasm is contagious. I have also uploaded this video onto Youtube, seen below:
To start with, it is important to always consider the fact that any solar program, FIT or not, is in some fashion a form of redistributive taxation. Whatever premium over grid rates that the FIT program pays has to come from someone’s pocket. In Ontario, this is taken care of by everyone’s electrical bill, which is the best way to handle this. If Maury’s calculations are correct, all of the solar power in Ontario costs about $0.25 extra a year (yes, 25 cents). That will go up in the future as more systems come online, but if that goes to $25 a year given a huge build-out, that is a price everyone will be willing to pay to “go green”.
If we’re redistributing money, it’s important to ensure that you get your money’s worth. Ontario has a very strong manufacturing sector (#3 in North America I believe) that was hurting due to downturns in existing markets and increased international competition. FIT, especially the “buy Ontario” portion, was seen as a way to return some of these jobs here. So far this has been extremely successful; there are dozens, many dozens, of companies moving manufacturing to Ontario. So this is money well spent.
Florida is another issue. The local economy has been based largely on home building over the last decade or so, and this is definitely hurting these days. However, by carefully arranging the requirements for Florida workers, some of that lost manpower can be recaptured. Whether or not this can be seen as economically positive over a fixed period (20 years in Ontario for instance) is something for the economists to figure out. One of the problems in Ontario is that the bill that introduced FIT was part of a larger energy bill. A major part of that bill was unrelated to FIT — it was a phase-in period to bring home billing to commercial levels. Ontario always subsidized residential power, which is a serious problem for everyone and made out consumption one of the highest in the world — why not at 4.5 cents a kWh?! So now prices are going up, and keep going up, and…So everyone blames the solar panels. You see, if you pay a FIT price of 80 cents, then it seems at first glance that that’s the reason your bill is going up. But it’s not, it’s pennies. But in every debate, even the good ones (look for The Agenda on iTunes and get their podcasts about the green energy act — trust me on this), it’s all too simple to write it off.
So the lesson here is to make the law self-contained, and self-reporting. If it fails it fails, but don’t let it fail because someone was able to blame it for problems in some other part of an omnibus bill. Now how much should you pay in FIT? Well here’s another area where you can learn from Canadians’ lessons. Two of the most asked questions from homeowners is “how much stuff can I run off of this” followed by “how much will I save”. Well under FIT, the answer is “none” and “zero”. That’s not what a homeowner wants to hear. If you use net metering as opposed to FIT, then you get real numbers for both of these questions. It’s an easier sell even if the numbers aren’t actually as good. Yet for commercial users, FIT makes much more sense. Maury could tell them immediately what they’ll make a year on their investment. If they can borrow money for less than that, sold! So, what to do about this. HAVE TWO PROGRAMS. Instead of “residential” and “commercial”, which is what some countries were trying to do, have a “small” and “large” programs, assuming they would fall into these categories. The idea was that small systems cost more to install (true) so we’ll give better rates, and that will help the homeowners.
This backfired badly. What happened instead is that companies started putting up small systems due to the higher payouts, flooding the department that was originally expecting a few thousand requests from residential systems. These projects were field-mounted, which costs less to install. So then the government started patching the holes this caused. First they came up with a separate rate for ground mounted, then they said you had to own the house (no rental units) and they keep making changes to patch these problems — causing more problems every time.
So here’s the takeaway — have two programs, one for residential roofmount customers up to a certain size limit (10 kW is already on the high side) and another for everyone else. The power companies already know the difference between residential and commercial customers, let them tell you which is which. Make sure the residential rate applies only to rooftop installs on “main dwellings” that are actively occupied — no letting the farmers put them in the front yard or on their barn. You get the idea.
Now it’s simply a matter of numbers. Our program was set up so owners would basically double their money over 20 years. To do that with a typical residential system given Toronto sunlight, that set the rate to about 80 cents. Tampa gets about 20% more sunlight than Toronto, so right off the bat you can cut 20% off the FIT rate, taking you down to about 65 cents if you want to pay out over 20 years like we do.
But as long as the rules on who can apply are ironclad, I HIGHLY RECOMMEND an alternative approach. Instead of a 20 year program that doubles your money, how about a 10 year one that gives you only 50% more than you invested? Wait, pay out almost half the money and kill the financials? Yes. I guarantee you that the uptake on a program like this would be MUCH higher. Why? Because people don’t own houses for 20 years — or they don’t think they will. There’s a perceived risk that business owners don’t see. They invest in new equipment all the time, it’s strictly a matter of looking at the numbers.
Now some tech. If you’re going to make this work at the residential level, make sure they figure out the “metering issue”. What’s that? Well with net metering everything is simple, because I pay you the same rate you pay me. All I need is a single meter, and I bill you based on that number (positive or negative). But with FIT you pay and receive different rates, and a single meter doesn’t give you those two measures — you need two meters. The simple way to solve this is to put a meter anywhere, then run the wire from that meter into a breaker in the customer’s basement. However, this leads to the possibility of errors. Imagine I generate the exact amount of energy I use. In that case, the meter on the solar panels will read something, say “100”. My main meter at the outside of the house will say “0”. So it would seem easy then — I bought 100 at one price and sold 100 at another price, done! Not so fast. Each of those meters is accurate only to 3% (or so). So if I actually produced 3% more power and used 3% less, the numbers on the meters stay the same, but I just lost 6% of my income. This is bad. So what they did here is demand the two meters be independently metered to the grid, eliminating this problem, now it’s 3% on both, which is within limits (I know that sounds strange). This costs us an additional $1500 an install, or more. We have to remove the customer’s existing meter, put in a double-one, rewire everything, and get it inspected. The power is off while this happens. The overhead is killer.
There are many solutions to this problem, metering ones, legal ones, billing ones. Just make sure to pick one and let the _residential_ customers use it.
Ok, I think I’m spent. 🙂 Maury
Thank you, Maury, for your input and encouragement ! I only wished that I posted this earlier. Again, meeting with you affirmed my belief that there is hope for Florida and US in our path of learning/understanding for Feed-In-Tariff and the transition to renewable/solar energy age will be based on shared experience of all earthlings.
Posted by sunisthefuture-Susan Sun Nunamaker, firstname.lastname@example.org
Tags: Canada, clean energy, feed-in-tariff, FIT, Florida, Incentive for solar, InPhase Power Inc., Maury Markowitz, Ontario, renewable energy, Solar Energy, Sun Is The Future, sunisthefuture, sunisthefuture.com, sunisthefuture.net, susan sun nunamaker, Toronto, USA