July 14, 2010 - Thousands of Ontarians are taking part in a brand new and unique program by becoming renewable electricity generators in their backyards, on their roofs and around their farms while earning a reasonable rate of return on equity over the life of the contract. We are fixing a glitch in the programs that was highlighted because of the unexpected popularity of ground-mounted solar projects. We are now creating a separate price category for ground-mounted solar to ensure the microFIT program remains sustainable and electricity ratepayers – Ontario families – receive good value for new renewable energy.

FIT and microFIT Program rates for all project types are set to cover costs, plus provide a reasonable rate of return on equity to the developer - roughly an 11 percent return on equity over the 20 years of the project contract.

In setting FIT and microFIT rates, OPA took into account typical project capital costs, operating and maintenance costs, financing costs and expected electricity production over the life of the project.  A 70/30 debt/equity split was assumed and debt borrowing costs were assumed at 7 percent.

Projects can come in many different configurations. Project costs and capacity factor - that is the amount of energy a project produces - are BOTH key elements in determining a project's rate of return on equity.

Upfront capital costs of ground-mount projects depend on whether they are on tracking or non-tracking systems. Higher revenues offset the higher project costs and mean the lower rate of 58.8 cents/kWh provides developers of ground-mounted projects with a return on equity comparable to the one rooftop generators receive at 80.2 cents/kWh.

Ground-mounted projects with tracking systems (panels that turn to follow the sun) have higher upfront capital costs but produce more energy (higher capacity factor) and therefore generate more revenue. At 58.8 cents/KWh, the higher revenue offsets the higher capital costs and results in a rate of return on equity that is comparable to rooftop solar projects as well as other projects.

Ground-mounted projects without tracking systems have lower capital costs but also generate less energy and therefore less revenue. In this case, the lower upfront cost offsets the lower revenue, still enabling a reasonable rate of return on equity from the same 58.8 cent rate. The costs of these projects in particular have come down relative to rooftop installations since the program was introduced, enabling a reduction in the tariff rate.

The new price category levels the playing field with other program categories. The OPA is conducting a 30-day consultation period on the new price category and invites proponents to submit feedback.