I don’t believe in free lunches. Whenever somebody offers me anything for “free” I immediately ask myself what’s in it for them. If the answer doesn’t bother me, I may go with the offer. microFIT PV is no different, so here is the best explanation I could think of.
This is the first part of a series analyzing what are the incentives for the Government to offer such a generous price for the solar-produced electricity. If you remember from my previous post, the electricity produced by the roof-mounted solar panels is rewarded with a price of $0.802/kWh, at least 8 times higher than the price we pay for the electricity we use.
I’ll start with a quick note: since I’m only interested in solar panels, whenever I write microFIT PV I’m only considering the grid-tied Photo-Voltaic installations, aka solar panels. Also, when I’m talking about the Government, I’m thinking of the Ontario Provincial Government, which controls 70% of the provincial electricity market through Ontario Power Generation, and also controls the pricing through its agencies.
Now it’s time for some basic considerations about how the electricity industry works. Because electricity cannot be easily or cheaply stored, the production should always match the consumption. But the consumption varies wildly during the day and also during the year. So we need to have generators capable of producing the maximum amount of electricity needed at peak time, even if that peak is just for a few hours a day. As the demand constantly increases because of our ever growing electricity hunger, the peak also rises and new generators are needed. Building them takes a long time and it’s extremely expensive.
Let’s see if the amount of power potentially generated by the microFIT installations is comparable at least to a power station. OPA’s press release notes that they received 19,000 applications until August, 2010. Just for the sake of the argument, I will consider that only 15,000 of them will finally end up installing their solar panels, and that the average installation is 7kW. The latter is an absolutely wild guess, but based on a few facts:
- the maximum installed power is 10 kW
- the minimum installed power that may be financially reasonable is probably around 3-4 kW
- OPA is complaining that too many applications are for ground-mounted installations. I suspect most of those are probably close to the 10kW limit, since it makes economic sense
The total installed power is:
15000 installs x 7 kW = 105,000 kW = 105 MW
Given that around Toronto 1 kW system can generate around 1100 kWh/year, the total yearly production is:
105,000 kW x 1100 kWh/kWpk= 115,500,000 kWh, or 115,500 MWh
If this power were to be equally spread during the whole year, how big the respective power plant should be? It’s easy:
115,500 MWh/(365 days x 24hours) = 13.18 MW.
And this is only for the people who were interested enough to put an application in the first year of the program! Now, the only thing that we can’t easily grasp is how big a 13 MW power plant really is. According to the list of power plants in Canada, there are lots of hydroelectric plants smaller than 13 MW. I counted 63 in Ontario alone! And it seems that they still build small hydroelectric plants. Glen Miller Generating Station is only 8MW, and it started working at the end of 2005.
So here is one of the main advantages: even if all the microFIT PV installations in Ontario are equivalent to a single power plant, that’s money the Government/OPG doesn’t have to borrow to build it, as they usually do these days! In the worst case, it will at least buy them a little time, for a total cost of … $0. OK, there’s a little exaggeration here, there are some costs for administering the program, but they should be nominal.
P.S. If you want to read the rest of my analysis, go on and read part 2.
Update: I discovered the OPA report for the second quarter of 2010, which confirms our estimates. At page 9 they mention the microFIT program status, as in the table below. We can see that the installed average system power is lower than the one applied for. That’s probably because they stopped approving the larger ground-mounted systems early in the year, dragging the average installation to a lower value. Anyway, the total power for all the applications is 154 MW, so our estimate was not far off.
Number Total Power [kW] Average power [kW]
Applications 16756 154000 9.19
Approved 3997 35000 8.76
Installed 552 2900 5.25