Focus on the Environment: Reaping the Sun - A primer on the complexities of solar power generation

Tuesday, March 2, 2010

Ontario power generation has shown it is serious about encouraging solar power generation by doubling its feed-in rates. But rules on domestic content and connectivity costs are not making life easy for the farmer

by PETER ION

Perhaps watching European nations, such as Germany, literally smother their landscape with solar panels whilst maintaining an agricultural surplus has finally triggered a feed-in-electrical tariff for Ontarians that makes some sense.

In effectively doubling the existing rate to just over 80 cents per kilowatt hour, the Ontario Power Authority (OPA) looked to have set the ball in motion to trigger a mass hook-up to the provincial grid. The embedded terms and conditions of participation in the scheme appear to be designed to slow things down. The most logical explanation however would be to provide time to build capacity. At another level, it begins to smell of provincial protectionism by ensuring that solar installation designs have a minimum content of Ontario origin.

For Ontario farmers, the critical figure to memorize is 10 kilowatts. Keeping any solar installations below the 10kW threshold will qualify them for the premium rate of 80.2 cents per kWh. This applies to either roof-mounted or ground-based projects. Increasing the scale decreases the rate awarded by the OPA for power delivered to the grid. A 10 kW array of the most efficient panels on the market today, typically comprising 50 panels capable of delivering 200 kW each, would occupy around 250 square feet of roof space.

The exact same design on land would only qualify for a feed in tariff (FIT) of 44.3 cents per kWh.

Whereas placing restrictions upon the use of quality farm land is understandable (and the disqualifying criteria are designed to be very stringent, with class 1 and 2 land units entirely ineligible), the domestic content requirements are a lot more complex. In essence, solar projects at and below the 10 kW threshold (actually classified as "micro-FIT" projects) were required to pass a minimum composition of 50 per cent "originated in Ontario." These requirements were initially ramped up by 10 per cent for projects commissioned in 2011 rather than 2010.

According to Peter Wetzel of solar system suppliers Solex in Barrie, "the complexities of implementation have triggered a rescinding of this rule, as Ontario suppliers are working around the barriers by building in system components from mounting hardware and inverter units, built in Ontario, rather than elsewhere, to meet compliance.

Essentially, the OPA have recognized that it is going to take some time for the solar cell supply chain to get established in Ontario and for a competitive structure to evolve to offset legitimate fears of price collusion. With the silicon-based core components of the cell typically sourced from Asia or Europe, incorporating the supporting hardware from Ontario manufacturers is the preferred solution. Naturally, the responsibility to provide documentary evidence of certificates of origin is borne by the generator – the farmer.

The domestic content criteria are particularly frustrating and incomprehensible when you consider that equivalent Australian schemes offer fractionally less by way of compensating tariff but have no such local-sourcing conditions.

As for connectivity, it is something of a curate's egg in which the complexities can work both ways in terms of advantage. The system must, of course, have sufficient capacity to accept the generated power and the OPA have set in place clear guidelines for who bears the cost of connection. Mutually-beneficial upgrades share the cost burden between OPA and the generator. "Enabling" facilities that are made viable through the joint action of more than one generator – for example, the close clustering of several renewable resource providers, including non-solar generators such as a wind turbine – may become available at a later date. The opportunity to "wait in line" until a viable cluster becomes available is accommodated within the system design. There are also very healthy (95 per cent) discounts on the initial completion and security application fees for either community-level or aboriginal participation.

The onus to ensure connectivity to the grid is entirely upon the generator in these FIT (and smaller micro-FIT) projects. A $5,000 outlay for even the most economically viable option – be that a direct connection, a mutually-advantageous "upgrade" to an existing connection point or to an "enabling" facility (made viable by the inclusion of additional local generators) – would be considered modest, according to the OPA's FIT advisors.

Additional costs of accreditation through the Electrical Safety Authority are also borne by the generator. (A summary of typical costs are included in Figure 1.)

According to a recent European research report, the unit cost of solar cells are anticipated to fall by between 20 per cent and 25 per cent and cells are demonstrating a lifetime of between 30 and 40 years – way beyond the typical 20- year period of the "performance warranty" guaranteeing minimum output levels.

The upside of the FIT process is that, once connected, payback is instantaneous. And, for that reason, there are attractive rates offered for loans through the banks. TD Bank offers a five per cent loan on a 20-year contract to match the minimum term of the OPA offer.

The risk to the generator is in the vagaries of the FIT "production line." Once registered, the project is subject to a series of economic viability tests that periodically assess whether or not there is available capacity (application fees are gradually used up with each assessment). 

Farmers feeding into the grid under overcast Ontario skies will still receive payment. The "diffuse" component of solar radiation typical of cloudy days is usually at least 60 per cent that of the combined "direct and diffuse" radiation of cloudless skies. At the molecular level, a "photon" hitting a solar panel is more efficient (if only in terms of cash flow) than any planted crop in Ontario.

It is however unlikely that any near-term solar farm installation will be able to take advantage of the 36 per cent efficiency solar cells that are coming out of the research labs. These will be priced in line with procurement policies in play at the space agencies. A figure closer to 18 per cent is more typical for terrestrial solar panels.

On sunny days, there may be a case to be made for the use of solar trackers – motorized devices that house panels and track the solar azimuth during the day to optimize the solar receipt. The downside of mass adoption of these units (other than a $10,000 addition to system costs) is in the possible rise in "load curtailment" actions, where a saturation of system capacity can trigger restrictions on power imported to the grid through FIT projects.

Unlike wind power projects, installers of solar are not going to be getting a visit from Bullfrog Power anytime soon. The Ontario-based eco-electricity middleman is not planning to include photovoltaics in its portfolio and, in any case, could not compete with the 80 cent tariff on offer, incidentally the highest available globally.

If Canada as a nation is in any way serious about its carbon footprint and if the Copenhagen promises are to have any substance, then "solar farming" is a likely contributor. Germany has stated that the adoption of solar cell technology has been 11 times more effective than emissions trading in reducing its national profile in terms of carbon substitution. And this in a country with triple the population of Canada, a fraction of its land mass and a much cloudier climate.

Reaping the sun should have a bright future in Ontario, political will and the OPA notwithstanding. BF