Life in the Trenches: How Solar Projects Really Work (or Don’t)
By Derek Satnik, P.Eng., LEED® AP
When I was a kid I used to love lego. My brother and I could build anything when we set our minds to it. We had adventures with castles, nights and monsters, drove trains on the moon, made our own transformers… and never needed a building permit, or a utility connection agreement, or an ESA approval.
The Solar industry is not new in Canada, but it has certainly grown over the past decade. The advent of Ontario’s Renewable Energy Standard Offer Program (RESOP) in 2006 was heralded globally, and Ontario was thrust into the forefront of global solar media. When 2009 turned RESOP into the Feed-in Tariff (FIT), Ontario became North America’s renewable energy policy leader, and a global model for other jurisdictions to follow. Ontario’s solar industry blossomed, and regulators scrambled to put processes in place to keep us all safe and to help projects move forward.
Help. That’s an interesting word.
The truth is that many well intentioned players from all sides of the industry had no idea what to expect. It was as if we knocked down the first domino in a long chain, and I think to some extent that we’re still watching other dominos fall, and we’re learning how to clean up the mess.
Solar projects are exciting. They’re great for the environment, they’re good for social ethos, and thanks to the FIT programs, they’re affordable to farmers, faith groups, municipalities, and average middle-class laypeople.
But like everything that’s exciting, there’s a bit of a mythology that’s built up around solar energy projects, and some of those myths need to be cleared up.
FIT: Contract, not Subsidy
For example, FIT contracts are not subsidies, and they won’t help anyone get rich quick. Subsidies by definition are intended to help “subsidize” something: they do things like reduce or offset construction or other development costs, like the way we pay for the construction of new gas or nuclear energy plants. FIT contracts are quite the opposite: they only pay for delivered energy. Project proponents absorb 100% of the project risk up to the day when energy is sold to the grid, and the only payment they ever get comes later, for electrical kilowatt hours (kWh’s). Nuclear energy plants will typically have special contract provisions that ensure they get paid even when they have down-time. FIT contracts offer no such luxury: payment is only made for kWh’s delivered to the grid. This is a great thing for the ratepayer and taxpayer, but it poses an interesting challenge to the project team: the project needs to be designed right and implemented precisely as planned, or all the losses fall to the project owner.
Common Project Pitfalls
At Mindscape we consult on a variety of solar energy projects. Our clients are spread across Ontario, and range from home owners to farmers to commercial developers or industrial factory operators. They have many different needs, but they tend to struggle with the same things when considering solar energy projects. Like any project, solar energy projects succeed or fail based on planning. As the proverb goes, if you fail to plan, then you plan to fail, or at least to learn some hard lessons along the way.
The single greatest project killer we’ve encountered repeatedly is when project teams neglect to contact all their approving authorities before they start the project. You may need approvals from the any or all of the local municipal building department, the Ontario Power Authority, the Electrical Safety Authority, and sometimes even a local Conservation Authority. Any one of these can stop a project in its tracks, regardless of how much money you’ve spent before you call them. The most tragic case we’ve seen was nearly 200kW of solar panels fully installed, but unable to connect to the grid, because the owner neglected to get approvals first. There are more than a few homeowners across Ontario currently attempting to connect microFIT systems, less than 10kW in size, who similarly neglected to talk to their local electrical utilities first, and who now may not be able to get connected at all. Some have even withdrawn their retirement savings to finance their projects. That’s a tragic and costly mistake to make.
We’ve watched other projects get hung up in the fine print. In this market it happens all too often that contractors get hired in good faith based on a talented sales call and a thin purchase agreement, and the fine print doesn’t include some of the important details that the property owner doesn’t understand, like securing the FIT or microFIT contract to sell the electricity to the grid. Sometimes in larger projects this falls between contracts. For example, when a general contractor delivers a “turn-key” system design and installation, hires engineering consultants to do the design and electricians and roofers to do the install, but forgets to clearly spell out who will apply for the FIT contract. Without a FIT or microFIT contract, solar panels can be very expensive decorations. Especially in progressive and exciting new markets, one cannot overstate the importance of having clear contract documents, and of making sure that the whole project team has a complete and clear understanding of each other’s responsibilities, and that nothing falls through the cracks.
And even when you do everything right, sometimes projects still get jinxed over the most unexpected things. Most contractors don’t think to check for CSA certifications on the products they install, but I’ve seen equipment arrive on site that was not CSA certified, and that ultimately needed to be torn out and replaced with something that was. Unless products are certified to CSA or equivalent standards, the Electrical Safety Authority will not let them be connected to our grid, and with good reason. None of wants to be the project that caused a fire or worse, a fatality.
One of the most unexpected challenges that our projects sometimes face is social friction. One of our clients was chastised by a neighbour because “my taxes are paying for your [expletive] panels you thief!” It is remarkable how little Ontarians know about how our energy markets work, and how hypocritical some uneducated or miseducated people can be. False information is free and widely available. Good information takes effort to compile, and often costs money. And although any bigot can level heavy accusations with little effort, the “good guys” have to work hard and invest heavily to give solid answers to those accusations
Where to Find Help
If there’s any one key lesson we’ve learned about solar energy projects, it’s that they’re not as simple as they seem. Thankfully there is good help available, and a properly implemented project can be a dream when done… if you plan it right!
The Renewable Energy Facilitation Office (REFO, www.energy.gov.on.ca/en/renewable-energy-facilitation-office) within the Ontario Ministry of Energy is tasked with the role of facilitating renewable energy projects as they navigate their way through the various government approvals required. They handle inquiries about everything from biomass to hydro to wind and solar, and compared to the rest of what they do, solar is blessedly simple. Don’t hesitate to call them for advice.
The Ontario Sustainable Energy Association (OSEA, www.ontario-sea.org) is the non-profit agency whose efforts brought together all the stakeholders and leaders that first gave us RESOP, and then the Green Energy and Green Economy Act with its FIT programs. OSEA is at the heart of the Community Power sector in Ontario, and loves nothing more than to help local community groups (farmers, coops, churches, or even private land holders) to plan and implement their own energy projects.
The Community Energy Partnership Program (www.communityenergyprogram.ca) has several grants available to help local community groups navigate the government approvals process.
And any good accountant will be able to help you plan the tax write-offs in your project: proper use of class 43.2 depreciation allowances can double the returns on your investment, and are sometimes the key element that makes a project possible.
Plan early, get help, do some research, and solar energy projects will consistently come out right. Failure to plan is planning to fail, and as simple as these projects seem, they can break just as easily as my brother and my lego fortresses if you don’t plan them properly.
Derek Satnik is a Professional Electrical Engineer, and Managing Director at Mindscape Innovations Group Inc: a wind and solar energy consulting company with offices and projects across Ontario. www.mi-group.ca GB