Why do you get paid 80.2¢/kWh when electricity only costs a fraction of that?!
People hear about the 80.2¢ rate for microFIT, and they immediately think of their own electricity bill. And if they’re familiar with electricity prices, they know that they pay less than 10¢ per kilowatt hour for electricity.
What’s going on?!
First of all, the 80.2¢ rate is not available anymore. Every two years, there is a review of the program, and the rates for future contracts are adjusted. The microFIT rate as of August 26, 2013 is 39.6¢.
That is still more than the cost per kilowatt hour for electricity in Ontario. The big difference looks strange at first glance, and some people are using this to try and mislead the public about the entire program.
But the fact is that you cannot compare the microFIT rate to the pure cost of electricity on your bill.
When you pay for electricity, you pay the per kilowatt hour rate, plus you pay a distribution charge. Plus you pay the debt retirement charge. Plus you pay through your taxes for all kinds of other stuff, like refurbishing nuclear reactors.
The total cost of building, maintaining and using the electricity system is paid for through many different things.
But in the microFIT program, the total cost is paid for by only one thing: payments to the participants based on how much electricity they generate.
This is a key point, and one of the major strengths of the program. The payment structure for microFIT ensures that the entrepreneurs who participate will build efficient systems that will reliably produce electricity for the long term. If they don’t, they won’t make any money.
The only way that microFIT (and FIT) participants get paid, is when they produce the electricity. So that single 80.2¢ payment, should be compared against the cost of electricity on your bill, plus the distribution charge, plus the debt retirement charge, plus all the other ways that your tax dollars find their way into supporting our electricity system.
The rate is also going to go down in the future. Regular reviews of the rates have been part of the program from the beginning. In response to decreasing costs, as the FIT and microFIT programs create a strong market in Ontario for solar power systems, the rate will continue to drop, as has twice already.
Yes, it is possible to profit from microFIT, but it truly is not a get-rich-quick-scheme (by one measure, we’ll make less than 5% on this very long term investment).
The contractors and companies who built our coal and nuclear and natural gas power plants all made profits along the way too. This is no different…
…except that here the government is giving “ordinary Ontarians” a way to participate in making our electricity system more sustainable for the next generation. You might say that’s priceless.