Feed in Tariff and Grid Tie Systems
A Grid Tie System generates electricity at a particular location, like a home and typically uses solar, wind or hydro. The energy produced is then exported into the utility grid. The power grid effectively serves as a giant rechargeable battery storing the electricity produced. As the "generator" of the electricity you are paid a set rate per KWH (kilowatt hour) for producing electricity.
How A Grid Tie System works for Solar PV
Solar panels installed on your roof or on the ground will capture Solar Energy and produce DC (Direct Current) electricity. The electricity produced will run through an inverter to convert the DC electricty to AC (Alternating Current) electricity. This energy runs through your breaker box and to a meter on the side of a house/business/cottage. The energy is then fed back to your utility companies power grid.
How Ontario's Micro FIT Program Works:
Under Ontario's new MicroFIT program, residents of Ontario are eligible to develop an alternative energy project like Solar PV, with a guaranteed fixed rate price of $0.549 per kwh, paid over 20 years for electricity produced. If you are a homeowner, small business owner, cottage owner or farmer, you have the opportunity to develop a "micro" renewable electricity project (10 kilowatts or less in size) on your property and sell the energy produced back to the grid.
Feed in Tariff vs. Net Metering:
Ontario's Feed in Tariff (FIT) differs slightly from Net Metering. In principle both are "Grid Tie Systems", meaning each system has the capability to feed energy produced back to the power grid. The difference is with Net Metering you would use the electricity produced to offset the cost of the electricity consumed by your home/business/cottage. On sunny days if you produce more energy than you use, your system would feed the excess energy into the utility grid. With Ontario’s FIT program, participants connected to the grid are paid to simply produce electricity. A second meter is added to your home/business/cottage/farm to "monitor" how much electricity you are producing. You are paid $0.549 per KWH.
So why participate in Ontario's FIT program as a financial investment?
Ontario's Micro-FIT is one of the most aggressive and lucrative FIT programs in the world. Here are some facts to consider
Industry leading payouts - Under Ontario's new Micro-FIT program, participants are guaranteed $0.549 per KWH of electricity produced for the next 20 years. This means an average home with a 2 KW system can produce enough electricity to earn roughly $2000.00 a year for the next 20 years.
Reoccurring Income - By entering into a 20 year purchase agreement with the OPA (Ontario Power Authority) you will be paid on your regular billing cycle from you local distribution company. This means you will receive a cheque every 1-2 months (depending on your LDC’s billing cycle) for the amount of energy produced, guaranteed, for the next 20 years.
Payback is less than 8 years - Your payback for the entire system is roughly 7 years. The remaining 12 years is strictly income.
Add Value to Your Home - The value of a solar system is added to the appraised value of your property and does not increase your property taxes. You can increase the value of your home 8-12% above normal property appreciation. Having your home generate income monthly is like having a tenant living on your roof. Solar is one of the few home improvements that can be justified in terms of return on invested dollar.
Micro-Fit contracts are Transferable - If you decide to sell your house you can sell the micro fit contract as well. The buyer will receive the remainder of the 20 year contract.
Assured Return On Investment - The average rate of return for someone investing in Ontario’s Micro-fit program is roughly 8-13%. Currently, no other investment option offers an assured rate of return in those figures. Even with $100,000 invested in a GIC the best rate is 2%.
Protect Yourself From Escalating Energy Costs in the Future - Electricity is becoming more expensive every year. Over the last 35 years, the average annual rate increase has been approximately 6.5%. Ontario has introduced "smart metering" which will see the cost of electricity jump during peak hours. It is hard to predict what energy will cost in 20 years but once the 20 year contract has expired, homes with solar PV can always "net meter" reducing their hydro bills significantly. By simply using what they produce they can offset the cost of the electricity needed.