Alberta’s Solar Programs by the Numbers: Can We Afford It?
By: Nick Clark
Alberta Power Pool prices spiked to $1,000/MW this week.
Warning: This will happen more and more as Alberta moves towards the 30 by 30 renewable energy policy.
Since the NDP took office in 2015, they made it clear that one of their primary focuses would be transitioning Alberta to a clean energy future. They have committed to 30% renewables by 2030 and to the phase-out of coal fired power. This week, coal plants went offline for a few hours and wholesale prices jumped from an average of $30/MW to $1,000.
To a consumer buying electricity on the floating rate this means $1 per kWh for these hours. Prolonged periods like this will damage our economy and unfortunately, this is what the future might look like. No coal – No wind. Yesterday, wind generation was minimal (when the temperature rises – wind tends to tail off). The market was short for just a few hours and prices skyrocketed. Is this what we are risking in the future with the new government policies?
But, there is a silver lining in everything if you look hard enough. High prices are good news for Alberta’s solar market. Micro-generators need higher prices to help cost justify investment in PV Solar. The more electricity costs, the more micro-generators make on electricity exported onto the grid. The higher the price on electricity exported on to the grid, the quicker they will be able to shorten the estimated 20 to 25-year payback on their solar system investment.
In the governments Solar Rebate program announcement, solar micro generation was touted as a way to provide new job opportunities and a way for Albertans to reduce their energy costs. After this announcement, we decided to take a closer look at some of the numbers behind the government’s energy efficiency programs and what these numbers could mean for Alberta.
Comparing Electricity Prices in Canada
The monthly electricity bill for a family living in Toronto last year was about $200, compared to $100 here in Calgary. A report by the Fraser Institute, which used data from Statistics Canada, shows from 2008 to 2016, residential hydro costs in Ontario rose 71%, while the average increase across Canada totaled 34%. According to the report, “policy choices by the Ontario government have been the leading drivers of increased prices”.
Torontonians also paid an estimated $1,000 more per year for electricity than Vancouver and Calgary residents (Alberta bills have actually decreased in recent years). Ontario’s high electricity costs could cripple families. Is Alberta going down the same path?
Today in Alberta the cost of electricity is the lowest it has been in almost two decades. Based on the cost people pay for the electricity they consume, deregulation in Alberta has worked. The private sector and utilities invested $17 Billion to build the grid that we enjoy today, without government subsidies, while Ontario’s model of subsidies has failed. Hopefully our political leaders in Alberta will learn from the failed policies in Ontario.
Just ask a customer of Spot Power or other competitive Energy Marketers in Alberta who paid 2.9 cents per kWh last month for the electricity they consumed. Over the year they saved 18% compared to the government’s own Regulated Rate Option (RRO) which the NDP have now capped at 6.8 cents/kWh. The cap has been put in place because our government is expecting retail prices to rise. Close coal plants, add a carbon tax, and electricity prices become more volatile, especially if the wind isn’t blowing or when the sun goes down at night. For those that are looking for a safe haven – consumers can find guaranteed rates well below the governments RRO. Check it out.
The NDP’s goal is 30% renewables by 2030. 5,000 MW of new generation capacity is required to meet this goal. If you do the math, it could cost upwards of $10 Billion of which the government will most likely give out $5 Billion in subsidies. Do we have enough money in the bank to do this? Are we spending our money wisely?
Alberta’s debt is forecast to hit $71.1 billion by 2019-20, with a debt-to-GDP ratio of 19.5 per cent. Debt servicing costs by then are estimated at $2.3 billion. The province is out of money, yet we are still spending. This kind of out of control spending will result in the credit rating of our province being downgraded, a blow that is hard to recover from.
It is essential to look at what the numbers tell us. Do any of our MLAs truly understand the ramifications of the path being charted? It is a complicated maze of programs, but for a second, let’s just look at Solar and try to understand what the numbers are telling us and how the investment fits into the bigger picture.
Alberta’s Solar Rebate Program by the Numbers
On the first day of summer the government announced the official launch of Energy Efficiency Alberta’s $36 million Residential and Commercial Solar Program, with one of the benefits being promoted by Minister Phillips as “helping Albertans lower their utility bills”. While it is the right thing to do from an environmental and clean air perspective, it isn’t going to help consumers lower their cost of electricity as she indicated. It will just add another $36 million to the provincial debt.
We tried to understand the numbers and spoke with the people at Energy Efficiency Alberta. They are actually doing an admirable job, with a mandate to educate consumers on the importance of energy conservation. They are just following the party line and have a bucket full of money to give away. They are just doing their job. Don’t blame them – it is our MLAs who we need to hold accountable.
The wholesale cost of rooftop solar photovoltaic (PV) systems for electricity generation has dropped dramatically in recent years. Even so, for homeowners it would take at least 20 to 25 years to recoup the investment at today's average electricity rates.
From a purely economic perspective, why would anyone pre-pay 20 years in advance for the energy they will consume in 2035? However, in remote locations where there is no grid to tie into for power, off-grid solar PV systems can be used to store power in batteries and can make for a sound investment. And, if government policies cause prices to climb – then PV Solar might be a safe investment, at least for those who have an extra $10,000 -$20,000 in their bank account to invest today.
But don’t get me wrong, there are a number of very smart people that are doing it right, as an example, building solar into the construction of net zero new homes. Landmark Homes and SOLARMAX are a good example of a solid business model promoting roof top solar. Bow Valley Power, half a decade ago was one of first independent Energy Marketers to promote solar and a provider of green energy. This is still a great option and an example of a non-government subsidized option. Additionally, Solar People, based out of Edmonton, provide efficient and attractive solar systems.
Alberta's solar patch has 1,826 operational PV generating units and 17.9 MW of PV capacity now. The first six months of 2017 has seen only 95 PV systems installed, which is a significant downturn from the 160 systems in the same months in 2016. Likely this is due to people waiting for the government's Residential and Commercial Solar Program, which was announced a few weeks ago. Why invest your own money when the government is inviting you to the proverbial trough?
The government wants to quadruple the installation of PV Solar – but what’s behind some of these numbers? In addition to paying $3.6 million to ICF Inc. of Virginia, here is the starting list of where our MLAs are spending our money. It is only a million here or there, but it adds up quickly.
Alberta Infrastructure
RFP for 135 million kWh/year of solar, will require 80 MW of solar capacity. Est of the yearly premium that this policy will cost taxpayers: ($6 to 10 million annually)
Alberta Indigenous Programes
- Climate Capacity Program - including climate literacy sessions: ($2.5 million)
- Climate Planning and Opportunity Assessment Program - to establish an understanding of local opportunities: ($2.5 million)
- Community Energy Program - to determine how energy is being used in their buildings: ($3 million)
- Energy Efficiency (Retrofit) Program - grants to improve energy efficiency: ($14 million)
- Green Energy Development Program - grants are available to develop commercial-scale, renewable-energy projects: ($8 million)
- Indigenous Solar Program - grants to install solar systems on indigenous community facilities: ($3 million)
- Green Employment Program - grants for training such as solar panel installer and spray foam insulator: ($2 million)
Alberta Agricultural Grants
On-Farm Solar and Energy Management Programs – to improve efficiency and accelerate innovation: ($10 million)
On-Farm Solar and Energy Management Programs – to improve efficiency and accelerate innovation: ($10 million)
Alberta Municipal Solar Program
Municipal Climate Change Action Centre - to install solar panels on buildings, fire halls and community centers: ($5 million)
Municipal Climate Change Action Centre - to install solar panels on buildings, fire halls and community centers: ($5 million)
Emissions Reduction Alberta (ERA) Grants
Brooks Solar 1 Elemental Energy – grant to demonstrate the advantages of a larger-scale 15 MW solar power farm: ($15 million)
Alberta Solar One - given to Morgan Solar & Enbridge to build a flagship utility-scale 10 MW solar farm: ($10 million)
Brooks Solar 1 Elemental Energy – grant to demonstrate the advantages of a larger-scale 15 MW solar power farm: ($15 million)
Alberta Solar One - given to Morgan Solar & Enbridge to build a flagship utility-scale 10 MW solar farm: ($10 million)
Non-Profit Energy Efficiency Transition (NEET) Program
Funding to help non-profit organizations determine how efficient their current lighting systems are: ($1 million)
Funding to help non-profit organizations determine how efficient their current lighting systems are: ($1 million)
Residential and Commercial Solar Program
Grants of 25% to 30% of the cost of adding a PV Solar system commercial and residential roof tops: ($36 million)In addition to the above, there are 40 commercial sized projects in various planning stages. If the government continues to dish out $1 million subsidy per MW, the cost will add up to staggering amounts. There are probably more programs then those listed above, it is just difficult to find a complete list in one place.
Why is Alberta Moving Down This Path?
Ontario has the greatest concentration of solar deployment in Canada and also the highest consumer electricity prices in the country. Australia is another good example to look at. It has a massive number of solar installations, but also has the highest electricity prices in the world. What can we learn from this? Are we going down the right path? Do we have enough money in the bank to add 5,000 MW of renewable energy to Alberta’s grid?
Notwithstanding the above reality check, we support solar. Consumers just need to realize that it is costly and the minister is wrong when she said: “the new PV Micro Gen policy will help consumers lower the cost of electricity”. This statement is misleading.
We believe what the government is doing will help bankrupt the province. I wonder if our MLA’s were spending their own money they would still make the decisions they have made so far?