FIT Review: Look abroad for examples

By JP on November 8, 2011 9:36 AM

Like Ontario, the UK has a young and very popular FIT program. Like in Ontario, UK politicians are concerned about the cost of the FIT program. And so, like in Ontario, the UK is in the process of re-evaluating the details of the program and will be lowering FIT contract pricing.

Unlike Ontario, the UK appears to be going about this in a transparent and fair manner. Namely:

• The UK government is sharing the financial assumptions and evaluations on which it is basing its decisions; and
• The effectivity of the changes will be after they're announced, giving the whole supply chain time to adapt to the change while still actually operating on the existing pipeline of projects.

There are differences, of course, between the two programs. The UK program is funded from a set reserve that is intended to last a set number of years. If the reserve runs out early, the program won't be achieving its time targets. This closed-end program has clear limits to work within. The Ontario program is open-ended, and that makes people very edgy.

Another difference is scale, but this is interesting: The UK program, which is a bit younger than the Ontario program, has encouraged over 100,000 household-scale systems to be installed since it started, totalling over 400MW of production. In Ontario, up to the end of October, the MicroFIT program has resulted in a mere 8,494 connected projects totalling 73MW of installed capacity. The 'success' of the UK program is evident (in the context of needing to throttle back); that of the Ontario program is less so. (Apparently there is a large number of MicroFIT projects in the queue, but for some reason this does not seem to be translating into actual construction; we're not sure why.)

Of course the best example of a FIT working well remains Germany, where FIT price degression is prescriptive based on installed capacity. IE if the market grows by X, the rate will drop by Y. If the market fails to grow by X, the FIT rate will not drop until it does. This creates a very stable marketplace because the entire industry knows exactly how large the market will be at a given FIT rate, and so can plan accordingly. Note that Germany is on track to install 5000MW of solar in 2011 alone.

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