With the release of the OPA’s new policy dealing with constrained MicroFIT projects, there is a rush to find buy/sell/relocate these projects before the May 31 deadline. The offering price for conditional rooftop solar offers is quickly rising. These 80.2 cents/kWh offers are a commodity in a new world where the OPA’s pricing has been scaled back to 55 cents per. This (roughly) 30% price reduction means that annual revenues have decreased about $3,000 with the practical impact of stretching out the capital cost payback period. So, on it’s face the increasing value of these 80.2 cents offers makes sense. In fact, the total profit on a 10kW 80.2 cents contract will outpace that of a new 55 cents contract by almost $20k.
However, as the market has matured, capital costs have decreased. A system that was quoted to cost upwards of $70k at the onset of the MicroFIT program has almost been cut in half. So if a 10kW system now costs roughly $40k (for example) and annual returns have decreased to say $6k the payback period is still hovering around 7 years. Surprisingly, compared to the initial payback period, the payback now occurs slightly earlier (6-8 years versus 8-10 years).
Similar to the way these types of FIT programs have played out in Europe, the decrease in capital costs has outpaced the program price decrease, keeping the investment worthwhile and preserving the market that the initial prices created. In Ontario, the high initial program prices were needed to overcome the high capital costs and now that a provincial manufacturing base has been established and those costs have come down, the OPA’s purchasing price can now come down without harming the attractiveness of the investment.
So while the magnitude of the annual returns have gone down with the OPA’s new pricing, the payback period is actually a bit better because of the significant decrease in capital costs. This, along with difficulties in finding eligible assignees that can and will buy a constrained offer will moderate the selling price of these older offers but the difference in annual returns remains high enough to make these 80.2 cents offers very attractive.
For professional advice on buying or selling constrained MicroFIT offers, contact Graystone Environmental and we’ll put you in touch with a network of buyers/sellers and help you get the most out of your MicroFIT investment.