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Solar Power Bad for Hydro’s Bottom Line

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A recent Winnipeg Sun editorial suggested that Hydro’s now-closed solar power program should not be renewed. In response, Justin Phillips, an executive with a solar installer, praised the program as having been a roaring success. Why? For bringing in $110 million of private investment and providing potential long-term benefits for Manitobans that took up the initiative. Yet, and ahead of Efficiency Manitoba (to be led by a former Hydro manager) taking over Hydro’s Power Smart’s responsibilities, Brian Ransom (a former Chairman of Hydro’s Board of Directors) opined, in a commentary for Frontier Centre For Public Policy, that the program should not be renewed.

Hydro’s Solar Power Pilot Program, which ended May 2018, featured two types of subsidy. One was Hydro providing a one-time subsidy for the equipment, the second was to continue as long as participants drew electricity from their solar panels. The ongoing subsidization, more costly than the one-time equipment subsidy, has customers displacing high-value dependable grid hydroelectricity with intermittent solar panel electricity. The displaced grid electricity is usually exported by Hydro at prices well below the average cost of new generation and transmission, bringing about a substantial drop in Hydro’s overall revenue – and, in time, to push up rates for all customers.

In his Frontier Centre dissertation, Ransom projects in detail the cost for Hydro and its solely grid customers from a renewed solar program. And, while Ransom doesn’t focus on the overall impact on residential customers ‘going solar’, which would depend on the level of the investment and the percentage of grid power experienced, going solar’ may not be financially advantageous even for them. Only if Hydro rates end up soaring could solar customers gain long-term financially.

Hydro must maintain sufficient generating capacity, its obligation extends to grid customers installing solar just the same as if there were no solar panels. “Sorry, but we were counting on the sun to shine more” isn’t an acceptable reason to Ransom for failing to supply “ … as much electricity as each and every customer requires every second of every minute of every hour of every day”. The bottom line is that the impact of customers using solar panels would only be lessened for Hydro if the customer went completely off the grid.

Ransom suggests that, if Hydro is to return to allowing customers to install solar panels while remaining connected to the grid, solar customers should have to pay a fee to cover the costs of Hydro providing “guaranteed instantaneously available grid backup power”.  This would help compensate for the spread between residential grid price and the export opportunity price plus operating costs.

This would mean that residential customers using their own solar panels would only get a credit based on the export opportunity (cheap) price rather than Hydro’s full residential rate. Anything more would require grid-only customers to, long term, pay more.  Alternatively, customers installing solar panels should go off the grid entirely and provide their own batteries and/or standby generators.

Ransom makes sense, either case would be a truer test of the competitiveness of solar power, leaving Hydro to pursue its responsibilities, with economy and fairness for both grid-only and solar customers.

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