+ RMA Rural Municipalities
of Alberta

Resolution 20-14F

Micro-generation Reimbursement

October 20, 2014
Expiry Date:
November 30, 2017
Active Status:
Starland County
2 - Central
Vote Results:

WHEREAS the emerging solar micro-power generation industry has the potential to provide a hedge against rising energy costs and produce a more sustainable agricultural sector in rural Alberta; and

WHEREAS the price of solar panels has dropped dramatically in recent years and has now become a much more attractive investment over longer term time horizons; and

WHEREAS the current method for reimbursing solar micro-generators for the energy they produce does not take into account  time of generation or allow them to access the Alberta Carbon Offset Market;  and

WHEREAS the current Alberta regulatory environment discourages investment in small scale solar power in the way it reimburses producers;

Operative Clause:

THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties lobby the Government of Alberta to implement a system for reimbursing solar power micro-generators that is based on a detailed analysis of its time of production, and carbon offset benefits, and that this system be included in its upcoming Renewable and Alternative Energy Framework.

Member Background:

Following the 2009 passage of the Micro Generation Regulations, which allowed for a streamlined regulatory process for the connection of solar power producing installations of up to 10 Kilowatts to the electricity grid, several rural and urban municipalities have, at the request of their residents, pursued solar energy over the past several years as a way to show economic and environmental leadership in their communities.  Through partnerships with industry and electric line operators they have been working to lower the barriers to private investment by streamlining and lowering the cost of the process for permit application, installation and start up.  These efforts, when combined with rapidly falling prices for solar panels themselves, have led to an environment in which solar is becoming an attractive investment option to private individuals and especially farm corporations.  Recently the farm community has begun to take notice and invest in this technology but their investments are not being rewarded in the current regulatory environment.

There are several reasons why solar has become a popular investment decision in recent years. First among these would be the fact that, as pointed out in a recent report by the Canadian Solar Industries Association titled From Proven Reserve to Developed Resource: Realizing the True Value of Solar Energy in Alberta, the price of installed solar in Canada has fallen nearly six-fold since 2005 to the point where a 10 Kilowatt system can now be installed for $25,000.  At the same time the Government of Canada, in an effort to promote renewable investment, has implemented an accelerated capital cost allowance for solar installations by businesses which provide thousands of dollars in additional savings.  Additionally both of these developments have come at a time when the price of energy in Alberta continues to soar.  According to the Statistics Canada July Consumer Price Index for Alberta, energy costs have risen at a rate nearly 2.5 times the regular rate of inflation over the last 12 years. Farms, as major consumers of energy, need to find a way to contain these costs and increasingly affordable solar energy has become a viable option.

Despite these changes, producing solar power in Alberta will only appeal to those with a long term view to tolerate investment returns that are much smaller than their potential.  There are two principle reasons for this.  The first is that small solar producers are unable to access the funds available for carbon offsets in the Alberta offset market. The second is that currently solar power producers are paid for what they generate into the grid at the same rate they purchase power from their retailer.  Both issues have the effect of reducing the return on investing in solar power to below what the market should provide.

In addressing the first issue it is important to see how the carbon market in Alberta disadvantages small producers. If a large corporation were to build a wind farm, that wind energy would displace energy produced by burning coal or gas, under the Alberta carbon market that company has the ability to calculate how much carbon dioxide is not being released and receive payment for that at a rate of $15/tonne from another company which needs to reduce its emissions.  On a major wind project this can result in hundreds of thousands or even millions of dollars being paid.  However because the costs related to packaging, verifying and selling these reductions can run into the tens of thousands of dollars only groups with a very large commercial interest can participate.

As a result, small producers of renewable power are not compensated for their environmental contribution but large companies are, which leads to unfair investment returns.  The Government of Alberta needs to find a way to compensate small producers for their contribution to making Alberta a leader in reducing greenhouse gases.  Saskatchewan, a province with no carbon market and far less environmental scrutiny than Alberta, offers its small producers a one-time rebate of 20% of the cost of the installed system provided that producers give the government access to electricity bills to measure their contribution to lower greenhouse gas emissions.  Alberta likewise needs to find its own way to compensate its small renewable power producers.

The second issue, also pointed out in the Canadian Solar Industries Association report, is that the current way of paying micro-generators is to reimburse them for electricity put back onto the grid at the same rate charged by their retailer.  The problem is that this rate has no relation to the price being paid for similar power purchased from the power pool at the same times.  As solar produces nearly all its power in the spring, fall and summer during the midday when prices are much higher than at night it does not make sense to compensate micro-generators at the retailers rate which takes into account both day and night pool prices.

The result of this rate discrepancy could potentially be very large and needs to be studied further.  The Canadian Solar Industries Association report puts the price micro-generators should have received had they sold into the pool at 13.5 cents per kilowatt hour which is substantially higher the current regulated rates of approximately 8.5 cents.  While we cannot simply take the word of an industry association that this is the correct price it would be prudent for the Government of Alberta to conduct a detailed analysis of this issue to arrive at a number which is based on its value in the power pool. The current development of the Renewable and Alternative Energy Framework is a perfect opportunity to do just that.

Beginning in 2009, the Government of Alberta started to promote small scale solar projects in Alberta communities. Since then, that movement has been taken up by municipal governments, private citizens and local businesses.  The recent developments in the solar industry have been fast and dramatic.  Farmers in Starland County and all over Alberta have begun to act to seize this opportunity.  It is now up to the Government of Alberta to modernize its regulatory framework to help small investors in this technology realize the benefits.

RMA Background:

21-12F: Sustaining Alberta’s Energy Value Chain

THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties urge the Alberta government to re-affirm its commitment to expand the energy value chain consistent with the Alberta Energy Strategy, Launching Alberta’s Energy Future; and

FURTHER BE IT RESOLVED that the Alberta government advocate for the concept of value creation from natural resources in Canada into any proposed Canadian energy policy framework; and

FURTHER BE IT RESOLVED that the Alberta government work with industry to address the potential constraint of labour shortages and cost competitiveness that might inhibit major value added projects and economic prosperity for its citizens.

DEVELOPMENTS: The Government response explains the importance and significant impact of various value-added ventures that are present within Alberta. While these are significant, it does not fully address the resolution. The first point is well addressed in the response and the government’s commitment to the Energy Strategy and expanding the energy value chain is apparent. However there was no commitment expressed that the Government of Alberta would advocate for ‘value creation’ to be a part of any Canadian energy policy framework, nor was there any comment on how the government intends to address potential labour shortages. As such, the AAMDC gives this resolution the status of Incomplete Information and will follow up with the Ministry for clarification.


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