In September 2009, Ontario, Canada, led the North Americans in approving a FIT (feed-in tariff) Program under the Green Energy Act. If you own a self-storage facility in Ontario, this may be the answer to generating income from your roof space, or making your business more environmentally friendly, by generating solar power. This article is a financial analysis of the related investment decision.
The FIT program is designed to encourage property owners or renewable-energy investors to invest in the capital amount of photovoltaic (PV) systems. The Ontario Power Authority (OPA) will sign a contract with the system owner to purchase all the energy produced at a pre-determined price for 20 years.
System owners will be paid based on the amount of electricity produced and fed into the grid. For a solar PV system between 10 and 250 kilowatts (kW), the FIT price is 71.3 cents per kilowatt hour (kWh). Solar PV receives the highest price of all renewable-energy sources. Currently, energy consumers in Ontario generally pay 6 to 8 cents per kWh to the local utilities.
So how can self-storage owners benefit from this program? Given a rectangular rooftop space of 5,130 square feet, a storage operator could install a solar PV system up to 50 kW. Depending on the location, the system will generate annual FIT revenue of $50,000 to $59,000, or $9 (Toronto) to $11 (Thunder Bay) per square foot. The actual area required may be slightly larger, to allow extra space between panels for service and cleaning purposes.
The Income Tax Act of Canada also created asset class 43.2 to allow investors to accelerate the write-off of renewable-energy equipment at 50 percent per year (declining balance). The claim is, however, subject to the limit of the revenue it generates that year.
The first cost consideration is the technology deployed. Solar panels are available in two forms, conventional photovoltaic crystalline wafer and thin film. Thin film is a newer technology that’s cheaper per watt, as it requires much less silicon. However, its lower efficiency may necessitate twice as much space.
Bigger systems will cost less on a per-watt basis, but the domestic content requirement of the FIT program may cause the system to cost a little more. The inverters have to be replaced after their 10-year life warranty.
As a PV system can sometimes last for up to 40 or 50 years, it’s more convenient to replace the old roof before the system is installed.
Note: The numbers used and reported in this analysis are for reference only. They are not designed for exact and accurate measurement. The Income Tax Rate may be different for each business.