Personal Finance

ONT ONLY - microFIT solar panel program: 10-14% return for 20 yrs * FAT LADY HAS SUNG

  • Last Updated:
  • May 24th, 2017 6:52 pm
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Apr 21, 2004
37009 posts
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sroghen wrote:
Apr 3rd, 2017 7:58 pm
Isnt Delivery Charge from Enersource a Business expense for tax purposes?
Toronto Hydo doesnt have similar charge?
Damn another thing to put in. :)
Newbie
May 11, 2005
91 posts
8 upvotes
Hi all,

I am considering doing the microfit project this year and am trying to put together an accurate model to understand the cashflow if I installed a 10kw system. Two areas I am having trouble with is: 1) "each KW of capacity on average produces 1140kw-h/year." Does anyone have any information on how this 1140 number is calculated? I just want more details to verify that this is an accurate enough estimate. I assume we can break it down further into month of year, and average number of peak and off peak hours of daylight for each day in that month...or even more detailed!

Another thing I would to understand is how do I account for depreciation of the panels and what is the rate of taxes are applicable to the income generated? Is it possible for me to do the installation contract through my business (corp)?

I am fortunate to have a home that just happened to have enough directly south facing sloped roofing to accommodate almost all 10KW so I think I would be a good candidate.

Thanks for any pointers :)
Jr. Member
Aug 31, 2015
118 posts
21 upvotes
Scarborough, ON
I don't think you can install the panels through your business unless your existing utility contract is in the name of your business as I am pretty sure that the microfit installation has to be in the name of the existing utility (in my case Toronto Hydro) customer.

The 1140kWh/yr should be calculated from a model based on the orientation of your house, the angle that the panels are mounted on plus allowances for any shading that may occur due to trees, other houses, etc. My system has now been up for about 19 months and in the 2016 calendar year I generated 12.93MWh on a 10kW system so that is a bit above what you were quoted. But I have very good SSE exposure with very little shading other than for a couple of my panels.

There are some good depreciation examples in this thread, including one that is back just a page or two. You can depreciate panels at 50% per year but the first year you multiply by 50% to account for a partial year. So if you spend $30k on panels you can use up to $7500 ($30,000*50%*50%) in CCA in your first year. In the second year you can use up to (30000-$7500)*50% or $11,250. But you can't generate a loss so the maximum amount that you can claim in any one year will be limited to your net income - so the real world numbers will be below what I showed above. You can write off a few things against your income, such as interest charges if you borrow for the panels, etc. The depreciation alone should mean that you don't actually generate any positive net income from the panels for 5+ years

The rate of taxes is whatever your marginal tax rate is. If you are in the top tax bracket in Ontario (over $220k) then that is 53.5%.
Newbie
May 11, 2005
91 posts
8 upvotes
wayner9 wrote:
Apr 14th, 2017 2:41 pm
I don't think you can install the panels through your business unless your existing utility contract is in the name of your business as I am pretty sure that the microfit installation has to be in the name of the existing utility (in my case Toronto Hydro) customer.

The 1140kWh/yr should be calculated from a model based on the orientation of your house, the angle that the panels are mounted on plus allowances for any shading that may occur due to trees, other houses, etc. My system has now been up for about 19 months and in the 2016 calendar year I generated 12.93MWh on a 10kW system so that is a bit above what you were quoted. But I have very good SSE exposure with very little shading other than for a couple of my panels.

There are some good depreciation examples in this thread, including one that is back just a page or two. You can depreciate panels at 50% per year but the first year you multiply by 50% to account for a partial year. So if you spend $30k on panels you can use up to $7500 ($30,000*50%*50%) in CCA in your first year. In the second year you can use up to (30000-$7500)*50% or $11,250. But you can't generate a loss so the maximum amount that you can claim in any one year will be limited to your net income - so the real world numbers will be below what I showed above. You can write off a few things against your income, such as interest charges if you borrow for the panels, etc. The depreciation alone should mean that you don't actually generate any positive net income from the panels for 5+ years

The rate of taxes is whatever your marginal tax rate is. If you are in the top tax bracket in Ontario (over $220k) then that is 53.5%.
Thanks, helpful information. The 1140KW-h is not a quote I received, but an average estimate listed by some of the Microfit guides. I have perfect sse exposure and no shading, so hopefully I can generate more than that. With my model as it is now, I am seeing a payback in just over 5 years, with a total profit of 45k, over 20 years. This is if I install my panels by myself (which I plan to do). What is missing from my model is depreciation, taxes and the reduced capacity of the panels as they age. I will update and share this model. But overall from a financial standpoint, not much incentive to do it. Although, I have other reasons for going solar (potentially powering my own home in the future as technology improves and batteries become cheaper).

To have it installed by any of the solar companies nowadays, it wouldn't really be worth it. Payback is as high as 10 years, with profit as low as 20-30k.
Last edited by sweetlikechutny on Apr 14th, 2017 2:52 pm, edited 1 time in total.
[OP]
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Nov 18, 2005
10261 posts
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Kingston
sweetlikechutny wrote:
Apr 14th, 2017 12:19 am
Another thing I would to understand is how do I account for depreciation of the panels and what is the rate of taxes are applicable to the income generated? Is it possible for me to do the installation contract through my business (corp)?
Please see the first post for lots of info.

The income generated is reported as business income on your personal tax return. So it will be taxed at your marginal tax rate. But you won't have any taxable income for 5+ years.

microFIT contracts have to be done with homeowners, not corporation. You can't expense the install with your company and you wouldn't want to since you can deduct it against your generation income.

Depreciation (Capital Cost Allowance) example is here.
[OP]
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Nov 18, 2005
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Kingston
sweetlikechutny wrote:
Apr 14th, 2017 2:52 pm
This is if I install my panels by myself (which I plan to do).
A few costs to take into account for stuff you (likely) can't do yourself:
  • Engineer's report saying your roof can support the panels if your building permit requires it (probably a good idea in any event).
  • Electrician to do the final connections (if not all the electrical work).
  • Connection charges of your hydro company ($1-2K).
Unless you don't have a connection to the grid, there isn't much reason to get batteries. With net metering the grid is your free battery (all your excess goes there and you can use that, and more, on demand).
Jr. Member
Aug 31, 2015
118 posts
21 upvotes
Scarborough, ON
Does't the microFIT contract say that you are not allowed batteries?

The other factor that is an issue for how much power you generate is the tilt angle. I believe the optimal angle is the same as your latitude.
Newbie
May 11, 2005
91 posts
8 upvotes
wayner9 wrote:
Apr 14th, 2017 3:54 pm
Does't the microFIT contract say that you are not allowed batteries?

The other factor that is an issue for how much power you generate is the tilt angle. I believe the optimal angle is the same as your latitude.
I stated batteries as a long term solution (after the end of your microfit contract). Who knows what the solar landscape will look like after 20 years. But you have the options to make some alterations like batteries.

Another consideration is can we end the microfit contract early and switch to net meetering? It might make sense if a KW-h costs more than 28.8 cents (adjust with your tax bracket) in the future. I don't entirely know how the payments in netmetering work at this point, but its something to look into.
[OP]
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Nov 18, 2005
10261 posts
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Kingston
sweetlikechutny wrote:
Apr 14th, 2017 4:18 pm
I stated batteries as a long term solution (after the end of your microfit contract). Who knows what the solar landscape will look like after 20 years. But you have the options to make some alterations like batteries.

Another consideration is can we end the microfit contract early and switch to net meetering? It might make sense if a KW-h costs more than 28.8 cents (adjust with your tax bracket) in the future. I don't entirely know how the payments in netmetering work at this point, but its something to look into.
Yes you can terminate the microFIT contract at any time.

I started a net metering thread in this forum with lots of details.
Member
Jun 27, 2010
331 posts
45 upvotes
Mississauga
My accountant just pulled this out and asking me for clarification. Although it refers to EVCSs only, what does it mean for us?

Class 43.1 (30%)
Include in Class 43.1 with a CCA rate of 30% electrical vehicle charging stations (EVCSs) set up to supply more than 10 kilowatts but less than 90 kilowatts of continuous power. This is for property acquired for use after March 21, 2016, that has not been used or acquired for use before March 22, 2016.

Class 43.2 (50%)
Include in Class 43.2 with a CCA rate of 50% electrical vehicle charging stations (EVCSs) set up to supply 90 kilowatts and more of continuous power. This is for property acquired for use after March 21, 2016, that has not been used or acquired for use before March 22, 2016
Last edited by sroghen on Apr 15th, 2017 12:09 pm, edited 1 time in total.
[OP]
Deal Guru
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Nov 18, 2005
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Kingston
wayner9 wrote:
Apr 15th, 2017 12:42 pm
There is a specific CRA bulletin on microFIT. http://www.cra-arc.gc.ca/tx/bsnss/thrtp ... ng.html#a5 However most of the web sites with info on this aren't very clear about specifying the difference between 43.1 and 43.2 for solar panels.
Good link. In that info it says: The renewable energy property included in these Classes is generally the same with the exception that renewable energy property acquired after February 22, 2005 and before 2020 is classified as Class 43.2 property.

43.2 = 50% rate
Newbie
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Nov 29, 2015
40 posts
18 upvotes
Bradford, ON
Howdy folks. I'm 40min north of toronto. Got quoted 30k for the system (9KW) but I get back 3.5k in HST. So technically the system will cost 26.5k. Just wondering what everyones estimates are at the moment. Thanks!
Jr. Member
Nov 29, 2011
138 posts
28 upvotes
Toronto
MoreDealz wrote:
Apr 15th, 2017 9:56 pm
Howdy folks. I'm 40min north of toronto. Got quoted 30k for the system (9KW) but I get back 3.5k in HST. So technically the system will cost 26.5k. Just wondering what everyones estimates are at the moment. Thanks!
You should be able to get it a little lower. Maybe 2 or 3 gs.
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