The provincial government says it can't afford to pay the current rate to homeowners with small, ground-mounted solar power systems who sell power back to the grid.
The Ontario Power Authority has proposed dropping the rate to 58.8 cents per kilowatt-hour from the current 80.2 cents.
Ontario Energy Minister Brad Duguid said keeping the current rate would cost taxpayers more than $1 billion over the next 20 years.
"There was an exorbitant rate of return on this and it brought on an onslaught of applications because there was huge money to be made," he said.
"In fairness to Ontarians, we have an obligation to stand up to ratepayers."
Last fall, the Ontario government introduced a feed-in tariff program so producers could sell solar power back onto the grid.
The Ontario Power Authority said its microFIT Program — which is for homeowners, businesses and farmers feeding 10 kilowatts or less into the power grid — has become far more popular than anticipated.
In a release, the authority said it had received more than 16,000 applications for solar projects — the majority of them for ground-mounted solar systems — since the province's announcement in October.
It said lowering the rate would ensure the "long-term stability of the program."
Price drop to hit industry hard
One Ottawa company estimates it will lose $1.5 million in contracts if the price drops.
Peter Glover is with Ottawa Solar Power, one of 40 local companies that install solar energy systems.
Glover said many customers currently waiting for the province to approve their solar applications have cancelled their contracts in anticipation of the rate drop.
"I don't know why they introduced something they couldn't follow through on," Glover said.
"They've just knocked their program's success rate down by 75 per cent, say, and is that a successful program anymore? It's hard to have faith in what people say."
Glover said he is already dealing with customers furious about the proposed rate change.
"The range of reaction has been extreme disappointment to complete outrage. They are really, really disappointed," he said.
"Of all of them, only one of them has contemplated signing on at 58.8 cents. The rest say that there's no way that they'll do it. We're going to lose about $1.5 million in contracts and, in one or two instances, we're going to have to pull out the equipment we've installed there."
Resident Tim Pychyl, who was considering generating green power on his farm, is rethinking the investment after hearing about the drop in price.
"We thought, 'Well done, Ontario government. You're really looking ahead here. We'll get on board with you,'" he said.
"And now when they change the terms in the process — will you do that to me 10 years from now? Right now the government isn't giving me the confidence that I want to partner with them."
Those who have already signed a 20-year contract with the Ontario Power Authority will continue to receive the original rate. In addition, those with rooftop solar projects will continue to be eligible for the higher rate.
The Ontario Power Authority is hosting a webinar to discuss the proposed changes on Thursday. It is also accepting comments and feedback by mail or email until the end of July.