Designed to alleviate electricity costs, the net metering system focuses on balancing solar energy production and electricity consumption. Such integration makes net metering a financial framework where solar panel users receive credits when the system sends excess energy back to the power grid.
To ensure the efficiency of the net metering system, the received credits are implemented to equate the cost of grid-supplied energy when a solar system is not generating enough electricity (during cloudy days or at night).
Needless to say, such a symbiotic system, which ensures that neither energy nor finances are wasted, aligns with principles of sustainability and renewable energy that the Canadian government has been implementing over the last two decades.
Net Metering Explained
Five steps cover how net metering operates:
- Electricity is generated from renewable sources such as solar, wind, and bioenergy using renewable energy systems.
- A house or a commercial establishment consumes that electricity from the renewable energy system or the utility electricity grid if the renewable system is not producing enough (supplied on demand).
- Local distribution company measures the electricity that was used from the grid, either by a residential home or a business.
- The same local distribution company issues a bill for the consumed electricity and provides a credit in return based on the renewable electricity a home or a business sends to the grid. (To defray electricity consumption charges is the only way to use these credits.)
Net Metering in Ontario
Since provinces and territories implement different rules for net metering solar power systems, Ontario has its own regulations of eligibility. To qualify for net metering in Ontario, a generating system can only supply energy for personal consumption derived from clean or renewable resources such as bioenergy, solar, wind, or water.
You must also be an active customer of a Local Distribution Company (LDC) such as Hydro One, Toronto Hydro, or Alectra. While both residential and commercial accounts are eligible, the renewable energy system must be sized for a certain limit of 500 kW.
Personal use is not the only requirement for net metering in Ontario. It is vital to meet safety and inspection requirements, in addition to environmental permits and approvals.
However, the process of applying is straightforward, where you would be expected to sign up a net metering contract with a local power distribution company, in which you agree to send any excess renewable electricity to the grid and receive on-bill credits in exchange.
It is worth reminding about contacting a utility agent to ensure you and your property are eligible and the system can be connected to the grid, before arranging for the installation of a renewable energy system and signing up for a net metering agreement.
Throughout the application process, an electricity retailer will require two agreements:
- A Power Purchase Agreement (PPA), which allows the purchase of energy produced by independent power producers.
- An Associated Equipment Agreement (AEA) is a legal contract that outlines regulations on the renewable energy system, including financial terms, maintenance, ownership, and hardware specifications.
Established by the Ministry of Energy (governed by the Regulation O. Reg. 541/05: NET METERING), the net metering program regulations set technical requirements, financial obligations and calculations, eligibility criteria, and other administrative procedures.
Costs of Net Metering in Ontario
In Ontario, the process of buying a renewable energy system can be done by paying upfront, leasing, or financing it from a third party, such as an electricity retailer.
1. Upfront System Costs:
These are the largest expenses and include the actual purchase and installation of your equipment.
- Residential Systems: Typically, $2.50 – $3.50 per Watt. For a standard 10 kW system, customers can expect to pay $25,000 – $35,000.
- Commercial Systems: Often ranging from $1.50 – $2.00 per Watt.
- Incentives: Business owners can use the 30% Clean Technology Investment Tax Credit (ITC) to offset these costs.
2. Administrative fees:
Before you turn the system on, you must pay for inspections and utility approvals.
- ESA inspection: The Electrical Safety Authority (ESA) charges roughly $90 – $200 for residential solar inspections (depending on system size).
- Bi-Directional meter: Most utilities (like Hydro One or Alectra) provide the meter at no upfront cost as part of your service, though some may charge a small installation fee (for example, $500 for complex commercial sites).
- Commercial systems: Often require a technical study costing $2,500 – $4,500+.
3. Ongoing monthly costs:
Net metering reduces your electricity cost but does not eliminate your bill entirely.
- Fixed service charges: Expect to pay the Fixed Monthly Distribution Charge (typically $30 – $50/month for residential) to stay connected to the grid.
- Non-Offsettable Fees: Credits generally cannot be used to pay the regulatory charges, or the HST on your fixed fees.
Community Net Metering Explained
A newly introduced concept in Ontario is community net metering. It demonstrates how renewable energy systems can be used in a community setting. For instance, community net metering would allow the following actions:
- for a community to generate electricity for themselves by using a renewable generating system and send excess electricity to the grid in exchange for a credit,
- to station a renewable energy system where it’s best suited for a community,
- to create a structure within a community where credits are shared among residents and businesses, which would reduce electricity bills,
- to provide communities with innovative approaches to energy systems where local governments, Indigenous communities, and businesses benefit from it.
Is There Net Billing in Ontario?
Unlike Manitoba, where Manitoba Hydro primarily uses a net billing approach, Alberta, with its hybrid model (which allows switching between high and low rates) and Saskatchewan, whose current program functions like net billing, Ontario offers net metering as its exclusive way of compensating for excess energy production.
The misconception around both terms is understandable. Net metering and net billing are used to describe compensation of residential and commercial customers for excess energy production. However, the distinction between the two is in the way of compensation based on industry rates.
While net metering users can expect compensation at the same rate they purchased energy from the power grid, net billing returns a lower rate to customers. In net billing, credits are not available for exchange for more energy. Instead, unused energy is typically sold for less than what it costs to purchase. Net billing customers can also expect to receive an offer in the form of a dollar value for excess energy.
Is Net Metering Worth It in Ontario?
Whether a home or a business has solar panels or plans to install them, there are several benefits offered by net metering, implemented to maximize efficiency and offset electricity costs.
- One of the benefits of net metering is lower electricity bills, due to excess electricity generated acting as an offset to energy consumption. (Usage of credits when more electricity is required.)
- Net metering also works as a guarantee against rising electricity costs by allowing you to generate your own energy and exchange the excess amount for credits.
- Sustainability is one of the driving forces of net metering. Another benefit of net metering is a lower carbon footprint and greenhouse gas emissions because solar net metering reduces dependence on non-renewable energy sources.
- Renewable energy systems help to contribute to the community when excess solar power returns to the grid in order to generate more clean energy for community-based projects.
- Finally, renewable energy systems (especially in residential areas) might increase property value. Advanced renewable energy generating systems make a house more attractive to potential buyers due to its cost-efficient and eco-friendly features.
Reviewing Commercial Electricity Costs
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