The (Ontario) Net-Metering Program

MicroFIT not right for you? Net-Metering is a great money-saving alternative!

The Net-Metering program gives you fair credit for all the electricity you produce yourself. You only pay for the amount you use. Produce more than you used? The Net-Metering program lets you carry forward any excess production for up to 12 months. Solacity can help you with a Do-It-Yourself Net-Metering system for your home!

Since we are located in Ontario this article focuses on the Ontario Net-Metering law (and be sure to also check the additional law that requires roof mounted panels only for residential systems), and uses the Ontario electrical rates. However, all of Canada’s provinces have Net-Metering laws on the books, and by-and-large they work the same way. What is written in this article applies just as much for areas outside of Ontario.

6.5 kW solar PV system

6.5 kW solar PV system

By installing a Net-Metering solar array you in effect lock in your electricity rate for the next 25+ years. For a 10 kW solar PV Net-Metering system on a south-facing roof you only pay 9.5 cent per kWh for the life of your system! Compare that to today’s average rate of 23.5 ct/kWh for someone in Ontario. Every time your electricity provider raises their rates your cost is unchanged and you save more and more.

What is Net-Metering?

The Ontario Net-Metering program is a great way of using a renewable “green” energy technology to generate your own electricity and and lock in your electricity price. If you’re not interested in a MicroFIT solar system (or live outside Ontario, or want nothing to do with the IESO), then Net-Metering might be the ideal solution for you. Unlike MicroFIT and FIT, there is no contract. There are far fewer rules too!

The Ontario government has mandated that electrical providers in the province (the official name for an electrical provider is “LDC” for Local Distribution Company) have to allow for their customers to offset their own electricity use by generating renewable energy, and this is called Net-Metering. The details differ a little from provider to provider, though by-and-large it works the same way.

Net-Metering systems can be up to 500 kW in size, though for most residential customers a typical system size would be 10 kW or less. The trick with Net-Metering is to size the system in such a way that annual energy production is equal or less to your electrical energy use: You can zero out your electrical bill by producing your own electricity, but you do not get a penny for any additional energy production beyond your own use.

To make life a little easier you can ‘store’ any excess energy in the electrical grid, for later use. The way it works is that excess energy can be carried forward against future use for up to 1 year. For solar PV this is great! Any excess production in summer can be used up in winter, when there is less sun. As long as you use up all your excess energy credits within a year life is good!

Net-Metering Process and System Size

First, please be sure to read our MicroFIT page; much of the information there applies to Net-Metering as well. That said, Net-Metering is of course different from MicroFIT: There is no contract with the IESO. You can place solar panels anywhere you like, the MicroFIT constraint of practically having to mount panels on a rooftop no longer applies. For Net-Metering ground mounted panels are fine.

At a more fundamental level, with a MicroFIT contract you generate steady income through solar PV, while with Net-Metering you lock in your electrical rate for years to come. There are several examples of this further down the page.

As mentioned before, with Net-Metering you do not want to produce more electricity than you use on an annual basis. The LDC will not pay you for overproduction, you want to even out your electrical bill for the year, but no more than that. So what solar system size should you install?

The Ontario Net-Metering Program

Annual Electrical Use Net-Metering System Size
6,000 kWh annually 5 kW Solar System
7,200 kWh annually 6 kW Solar System
8,400 kWh annually
7 kW Solar System
9,600 kWh annually
8 kW Solar System
10,800 kWh annually
9 kW Solar System
12,000 kWh annually
10 kW Solar System

Each kW of solar PV generates around 1,175 kWh of electricity annually in our area, when installed on an unshaded south-facing roof. With that, it is a matter of taking your electrical bills for the past year and adding them all up. The table on the left shows this.

This is for a nice, south facing unshaded rooftop with a 30 – 45 degree pitch. Any rooftop between east and west can be a suitable rooftop though. The Net-Metering system size can be adjusted as needed. For Net-Metering it does not have to be a rooftop: We can mount solar panels on the ground, though the installation cost for that is somewhat higher.

Net-Metering systems can be up to 500 kW in size. However, the process of applying for the Net-Metering agreement gets quite a bit more complicated for systems that are larger than 10 kW. the cost involved in this goes up as well. For 10 kW and under it is very simple and fast; just one form and the same “meter fee” as for a MicroFIT system.

For solar systems over 10 kW the LDC requires that one goes through “CIA” (Connection Impact Assessment), and that comes at a much higher price tag. The result of CIA is a proposal by the LDC that outlines the connection requirements and the cost they will charge to hook up the system to the grid. Depending on the changes the LDC has to make to the system (i.e. a transformer upgrade etc.) it can be costly to connect to the grid. The main point here is that total cost is unclear until after going through CIA.

Installed Cost for a DIY Net-Metering Solar System

There are many full-service solar installations companies, and if you want the job done for you that is the route you should take. However, if you posses good DIY skills and are not afraid of working on a roof then a Do-It-Yourself Net-Metering installation could be in the cards for you: This can save quite a bit of money and make payback and Return-On-Investment significantly better!

We can help you with a DIY installation; we have a decade of hands-on experience installing solar, and can point out the does and don’t s. We can also help you with electrical code questions.

You should be honest with yourself about your skills and abilities. Installing solar PV is not rocket science, though it is not a beginner’s project either. It is legally allowed to do your own electrical work (with a permit), however, we would strongly suggest teaming up with an electrician. Not just for the invaluable advise they can give you, but also to have an electrician do the AC wiring such as connecting the system to your panel or doing a line-side tap, and to deal with the ESA and your LDC.

The costs of materials for a 10kW grid-tie solar PV system, including sloped-roof racking and shipping, are around $16,500 at the time this was written (April 2016). On top of that come the LDC fees ($1,500), roof engineering analysis ($700), electrician fees plus materials ($2,000), and permits ($500 – $750). That brings the fixed costs, which you will have regardless of system size, to around $5,000, and overall cost for a 10kW Net-Metering system to $24,300 plus your time (this includes HST, since you can not claim that back for Net-Metering).

kWh Cost for Net-Metered Electricity

By investing in a solar installation today, Net-Metering locks in your electricity rate for the next 25+ years. That is the essence of Net-Metering! So how does this work?

Solar PV is very predicable in how many kWh’s it will produce over a long time period. As mentioned, each kW of solar PV will produce about 1,175 kWh of electricity per average year in our area. Solar PV is also very reliable: The warranty on solar panels is 25 years and they are expected to live for 30+ years. The other expensive part in the system is the inverter, and a conservative estimate would be to assume that it needs to be replaced after about 12 years of service (that is a very conservative assumption, in real-life most inverters should live 20+ years). For accounting purposes we can (again, very conservatively) assume the panels produce electricity for 25 years, and replacing the inverter costs around 1.2 cent per kWh during that time, using today’s inverter cost.

By dividing the cost of the solar system (including HST) by the number of kWh’s it produces over 25 years, and adding in 1.2 ct/kWh, we can find out how much each kWh of solar electricity costs. That is what the following table shows. It is clear from the numbers that Net-Metering is well-worth it! Even at today’s prices it is cheaper to make your own electricity, and that only gets better as electricity rates are bound to go up.

Array Size (kW) Annual Energy (kWh) Total Price (CAD) incl. HST kWh Cost (cent/kWh)
5 5,875 $15,030 11.4
6 7,050 $16,840 10.8
7 8,225 $18,760 10.3
8 9,400 $20,570 10.0
9 10,575 $22,490 9.7
10 11,750 $24,300 9.5

Note: The cost-per-kWh number assumes 25-year life of the system, and adds 1.2 ct/kWh for maintenance (such as replacing the inverter once during this time). The PV array is south facing at a 35 – 45 degree pitch.

With Net-Metering, each kWh your solar array produces offsets a kWh you would otherwise have to buy from your electrical company. So it offsets the cost of that kWh. For most people that cost is around 23.5 ct/kWh at the time this was written (just take your last electrical bill, and divide the total cost including tax etc. by the total kWh’s that were sold to you to find your cost per kWh). Since solar PV is very predictable in what it produces over a long time period, it is easy to calculate how long it would take to generate enough electricity to offset the cost of the system. That is the (simple) payback time.

Payback Time for Net-Metering

The Ontario law that governs Net-Metering also describes how the utilities have to calculate billing, and unfortunately it is about as clear as a sooth-sayer reading the coffee grinds. The long-and-short is that any fixed monthly fees the utility charges will still be there, they cannot be offset through Net-Metering. At the time this was written fixed costs are around $18 for those in “high density” areas, while people in the boonies pay around $34 per month. Using those monthly fees the table to the right shows how long it takes at today’s 23.5 ct/kWh effective rate to earn back the investment in a Net-Metering system.

While those payback times may not look too impressive there is more to the story: Ontario electricity rates are set to increase drastically over the coming years! The expectation at this time is that the rate at which Net-Metering offsets your bill will be at least 27 ct/kWh by the end of 2018. Using that number the payback time gets even more interesting, as shown in the table to the right!

That is only the tip of the iceberg though: Electricity prices will continue to rise as time goes by, and that will make your Net-Metering system look better and better. Because of that the actual payback time will almost certainly be shorter than the numbers listed here. It is hard to give accurate numbers beyond those in the table because so many variables are either unknown at this time, or they differ from case to case.

Array Size Payback @ 23.5 ct/kWh Payback @ 27 ct/kWh
5 kW 13 years 11 years
6 kW 12 years 10 years
7 kW 11 years 9 years
8 kW 10 years 9 years
9 kW 10 years 9 years
10 kW 10 years 8 years

Note: Simple payback time in years for a Net-Metering system with $18/month in fixed fees.

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