What is Solar Net Metering (Net Billing)?
Residential and small commercial solar systems are connected to the load centre in a home or business. Solar generated electricity is used first, and utility power provides when solar cannot. If there is excess solar power generated, the power is exported back to the utility. Net Metering defines the process where a utility wheels your solar power to and from your system, essentially storing it for you. Sometimes this is a credit of kWh per kWh, or a monetary credit at a fixed rate per kWh (Net Billing). Net Metering programs enhance the value of solar to customers, and set the rules as to how solar may be interconnected with your utility.
How Solar Net Metering works:
Each Canadian electricity provider has its own set of rules for solar system owners. Here are some examples:
BC Hydro has a very simple connection process outlined here. It involves the installation of solar modules on the roof, wired through an inverter and connected via a lockable disconnect to a breaker on an electrical panel. The system must be installed with an electrical permit, and a copy of the closed permit must be sent to the BC Hydro Net Metering management team. They will then issue permission to connect, and make software changes to your customers BC Hydro Account which sets up the credit process for energy sent back to the grid. There is no charge for customers taking advantage of BC Hydro’s Net Metering program, nor any connection charges (BC Hydro is the poster child for a good Net Metering Program).
In BC, solar generated electricity displaces consumption first. When excess energy is exported, customers reduce their monthly purchases at the highest rate (currently $0.14 per kilowatt-hour (kWh) with taxes), until the lower tier consumption is reached. Note that these rates have increased over 25% over the past 3 years, with more increases planned.
Another example is Alberta. First off, the solar energy that is produced during the day is first used to offset household loads. Typically customers pay $0.115 per kWh from their utility, so today solar saves 11.5 cents per kWh, when delivery and transmission charges and taxes are included.
One difference with Alberta's utilities is that they deal with exported solar power (the power generated but not needed by a home) through a Net Billing program. Rather than crediting a customer for each kWh, Net Billing offers a $ credit for each kWh delivered to the street. The rate at which these are paid to the customer varies between electricity providers. In January 2017, this price ranged from $0.05-$0.07/kWh (the retail "energy charge"). Note that if a home uses most of the solar electricity rather than exporting it, the customer gets the benefit of reduced energy and delivery charges.
Each utility has its own model of how it bills customers (fixed charges versus charges linked to kWh consumption), and how customers are compensated for the solar electricity delivered to the street. For your specific area check your utility website.
To calculate to cost benefit of solar electricity, here is a sample calculation for Calgary:
Cost of Solar Electricity in Canada
- Each kilowatt of solar installed (on an unshaded low slope roof facing SE to SW) will produce between 1000 and 1350 kWh per year depending on the local solar climate.
- Solar systems in the 5-10kW size can be installed by qualified solar contractors for approximately $3/watt. Assume the average is $3000 per kW.
- Solar equipment can produce electricity reliably for 30 years or more. Assume a 30 year life.
- Assume your project is paid for in cash (earning almost nothing in an interest bearing bank account). The cost of capital has been excluded in this simplified model.
With a 30 year life, and assuming Calgary production numbers, the cost per kWh delivered would be:
Cost per kWh = $3000 per kW (installed cost)/ 38,750kWh = $0.077/kWh
Similarly, in Victoria, where home owners are pay $0.14 for the utilities high rate kWh, each solar kWh comes in at $0.09.
Is your customer paying more than 9-12 cents per kWh (including rate riders, taxes, debt retirement charges, delivery charges, etc.)? Likely yes. Solar generated electricity is already cheaper than utility generated electricity almost everywhere in Canada.
If you layer on utility rate increases, the value of solar generated electricity increases every year.
The inevitable increases in electrical costs that all Canadians are faced with are there to upgrade the aging generation and distribution networks. Can you image that some provinces still use coal, with all its pollutants, to produce electricity? This antiquated infrastructure all has to be replaced - at a cost to ratepayers. Solar systems on a roof become an attractive investment to hedge against these increases, Solar customers can expect to see a rate of return on their solar investment from 5 to 12%, depending on their current costs and location.
If you want more help with the financial model for your area, email HES and we’ll will help you build it with the many tools in our toolbox.
The Case for Residential Solar - HES White Paper
Solar electricity makes sense, as it offers control of your power costs. Moreover, as utility rates go up, the return on investment is getting better. To read the HES White Paper "The Case for Residential Solar" click on the button below.