What is Net Metering?

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Net Metering in Ontario uses electricity produced by your solar system to directly power the electrical needs of your home or business.  When more energy is generated than you use, the surplus is transferred to the electrical grid and you accumulate credits that are applied when you produce less than you use. Credits are accumulated during periods of peak production and used during times of low solar production such as inclement weather, darkness or in the winter months. You have 11 months to use your credits to offset the cost of future electricity bills.

With Net Metering you only pay when you use more than you produce; the Net difference. Global Point can design a system that will cover all your electrical needs. We analyze your current usage and design a system that covers all your usage averaged out over the year eliminating most of your electricity bill.*

*Fixed utility charges will be billed.

How Does Net Metering Work?

Net Metering Infographic

 

Electricity Rates Continue to Rise 

From May 2006 until May 2016 average electricity rates rose  85%, an average annual increase of 8.6%.

From May 2011 until May 2016 average electricity rates rose 56%, an average annual increase of  11.3%.

In 2017 the Ontario government instituted the “Ontario Fair Hydro Plan” that promises to hold rate increases to inflation for 4 years. Be prepared for year 5 with your own generating plant for your farm or business. Rates are expected to rise significantly. 

The more rates rise, the more benefit Net Metering provides because the dollar amount offset by solar power grows in value.

Source: Ontario Energy Board – Historical Electricity Prices

FAQ about Solar Energy In Ontario

(Frequently Asked Questions)

I’ve heard there have been some changes to Ontario’s solar program?

You are correct!  In early 2018, the IESO made a major change in the way that solar system output is managed contractually. Rather than making solar system owners enter into a long-term fixed price contract via the Feed-In-Tariff (FIT) program, a simpler, and more flexible program called Net Metering was introduced.

How does the Net Metering program work?

Under the old FIT program, all power produced by a solar system was metered separately and dispatched to the grid. Your bill for the power consumption of your facility was unchanged, and you received compensation for your solar production that was deemed to be taxable income for your business.

Net metering allows you to credit your solar production directly against your power consumption. In essence, the solar system is operating behind your meter. This program allows you to offset up to 100% of your consumption on an annual basis. Your electricity bill is reduced in proportion to the amount of electricity you generate, and the prevailing cost of electricity.

On a month-to-month basis, should you generate more power than you consume, you will be credited with the surplus. This surplus can be applied to future months where demand exceeds production (for example, some months during the winter). However, should your production exceed your consumption over the course of a full year, any surplus credits are forfeited. This means it is very important to determine one’s current and future power usage and to size the solar system accordingly.

Is Net Metering better than the old FIT program?

There have been numerous iterations of the FIT program since its inception in 2009. Each successive iteration offered lesser tariff rates, as the IESO was intent upon reducing its subsidy to the renewable energy sector. Over the same period of time, costs for solar panels have diminished dramatically, allowing solar contractors to reduce their pricing. The net result was that solar proponents were able to develop a solar project of a given capacity for much less financial outlay and maintain the same rate of return.  In its final iteration (FIT 5), the tariff rate for industrial scale solar systems ranged from 18 to 20 cents per kilowatt-hour. This rate was used as the basis for a 20 year fixed price contract, with no provision for escalation.

In contrast, the Net Metering program does allow for escalation. The offset cost of electricity is based on the volume-based components of your electricity bill. These components typically include the electricity commodity supply, the Global Adjustment charge, and the Demand charge. For a typical Net Metering application the offset of these charges gives a saving of 15 cents per kilowatt-hour. With electricity costs rising well above inflation, it is easy to see that the Net Metering offset rate will overcome the FIT tariff rate in a relatively short period of time.

I understand all the potential “green” benefits of going solar, but what are the specific economics of a Net Metering system?

The renewable energy sector is quick to point out the multitude of qualitative benefits to the environment they can offer, but often fall short in addressing the basic economics of a given technology.   Global Point Energy understands that any large project must make economic sense as a foundation for its development. To this end, we work hard to provide accurate information to our customers. This goes well beyond simple payback calculations.

We can assist our clients to develop a detailed 25 year financial model that includes solar production, offset electricity cost, tax regime including CCA, financing, OM+A costs, and inflation. A very important aspect of this effort is the prediction of solar output for a given geographic location. GPE uses a program called PVSYST, considered to be the gold standard within the industry. It performs a true hour-by-hour simulation using a Typical Meteorological Year (TMY). The TMY represents a 20 year average of solar radiation and climate data as compiled by NASA and Environment Canada.

Basic financial information for a 500 KW (AC) roof-top system with debt financing.

Solar System DC Capacity – 600 KW

Budget Cost – $809,000, taxes extra

Annual Solar Production –  755,000 KW-hours (first year, subject to panel degradation )

Offset Electricity Rate –  15 cents per KW-hour (first year, subject to escalation by IESO)

Annual OM+A Expense – $7,000 (first year, subject to inflation)

Debt to Equity Ratio – 70/30

Debt Financing Rate – 7% fixed interest rate for 15 year term

Projected IRR – 39.6 % over 25 years

Total Projected Net Savings – $1,940,000 over 25 years

Why should I consider using Global Point Energy as a contractor?

As with all major capital projects, due diligence is required to ensure the following:

  • The investment is sound financially.
  • The project can be executed in a manner such that budget, schedule, and technical adequacy are met.

Net metering projects require a substantial effort in the area of load and energy billing analysis that was not required for FIT projects. Therefore, it is important that you chose a contractor that has this specific experience, and is willing to support you in your “early-days” feasibility assessments. In addition, the contractor must have a sufficient number of skilled technical staff to complete the project quickly, efficiently, and with the least disruption to your operations.

Experience

Global Point Energy has been a full service supplier of commercial-grade solar systems for over 10 years. GPE has completed over 220 projects for clients in the areas of agriculture, manufacturing, commercial real-estate, and municipal government. Most recently, we have completed seven Net Metering projects ranging in size from 200 kW to 480 kW kilowatts. We would be pleased to provide you with references to assure you of our capabilities – in fact, the majority of our contract awards have been through referrals.

With regard to feasibility analysis, GPE will sit down with a prospective client and review their power consumption and demand profile, establish optimal system sizing and associated costs, and provide detailed financial proforma analyses as required. All of this is done at no cost to, or commitment from the client.

We are able to field up to 20 qualified installation staff. This allows us to manage a variable project load without incurring any delays or cost overruns – this is a particular consideration when installing roof top systems in a variable and harsh Canadian climate. Moreover, in contrast to many solar contractors, we use only qualified electricians to perform our construction work. We feel this is of prime importance to the quality and integrity of our installations, as system voltage levels can be 1,000 volts or more.

Finally, as solar system owners, we understand the importance that effective financing can play in the success of a project. Through our efforts in developing eight of our own projects, we have a good knowledge of the financing community and the capabilities of various financing institutions.

How would a typical solar project proceed?

From concept design to connection of the solar system to your electrical system, a typical large scale solar project requires 8 months. Here is a list of the activities which encompass a typical build.

Pre Sale
  1. At your request, Global Point Energy will prepare a pre-feasibility study that will ascertain your maximum solar roof capacity, approximate system costing, annual solar output and energy savings. No site visit is required to perform this study.
  2. If the pre-feasibility study shows merit, Global Point technical staff will visit your facility to gather historical power bill information, discuss future energy needs, confirm roof sizing and integrity, and review your service distribution in general.
  3. With the information gathered during the site visit, we will perform a detailed analysis of your energy demand to establish an appropriate solar system sizing. This is compared to the potential roof capacity for a determination of final sizing. A detailed hour-by-hour simulation of annual solar system performance will be done using PVSYST.
  4. Using the final sizing, GPE will work with you to develop a detailed 25 year financial model that considers all factors such as capital cost, CCA and income tax regimes, OM+A costs, solar production, offset energy price, inflation, and possible financing scenarios. The model will display all annual cash flows and provide a project IRR using the NPV methodology.
  5. GPE will provide a firm price proposal to engineer, procure and construct (EPC) one of our state-of-the-art solar systems. We will also include an estimate of local utility hookup cost, and any ancillary costs that are required to support the project.
After Contract is Granted
  1. Upon award of contract, GPE will undertake to secure all required permits and approvals from the relevant authorities. This will include a confirmation of grid capacity and connection cost. Professional engineering analysis of roof structural integrity and electrical design is performed. As part of this effort, detailed layout drawings of the solar array and racking are made.
  2. Once all permits and approvals have been obtained, we will initiate construction at your site. We will assign a dedicated project manager, and they will work with you closely to ensure that our activities don’t affect your operations. Depending upon the size of the project, the construction phase typically takes 6-8 weeks.
  3. Final commissioning occurs with the Electrical Safety Authority (ESA) inspection, local utility inspection, your inspection, and any required third party reviews. At Global Point Energy, we do not consider the job to be complete until your project is fully operational and commercial operation is declared!

Can I reasonably expect my solar photovoltaic system to last 25 + years?

Yes!  Based upon our own personal experience, and the experience of others, this technology is mature and reliable. The target lifetime for the major system components is 40 years, and some early systems are now approaching this age.

However, it is important to address a few important issues when engineering a solar system.

Panels

Panel selection represents the most important aspect of the design, given that they represent approximately half of the total system cost, and their long-term integrity governs the success of your project. Accordingly, all panel manufacturers offer a failure/defects warranty (typically two years) and a long term power output warranty (typically 25 years). While this may sound compelling, there exists a real risk that a given panel manufacturer may not be in business in the future, leaving the system owner unprotected. Therefore, it is important that quality panels be purchased from reputable manufacturers with a proven track record. Global Point Energy will make specific panel recommendations to ensure your investment is protected.

Inverters

Inverter manufacturers offer a variety of warranty programs, with some long term programs available at additional cost. A typical program is a 10 year replacement warranty with no annual premiums. Global Point will make specific recommendations for your inverter supplier, along with the following considerations:

  • We recommend that two or more inverters be used, such that a single failure does not curtail production entirely.
  • We recommend that a remote monitoring system be utilized. Inverters incorporate safety functions such as ground fault and arc fault protection. These safety functions can cause the inverter to trip, requiring a manual reset. If the trip is undetected, the inverter may lay dormant for an indeterminate period of time – leading to a substantial revenue loss. The use of a remote monitoring system allows for instantaneous notification of a trip, and gives you insight into system performance with features such as trend analysis.

Installation and Service Contractor – For our part, Global Point offers a 2 year warranty on our workmanship and related contractual activities. In addition, we will often go beyond the terms of the contract, such as “going to bat” for our clients  in dealing with panel or inverter warranty claims. We feel that these value-added services are most important toward maintaining a healthy and beneficial  relationship with our clients.

In contrast to most solar contractors, we are a multi-disciplined company and are not wholly dependent upon our solar contracting activities. This allows us to carry through the highs and lows of the industry, a phenomenon that had caused issue with of many of our peers.  At Global Point Energy we have a long-term perspective, and we will be providing sales and service support to our valued customers for many years to come!

Links to Net Metering Information

Hydro One Net Metering FAQ

Wikipedia Net Metering

Ontario Government Net Metering Info

 

 

To learn more about Net Metering, click here. One of our solar experts will be happy to tell you more.