Ontario's net metering model on the drawing board

4 minute read
01 September 2015

The Province of Ontario is accepting feedback on a proposed transition of the current microFIT program to a net metering program which it wants to implement by late 2017 or early 2018. The net metering program will focus on renewable energy systems that are 10KW or less but may impact larger systems - potentially even commercial scale systems.

Net metering program objectives:

  1. Reduce ratepayer cost of generating small scale renewable energy relative to the current microFIT program. The ultimate goal is to create a self sustaining program;
  2. Facilitate Ontario's Conservation First policy by ensuring systems are right-sized and sited close to load;
  3. Reflect the costs and benefits of net metered generation while distributing the costs fairly; and
  4. Offer consumers choice to offset their electricity consumption by using renewable energy, subject to cost and need considerations.

The program concept is to develop a long-term framework for developing small-scale renewable energy systems and to fairly allocate the costs and benefits of distributed energy systems among ratepayers. The amount of electricity consumed minus the amount of electricity generated will be charged at retail rates to consumers. Any net excess generation would be credited at a price that reflects the project's value to Ontario's electricity system.

This value-based compensation would be calculated to include 'avoided cost' - a concept which has proven notoriously hard to pin down in other jurisdictions which have adopted net-metering. The idea, in Ontario at least, is that the province's many local distribution companies would willingly connect and compensate participants at a value that reflects system costs and benefits, that the determination of compensation would be transparent and predictable and that the program would be flexible enough to integrate innovative technologies - including energy storage. Focusing on value-based compensation, there are two proposed models for implementing this program. The first is the Value-of-Solar Tariffs ("VOST") model which would attempt to value the benefit PV electricity provides to the grid by valuing specific components of the energy generation system. The components of this calculation are yet to be determined but they may vary depending on location. VOST is calculated independently from retail rates so it may be priced above or below retail rates. The second proposed model is the Locational Adder Mechanism ("LAM", pronunciation uncertain). This is a simplified approach for locations where distributed renewable energy can preclude or offset infrastructure development. Participants would receive a premium over the retail rate for their net excess energy generated reflecting the Locational Adder.

Both the VOST and the LAM price determination models will leave ample room for interpretation discussions by various industry stakeholders. In light of the recently announced reductions to Ontario FIT Program pricing, the adoption of net metering will be of significant interest to solar market participants - particularly those focused on serving the consumer and commercial rooftop market sectors.

The Ministry of Energy has put forward a general framework for this program but it is relying on feedback and further consultation to refine its various elements. It is continuing to hold in-person engagement sessions to solicit feedback on this concept proposal with the final two sessions scheduled for Sept. 29, 2015 and Oct. 1, 2015 in Thunder Bay and London respectively. Written comments on key elements of this proposal will be requested following the in-person sessions and the anticipated deadline for submitting comments is anticipated to be mid-October.

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