ANALYSIS: Should Ontario Pursue Virtual Net Metering?

Virtual net metering is a program which, if implemented, would supplement Ontario’s already developed net metering policy. To realize the potential of virtual net metering, understanding the basics of regular net metering is important.  

Net metering is a credit system for homeowners producing their own renewable energy. While multiple forms of renewable energy qualify for net metering, this explanation will center around solar energy. Net metering balances out peak electricity production hours with off-peak hours by creating a “give and take” relationship between households and electrical grids. For example, in the afternoon, a homeowner’s electricity generation may exceed the household’s electricity consumption. Since there is an excess of electricity, it is fed into the municipal electrical grid. The homeowner is then provided with energy credits, which go towards covering future electricity costs. The value of the credits depends on the quantity of excess electricity fed into the grid. In Ontario, energy credits carry over for 12 months, at which point they are reset to 0.

In the evening, however, a homeowner’s electricity consumption may rise above production. When this occurs, previously earned credits are applied to cover the difference. The net metering system will keep track of the balance of credits. At the end of the month, homeowners will either receive a credit (able to be carried into the next month) or a bill to pay, based on the difference between their electricity production and consumption. The ability of net metering to both feed excess electricity into an electrical grid, and pull supplementary electricity out depending on a household’s demand means there isn’t any disruption to a household’s electricity usage. Plus, by using a credit system, net metering ensures that all produced electricity is fairly compensated for.

Ontario’s net metering program has been a critical tool in growing residential solar production, as it has vastly expanded the accessibility of the technology. Without net metering, storage for the produced electricity would need to be built alongside the solar panels, otherwise, a household could experience erratic blackouts. This would vastly increase costs, which would disincentivize individuals from pursuing solar energy.

While net metering has been an important addition to energy policy in Ontario, there are still plenty of opportunities for further improvement. The primary issue with net metering is that not every homeowner has the capacity for a solar installation. This tends to leave out lower-income residents who would benefit the greatest from the reduced electricity bills. Some homeowners are also left out due to poor property orientation, which restricts accessible sunlight. If potential panel locations don’t receive adequate sunlight, the purchase of a solar installation simply isn’t economical.

The core difference between net metering and virtual net metering is the location where the electricity is being generated. Regular net metering only works for individuals who can place the solar installation on their own property. Virtual net metering differs by allowing homeowners to buy solar energy which is produced externally. This allows those without the means of generating solar energy to reap the many benefits of it.

One of the greatest strengths of virtual net metering is its ability to take on multiple different business models. The private sector can set up solar installations and lease the energy to consumers on its own, or it may seek government partnerships to increase efficiency, reduce costs and speed up project construction time. Partnerships can be especially helpful when it comes to finding the most economical location for a virtual net metering installation. Analyzing possible installation locations for factors such as the quantity of sunlight, land value and community emotion can help ensure a location is chosen which is fair to the taxpayer and favorable to the community. Virtual net metering is also a relatively cheap option for the government to promote solar energy, as the various ownership models attract private business and investment.

Virtual net metering is already mainstream across many parts of the United States. Unfortunately, Ontario has recently regressed on this matter, as the Province canceled its virtual net metering pilot projects in October of 2018. If Ontario’s Progressive Conservative government was serious about lowering Ontarian’s electricity costs, these pilot project cancellations would be reversed immediately. Virtual net metering provides consumers an environmentally friendly and cost-saving way of purchasing electricity. This in turn, can further galvanize support for renewable energy. Ontario should continue these projects, with an emphasis on testing out a multitude of different ownership models. These pilot projects are critical, as they help to determine Ontario-specific problems and solutions with virtual net metering. Otherwise, Ontario should adopt virtual net metering “best practices,” which have largely been developed in energy innovation hubs across North America, namely New York and California. In its established locations, virtual net metering has been highly successful at its intended purpose.

Virtual net metering offers great potential to further improve access to renewable energy for Ontarians. To move this policy forward, Ontario should reverse the pilot project cancellations, as well as develop clear regulations that build onto the existing net metering framework (reg. 541/05). By providing homeowners of all income brackets the opportunity to reduce their bills and carbon footprint, virtual net metering represents a forward-thinking solution on how to increase affordability and accessibility of electricity, while simultaneously fighting climate change.

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