What are the options for residential solar electric in Ontario in 2021?

I’m just starting down this road and am looking for some directions – I’m thinking general stuff (not the specifics). The reason I’m asking is because I’ve already gone down some “rabbit holes” on the Internet and ended up more confused than informed.

My latest search involved a company called Energyhub which promises to organize everything while being ethical angels. So I’m wondering if you can say: Do this, don’t do that. Go here, don’t go there. These are the mistakes I made, this is what I would do differently next time, etc.

— Vern

Answer from Green Energy Efficient Homes

Note – this question came via email through Dave, a good friend of mine who like me has a solar electric system on his roof.

I’m certainly not an expert in this field but I have a solar electric installation on my Toronto roof, grid connected, and have several friends with similar systems installed at different times and under different solar interconnect regimes, and can offer a few pointers.

During the tenure of the Liberals in Ontario there was a MicroFIT program (FIT = Feed In Tariff) for renewable energy installations. For solar that meant, if you install an approved solar electric system, you get paid a set rate, for a 20-year term, for the electricity you generate from your solar panels, and you get charged whatever the regular rates are for electricity you consume. You have two meters running, one for what you’re producing and one for what you use. That’s the setup my best friend and I each have on our houses.

The FIT program was pretty successful; such programs exist(ed) all over the developed world and are a big part of what has accelerated the downward movement of solar panel prices, as it made solar panels affordable to homeowners, drove up demand, and therefore drove up manufacturing which in turn produced cost efficiencies.

The rate you got for your 20 year contract was set up front, but the contract rate for new installations kept declining year after year — people who signed later got lower rates per kWh generated, because the assumption is they also spent less installing their system. So for instance my friend put his system up a couple of years before me and gets $0.56 per kWh, while I only get $0.39 per kWh (the first people who did MicroFIT got something like $0.80 per kWh). But my friend paid more for his installation, on a per kWh basis, than I did, because solar panel prices are constantly dropping; the contract rate each year was designed to give about an 8 year payback based on cost of installation that year. So if all went according to plan, you would have 8 years of earning back your investment and 12 years of profit.

You could hire a company to do all the installation work and application work for you, and pay the costs yourself; another option that was offered was to rent your roof to a company that owned the panels, and they would profit from the income from the electricity they generated, and then they would pay you rent at some agreed upon rate (based on what you generated, or just a flat rate per year).

One risk with the first approach is that a company selling you a system that you’ll be the owner and operator of has an incentive to be optimistic on the generation potential and payback period of the system, so they may overestimate the possible output of the system. They normally do a detailed shade study (how much shade will fall on the panels at different times of day and different times of year, since the sun’s angle changes through the year) and they do energy modelling to show how much you’ll likely generate, and therefore how much money the system will make and what the payback period will be. But of course, there’s always the risk they’ll oversell the generation potential to entice you to sign.

There’s also the risk of them not doing a good job on installation. I was lucky – my installation was done well. My friend ran into problems as his installer was not a top tier company in the industry but rather a one person business, and he later had to pay another solar installer to redo parts of the installation.

Finally there’s the financial risk of things breaking – you pay the cost of any repairs, and you also lose income for any period where the system isn’t generating electricity because it’s broken.

The benefit of the second option, where you’re just renting roof space, is no up front cost, and if you’re getting flat rate rent, not a percentage of electricty generated, there’s no risk to equipment breakdowns. The downside is you still have obligations to the company who is leasing your roof, and it can make selling your home a little more complex, as you would either have to buy out the remainder of your contract, or get the new homeowner to assume the contract. When you sell a home with solar panels you own, the buyer can decide whether to keep them (and keep benefiting from the income) or not, at no cost to you.

With lower risk comes lower reward, so your net earnings (after all expenses in the case of buying your own system) will likely be lower for the renting roof space option than if you owned your own system.

Premier Doug Ford cancelled the FIT program soon after he took office – a typical shortsighted move by someone who has no understanding of the positive role solar power can play in building a sustainable economy – so the two options that remain are net metering and just powering your home (partly) with solar.

Net metering means you have a single meter, and it runs forward when you’re using more electricity in your house than the panels are generating (for example, at night, or on a hot day when the AC might be running) and it runs backward when you’re producing more electricity from your panels than you’re consuming. With Net Metering it’s actually possible to get your annual energy bill down to zero. But it can’t go BELOW zero, and there’s an annual reset where, if you have a credit (more produced than consumed), that credit gets wiped out. I spoke to a solar installer who has a Net Metering setup for his house in Bancroft Ontario. He said he tends to crank up the electric heat in his house in the fall if he sees a big credit building up. Why use firewood or propane when you’re going to lose the electricity credit in a month?

My next-door neighbor ran into this when he had his solar electric system installed on his Toronto roof. He went with Net Metering. Toronto Hydro (your local utility decides on what capacity and configurations you’re allowed to install) required him to demonstrate that the amount of electricity he would generate would be covered by consumption in the home. Even with a hot tub, a heat pump, and plans for a plug-in hybrid, they limited the number of panels he could put on his small older home roof, which he was not terribly happy about. He said he was perfectly fine with feeding more electricity into the grid than he wound up using – after all most of us early adopters of solar power are doing it not primarily for financial reasons but to help get the world’s carbon footprint down. But that wasn’t an option back then. In November 2023, Toronto Hydro removed that requirement and now just differentiates between small (<10kW) and larger systems; the smaller ones are typical for residential installations. So in theory my neighbor could cover the rest of his roof with solar panels.

Net metering is a viable alternative. According to the installer in Bancroft, at least in rural Ontario where electricity prices are higher, it can turn out cheaper than just buying electricity off the grid, when you factor in both installation costs and savings on buying power. However, the government has gotten very picky about installations (presumably because they don’t want more green power) and apparently won’t approve installations unless they meet very specific requirements for where they’re installed (must be rooftop, not standalone) and how. So it may be challenging to get an installation approved – you always want to make sure the revenue mechanism (in this case net metering) is approved on a design level for the installation before you proceed with installing.

The other alternative is just having a battery system inside your house that the solar system charges; you then draw off the batteries or directly from the inverter when there’s power available, and when there isn’t, you draw from the grid. The main advantage of this setup is that you have power during an outage, whether it’s sunny, cloudy or dark (it’s possible to have at least some power during an outage in the MicroFIT and Net Metering setups, but requires extra costs and only works when it’s sunny). But because you are buying a big bank of batteries, it takes more space and costs more money than a net metering system. Another possible advantage of a battery system is that if you set it up so that it can also charge from grid energy, you can take advantage of the ultra-low time-of-use pricing arrangement where overnight electricity is as cheap as 2.8 cents per kWh. Check out this pricing table accurate as of December 2023:

Time period Hours Price
Ultra-low overnight Every day from 11 p.m. to 7 a.m. 2.8¢ per kWh
Weekend off-peak Weekends and holidays from 7 a.m. to 11 p.m. 8.7¢ per kWh
Mid-peak Weekdays from 7 a.m. to 4 p.m. and 9 p.m. to 11 p.m. 12.2¢ per kWh
On-peak Weekdays from 4 p.m. to 9 p.m. 28.6¢ per kWh

From the above you can see that, if you charge your batteries up to nearly full overnight at 2.8¢ per kWh, and then use the batteries plus what the solar panels generate through the day, you can take advantage of electricity-intensive things like heating or cooling your home or your hot water at cheap or ‘free solar’ rates. (This works especially well in winter, when solar output is very low, and your heat pump will be drawing lots of electricity.)

As far as specific companies to use to have solar power installed, I can’t offer recommendations, but I would ask for a visit from 3-4 companies who specialize in residential solar electric installations. Have them come to your house, do a shade study, give an estimate, and listen carefully to what they offer. Ask how many installations they have done, and how many they do in a year. Ask for references, and call at least 3-4 references. Go visit some of their installations. Study their financial models carefully. If you’re signing a lease with a company that rents your roof (much less common these days since the MicroFIT program was canceled) read the terms carefully.

Finally, if they offer you squirrel guard (mesh coverings around the edges of the installation on your roof, so that animals can’t get under the panels and cause damage like eating through wires), buy it! I had raccoons find a way up onto the roof a few years back; they crawled under the panels and lay there during the day, chewing holes in my shingles; I spent a lot of time up there taking off panels, patching up the roof, putting panels back on, and then building my own homemade mesh coverings to keep future coons out. It was going to cost an extra $1,000 at the time of installation to install the squirrel guard, and while I didn’t pay nearly that much to do it myself, it was a multi-week effort patching the roof and installing my own home-built squirrel guards.

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