Is it worth it to put solar panels on your home?
The cost of solar panels has plunged in the past decade, so it seems like rooftop solar could be a good opportunity for homeowners to save on electricity bills and cut carbon emissions.
That’s what Ashley Reid thought when she installed solar panels on her home in the Kitchener-Waterloo area of Ontario a year and a half ago.
“I’m an accountant,” she said, “and when you do the math … financially it makes sense to have solar on your house.”
A Radio-Canada analysis earlier this year found that’s the case in most major Canadian cities.
But not everyone agrees. “I would not be recommending people install it for economic reasons,” said Heather McDiarmid, a climate and energy consultant who released a report earlier in August on the climate and financial benefits of residential rooftop solar for the Ontario Clean Air Alliance.
Environmentally, the case for solar is clearer, and a recent study found rooftop solar is even better for the climate than large-scale solar farms.
Here’s a closer look at rooftop solar in Canada and things to consider, including the up-front cost and a mix of policies and incentives that vary widely across the country.
Residential solar greener, calculations show
While large-scale solar farms are cheaper to install per kilowatt, a recent study led by Western University engineering professor Joshua Pearce found that residential solar is actually greener.
“You just have less materials involved,” he said, noting that solar farms mount panels using concrete or steel, which generate a lot of emissions during production, whereas residential installations mostly use existing infrastructure — your roof.
The study found that rooftop solar systems generate 18 to 59 per cent fewer carbon emissions than solar farms per kilowatt during production and installation.
Both Pearce and McDiarmid found solar panels generate more energy than were used to produce them in less than two years, even in Canada.
Residential solar is especially beneficial for the climate in provinces where it displaces electricity generated from fossil fuels, such as Alberta and Saskatchewan, which also happen to be the sunniest.
The new report from the Ontario Clean Air Alliance notes that solar generates the most electricity at times of day when Ontario relies most heavily on gas power plants. It calculates that a 10 kW solar array could avoid 1.5 tonnes of carbon emissions in 2024 and 3.9 tonnes of emission per year (roughly the amount of emissions generated by a car) by 2030, when Ontario is expected to rely more heavily on gas generation at peak times.
But only one per cent of electricity generated in 2022 came from solar, Natural Resources Canada reports. According to the Canadian Renewable Energy Association (CanREA), most of it came from large-scale solar farms, also known as utility-scale solar.
So far, only one in 200 Canadian homes have residential solar, a 2023 report from consultants Dunsky Energy and Climate found. It noted that models and calculations consistently show these solar installations are a key component to meet growing electricity demand while achieving Canada’s goal of net-zero emissions by 2050 at the lowest cost. That would require rooftop solar to grow 20 to 40 times.
Higher up-front costs
One of the biggest challenges with solar is the high up-front cost. B.C. and Ontario have some of the lowest costs for residential solar in Canada, according to Energyhub, a marketing agency for residential solar developers. Even so, an average 7.5 kW solar array, which would cover most of an average household’s electricity needs, costs an estimated $22,500 in B.C. and $25,000 in Ontario.
Some utilities and federal, provincial and municipal governments offer incentives to defray costs. CanREA lists many of these in its Go Solar Guide.
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Reid installed her system with the help of a $5,000 Canada Greener Homes Grant (no longer available) and the 10-year interest-free Canada Greener Homes Loan of up to $40,000, which homeowners can still apply for. She also improved her savings by electrifying her car and other appliances at the same time, so she could power them with solar generated electricity instead of racking up gas bills.
Once the solar panels are paid off, she says, “We’re not going to have an electric bill, which will be amazing.”
Many determine if solar is worth it based on the time it takes to save enough money in utility bills to cover the up-front cost, and reach the point where they’re “really” saving money each month.
Erwin Hueck, CanREA’s National Director of Distributed Resources, said the payback period is shorter in provinces with higher utility rates.
“For a number of jurisdictions like Alberta, like Saskatchewan, you’ve got payback periods that are, you know, sort of in that 10 year time frame,” he said, noting that incentives can bring that down further.
Radio-Canada found that when the Greener Homes Grant was available, rooftop solar could be paid off in as little as five years in Calgary, 10 in Toronto and 11 in Halifax. Quebec’s cheap electricity made paybacks longest in Montreal, at 19 years.
But McDiarmid’s Ontario analysis, released this month, after the Greener Homes Grant ended, found the payback periods “disappointing.”
For a 7.5 kW system, the payback period was 25 to 27 years — the official lifetime of the solar panels (although McDiarmid says they’re known to keep working much longer). That’s assuming electricity rates go up only two per cent a year. The payback is 18 years if electricity rates go up four per cent annually.
Pearce, who put solar panels on his own home, suggests calculating the “rate of return” over the system’s lifetime, taking inflation into account.
“When you do that, you see that solar is actually a massive inflation hedge and all of your ‘income’ coming from it is not taxed because it’s savings.”
How utilities ‘pay’ people for solar power
In Canada, most jurisdictions or utilities limit the amount of solar people can produce to the amount of electricity they consume annually, if they want to remain connected to the grid and get credited for the solar they produce.
Because consumption is averaged over the year and days are longer in the summer, homes with rooftop solar tend to generate more electricity than they consume in the summer and consume more than they generate in the winter.
Many utilities use a version of net metering — where solar customers are credited for extra kilowatts of electricity in summer that can be used in winter.
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How much the credit is worth and how long it lasts can vary. In Ontario and Quebec, credits are erased and customers’ balances are reset to zero after one or two years.
Reid thinks that’s a double standard.
“If you owe the utility money for not paying your bills at the end of the 12 months, they’re not going to wipe away your debt.”
Some other jurisdictions use net billing, where credits are worth a different amount than the regular electricity rate — generally, less. For example, SaskPower offers customers half the rate for power they produce compared to power they consume, sometimes resulting in a sizeable bill, even in months when they’re producing more than they consume.
Pearce said net billing is also used where he lives, in London, Ont. “That disincentivizes solar in general,” he said.
Given the environmental benefits and potential financial benefits, Pearce thinks anyone considered installing solar should have another look now: “Solar prices have come down enough that it does make economic sense once you take inflation into account.”
