Rules discourage Canadians from generating more solar power than they use
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Canada needs more clean power to meet growing demand, while aiming for net-zero emissions to fight climate change.
Many Canadians want to install rooftop solar panels to help. But while that can lower their electricity bills, they can’t actually get paid for it — because many jurisdictions limit the power generation of a rooftop solar system to the amount you consume, and customers can only be compensated in bill credits, not cash.
Hydro-Quebec puts it this way: “The customer’s goal must be self-sufficiency and not sales.”
Darren Chu, managing director of Calgary-based Utility Network and Partners, says similar rules in Alberta are frustrating.
“We have lots of customers who come to us and say, ‘Well, I have all this roof space and I’m only allowed to cover a small portion of it with solar panels because that’s all my consumption will allow me to do. How come I’m not allowed to export more?'” he said.
Chu’s company runs a special pricing program called Solar Club for Albertans with rooftop solar, offering them higher rates in summer when they have more surplus power and lower rates in winter. He wants the limits on rooftop solar generation lifted.
But why do they exist in the first place, especially given the way solar can benefit the grid?
The federal government says in a draft regulations released Thursday it has a plan to make Canada’s electricity grid cleaner, with the goal that it will be carbon neutral by 2035. But critics say this plan will drive up prices and possibly make electricity less reliable.
Technical challenges
Solar is “quite disruptive” to how utilities have done things for 100 years, says Martin Boucher, who researches public policy on energy at the University of Saskatchewan.
Traditionally, distant large generators have sold power to a single Crown utility for a low, wholesale price and it’s sent down transmission lines to be distributed to consumers at a marked-up price for regulated profit. Local grids were originally designed to send power in one direction — from long-distance transmission lines to people’s homes, not the reverse.
Additional safety infrastructure, including new sensors and programming, must also be added if homes are feeding electricity to the grid, according to Patrick Murphy, with the U.S.-based clean energy think-tank PSE Healthy Energy.
“Until protective infrastructure is in place, regulators cannot support distributed energy that generates more power than the customer’s average use,” he wrote in an opinion piece in the trade website Utility Dive a couple of years ago.
Those grids may also need to be expanded to accommodate more electricity in both directions.
In the meantime, injecting solar into those grids can introduce “additional congestion,” said Jessei Kanagarajan, senior manager of residential and community program performance at Ontario’s Independent Electricity System Operator (IESO). Because of that, IESO has some programs that encourage customers to generate solar for their own use to ease the strain on the grid, but don’t allow them to inject excess electricity they produce into the grid.
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Chu, who’d like his customers to be able to generate and sell as much solar electricity as they want, acknowledges that would require upgrades to the distribution networks, and that that would cost the utility companies money.
“But it’s also inevitable. They’re going to do that anyways,” he said.
That’s because utilities foresee two-way electricity flow becoming much more common with the increase not just in rooftop solar, but battery storage, bidirectional charging of electric vehicles and virtual power plants — technologies that are expected to benefit the grid and improve its efficiency in the future by helping to balance electricity supply and demand.
Murphy says upgrading distribution networks to support more solar could even reduce the need for other kinds of expensive upgrades, such as extra generation and transmission. Solar customers draw less power from the grid “and most of it is being used locally,” he told CBC News.
He says the areas most in need of upgrades tend to be disadvantaged neighbourhoods, and he thinks effort should be made to ensure outdated infrastructure doesn’t impede “equitable distribution of solar for communities that have lacked resources and investment in the past.”
Francis Bradley, president and CEO of Electricity Canada, a group representing the electricity sector, has talked about a future when consumers become “prosumers,” who both draw electricity from the grid and feed power back into it.
In fact, that might be a solution to another challenges posed by solar — sometimes it’s sunny and sometimes it’s not.
“You can’t plan for [solar] in the immediate short term,” Bradley said. “That’s a reliability challenge.”
But Bradley says the challenge is solvable using prosumers and technology such as virtual power plants to smooth things out.
Utilities can lose on rooftop solar
Beyond the technical challenges are those posed by the century-old business model for selling electricity.
Currently, many customers with solar are compensated with credits for each unit of electricity they produce — a practice called net metering.
It applies not just to individual homeowners, but also larger projects run by solar co-operatives to make solar generation and investment more accessible to local communities.
Some provinces, including B.C. and Nova Scotia, allow homeowners to generate more solar energy than they consume. But in Nova Scotia, they won’t get paid for it, and in B.C., they can only be compensated in credit.
While that may sound unfair to consumers, net metering can cause utilities to lose money.
First, they lose revenue when customers with rooftop solar buy less or even no power from them at marked-up rates.
And with net metering, customers effectively sell electricity to utilities at marked-up retail prices instead of wholesale prices
In some cases, net metering allows solar customers to avoid charges needed to maintain grid infrastructure that they still use when the sun isn’t out. Utilities such as SaskPower have said that unfairly transfers their costs from grid upkeep to other customers. SaskPower says that if its net metering program continued growing at the rate it had been, it would cost the Crown corporation $54 million by 2025. Because of that, in 2019, it replaced net metering with net billing, paying solar customers only half the retail rate for solar power they produce.
Boucher says, despite losing money on net metering, other utilities such as Saskatoon Light and Power continue to offer it because they see the potential of the technology for the future and are “trying to figure out what the business model could be for them.”
A number of those interviewed for CBC News thought dynamic pricing for electricity that changes with supply and demand (something that’s already happening to a limited extent in places like Ontario and at Solar Club), along with more batteries on the grid, could make distributed solar work better for both customers and utilities in the future, including financially.
Meanwhile, electricity demand in Canada is projected to double or triple by 2050.
Bradley said utilities across Canada all have different circumstances, and are at a different place when it comes to integrating rooftop solar, but “they’re all looking at this as one of the solutions to a future that is going to require essentially two to three times more kilowatt hours for the customer.”
