Ontario’s new community net metering regulation for pilot projects

On September 28, 2021, the Ontario government filed a new net metering regulation, Community Net Metering Projects, O. Reg. 679/21 (the CNMPR), and two consequential amendments,^[1] which are intended to support the incremental development of net metering by allowing for community net metering demonstration projects on a case-by-case basis.

In this blog post we briefly review the evolution of net metering in Ontario and discuss the new CNMPR, including its anticipated impact on facilitating net metering for multi-building pilot projects in Ontario.

Background – the evolution of net metering in Ontario

Nearly sixteen years ago, Ontario filed its first net metering regulation, Net Metering, O. Reg. 541/05 (the NMR). The NMR enables electricity consumers to install renewable generation (wind, water, solar or bio-mass) “behind” their electricity meter and receive consumption credits on their electricity bill for excess electricity conveyed to the local distribution system. Under the NMR, operators of the distribution system — known as Local Distribution Companies, or “LDCs” — pay the behind-the-meter generator credits that can be applied to future electricity consumption charges incurred within the subsequent 12 months. Today there are more than 2,000 net-metered facilities in Ontario, providing over 38 megawatts of renewable generation capacity.^[2]

Although adoption of net metering in Ontario has started to gain momentum, the existing NMR imposes two significant constraints that have inhibited potentially valuable connections of renewable generation to distribution systems and wider adoption of net metering. First, the NMR requires the electricity produced by a net-metered renewable generator to be primarily for the consumer’s own use (i.e., the owner of the generation must be the same as the utility load customer).^[3] Second, the NMR requires that net-metered renewable generators not rely on the LDC’s distribution system to convey electricity to their consumers (i.e., the benefiting load customer must be directly connected to the generator).^[4] These two constraints have significantly limited opportunities for net-metered renewable generators.

Prior to the last provincial election, the Government of Ontario had proposed two significant amendments to the NMR via O. Reg. 273/18, which likely would have significantly expanded uptake of net metering in Ontario. The first amendment was to allow renewable behind-the-meter generation to be owned by a third party. The second amendment was to allow virtual net metering demonstration projects selected by the Independent Electricity System Operator (IESO)^[5] to proceed. However, before O. Reg. 273/18 came into force, the regulation was revoked and the anticipated consequential expansion of net metering never came to fruition.

The new regulation

The filing of the CNMPR represents another limited step towards facilitating net metering for certain multi-building pilot projects. Similar to the NMR, the CNMPR requires net-metered renewable generators and storage facilities to be connected “behind” the meter of participating load facilities. However, the CNMPR allows consumption credits for excess electricity conveyed to a LDC’s distribution system to be applied against the consumption charges of load facilities that are not directly connected to the net-metered renewable generator that supplied the excess electricity.

In contrast to the revoked O. Reg. 273/18, the CNMPR requires the LDC accounts of all load facilities participating in a community net metering agreement to be held by the person or entity operating the renewable generation facilities that are parties to the agreement. As a result, such projects under the CNMPR will most likely be limited to large developments where a single party, usually a developer, can hold the LDC accounts for net-metered renewable generation facilities and multiple load facilities.

The following list provides an overview of the significant requirements established by the CNMPR for a prescribed project:

• The Project must be a pilot or demonstration project.
• The Project must have a net metering agreement not to exceed 10 years and that meets other prescribed requirements.
• The total generator and storage capacity of the project must not exceed 10 MW.
• The Project components must include at least one eligible generation facility and two eligible load facilities, at least one of which must be directly connected to the generation facility.
• The eligible generator must be the account holder for all eligible generation facilities, eligible storage facilities, eligible connected load facilities and eligible unconnected load facilities.
• Bill credits can be carried forward for a maximum of 12 months.

For now, the application of the CNMPR has been limited to a single demonstration project prescribed in a schedule to the regulation: the Sifton Properties’ West 5 development, located in London, Ontario. The West 5 development is a 70-acre community with a planned 2.5-million square feet of mixed-use buildings, which will see its residences, office space and retirement living integrate solar panels and other technologies to achieve net-zero energy and water consumption. When completed, the project is expected to avoid nearly 30 megawatt hours of energy usage annually, offsetting about 20 megatons of CO₂ over a ten-year period.^[6]

Throughout the duration of the West 5 demonstration project, Sifton Properties and the relevant LDC, London Hydro, will report to the government on the project, which will inform potential future policy and decisions about implementing community and other net metering models more broadly in Ontario.

Conclusion

As utilities, municipalities, developers, ratepayers and other stakeholders seek to expand opportunities for distributed energy resources as a means to achieve greater use of renewable energy and electricity storage assets, as well as to realize efficiencies and cost savings relative to traditional centralized utility services, regulatory restrictions on net metering structures in Ontario continue to represent a significant bottleneck. While the CNMPR may represent an incremental step forward and a window of opportunity for developers to integrate additional renewable generation into certain designated new developments, it does not provide opportunities for community members at large to benefit from renewable generation that they are not in a position to develop or own themselves on their properties. For now, it would appear that the Government of Ontario is still not ready to unleash the broader community (and electricity system) potential of virtual net metering projects.