Third-party financing for net metering

Ontario Energy Board confirms that third-party ownership of net-metered generation is allowed within scope of existing regulation

Ottawa, Ontario, October 25, 2021—In response to a request for regulatory clarification filed by the Canadian Renewable Energy Association (CanREA), the Ontario Energy Board (OEB) today published a Bulletin confirming that third-party ownership of net-metered generation is in fact allowed within the scope of the current regulation, O. Reg. 541/05: NET METERING.

CanREA’s request was submitted earlier this year via the OEB Innovation Sandbox Information Service, through which OEB staff may assist stakeholders by clarifying the regulatory framework, discussing any regulatory requirements that may be preventing a project from moving forward, or discussing the development of a pilot project.

The OEB’s response reads in part: “It is OEB staff’s view that an electricity distribution customer can qualify as an ‘eligible generator’ for net metering purposes where the customer operates but does not own a renewable energy generation facility.”

This clarification clearly establishes that an Ontario homeowner or business owner has the right to enter into either one of the following two third-party financing arrangements for on-site solar PV:

  • Solar lease: Customer pays a third-party developer for the use of an on-site solar PV system over a specified period of time, rather than paying for the power generated –Pay per month (e.g., 15-year term);
  • Power purchase agreement (PPA): Third-party developer sells the power generated by an on-site solar PV system to the customer for a fixed period of time (e.g., 15-year term) and at a fixed per-kWh rate (less than what is charged by the LDC). PPAs inherently afford greater consumer protection as consumers only pay for power produced.

At the end of either the lease or PPA period, the customer would own the solar PV equipment outright, and would continue to benefit from reduced demand for grid electricity for as long as the equipment remains operational (i.e., 20+ years).

Advantages of third-party financing for net metering:

  • Enhanced consumer protection: Maintenance and replacement costs would be included in the service agreement. The lessee or PPA purchaser is protected in the event that the solar PV equipment underperforms or malfunctions. Solar companies offering PPAs would be covered under OEB Retailer Licensing obligations, thus further enhancing consumer protection.
  • Levelling the playing field for consumer choice: Access to third-party financing opportunities reduce the gap between haves and have-nots; more consumers are able to access net metering.
  • Avoided opportunity cost: All consumers, both businesses and households, are able to keep more cash on hand while benefitting immediately from electricity bill savings.
  • Easier budgeting and cashflow management; preservation of lines of credit.
  • Tax planning for business consumers: Leasing/PPA arrangements may be preferable for businesses in that they can offer income tax planning advantages (leased equipment treated as an expense rather than depreciating purchased equipment as a capital cost).

Third-party ownership models are proven and very well established in other provinces (e.g., Alberta, Nova Scotia) and in the United States, where the US Solar Energy Industries Association (SEIA) reports that as of 2017, 57% of all installed non-residential solar PV capacity was third-party owned.

For more information:

Nicholas Gall
Director, Distributed Energy Resources
Canadian Renewable Energy Association (CanREA)