Feed-in tariff programs or net metering programs provide financial incentives to individuals and businesses to produce renewable energy. These renewable energy sources can include: solar power, bioenergy, hydropower and wind power.
What is a feed-in tariff program?
Feed-in tariffs are for everyone — whether it’s a family powering their home through rooftop solar panels, or a business looking to invest in a clean energy project. FIT programs provide financial incentive to individuals and businesses to produce renewable energy. These renewable energy sources can include: solar power, bioenergy, hydropower and wind power. FIT systems involve connecting an independent power generator to the electricity grid, and then selling electricity to a public utility.
FIT programs allow for the creation of new jobs in the clean energy sector, which in turn grows the use of renewable energies and encourages the development of new technologies. This helps to replace or decrease the dependency on coal and other fossil fuels for energy. In Ontario, and in fact much of Canada, coal has been phased out to be replaced by cleaner energy. Incorporating renewable energy into the energy mix reduces carbon emissions and mitigates the effects of climate change, improving air quality and protecting the environment from practises like strip mining.
Feed-in tariff programs in Canada
In 2009, the Green Energy and Green Economy Act allowed for renewable energy to gain a significant foothold in Ontario’s energy industry and economy. This act led to the creation of the Feed-in Tariff program by the Independent Electricity System Operator (IESO) in Ontario.
Although FIT programs are not widespread, there have been some initiatives popping up at the municipal level. In 2015, Banff became the first municipality in Canada to launch a FIT program, calling it a “solar PV production incentive”. Due to financial and geographic restraints, Banff decided to focus specifically on solar power and provide seven year contracts to its applicants.
How does it work?
Anyone who chooses to apply for a FIT program has to be willing to take on certain starter costs upfront, such as investing in the equipment necessary to produce and transmit electricity, including the connection to the grid and metering costs.
The electricity the applicant sells is separate from the electricity they consume, so they may be selling at one price and buying back at another. This can work in their favor if they are locked into a contract with a higher rate than the actual market value of electricity. However, with Ontario's FIT program, this price difference partly contributed to the overall rising prices for electricity.
In theory, FIT programs have great potential for encouraging the development of renewable and clean energy. In practise, the regulations around FIT programs are still being developed to make them sustainable in the long-term.
What about net metering?
There are other similar strategies for encouraging renewable energy use, such as net metering. Net metering is another financial incentive tied to a person’s electricity bill. Basically, a person can offset their electricity consumption by producing their own electricity through renewable energy. Ontario limits the maximum capacity of the generation facility to no more than 500 kilowatts.
Net metering allows a producer to send excess electricity to the grid for credits toward their own electricity bill. It works like a trade of electricity, where the public utility measures the electricity they supply and then subtracts it from the electricity they consume. That is why the system is called “net metering”, because their bill reflects the “net” difference between the two amounts.
If someone produces more electricity than they consume over the course of a billing period, then they receive a credit towards future energy bills. In Ontario, this can carry forward for up to 12 months. The downside of net metering is that those credits can expire and the producer doesn’t get paid for the excess energy.
Net metering has recently been implemented in the Northwest Territories to encourage less reliance on diesel fuel. The program began in 2014 and allows electricity customers who have renewable energy generators to accumulate kilowatt hour credits from the excess electricity they produce. These credits can then be used when they’re most needed, such as in the winter, before they expire at the end of March each year. They limit the maximum capacity of the generator to five kilowatts.
As with FIT programs, net metering encourages people to think about clean ways to support and sustain their energy needs.
http://www.ontarioenergyboard.ca/oeb/Industry/Rules and Requirements/Information for Generators/What Initiatives are Available
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