• Third-party financing of solar energy primarily occurs through two models: 1) lease; and 2) Power Purchase Agreement (PPA). Under both models, the solar provider installs and owns the system and the customer makes monthly payments to the solar provider based on a flat rate or on a $/kWh basis for the energy generated by the solar system.
• Third-party ownership is an established and effective financing solution in many markets worldwide, including the United States, where it accounts for approximately 60% of all non-residential solar installations.
• The third-party ownership model enables greater customer choice since it allows customers to go solar without any up-front capital investment.
• Both leases and PPAs offer distinct benefits. Customers in Ontario should have the choice of which arrangement best suits them. From a consumer protection standpoint, the Electricity Retailer requirements mandated by the OEB already offer robust consumer protection and, as such, a valid electricity retailer license would be a reasonable requirement for any solar provider who wishes to enter into a PPA with a customer.
• Looking to other, more mature solar markets, the lease and PPA models are successful because they offer customers: 1) energy cost savings vs. traditional grid-power, and 2) long-term energy cost certainty, by way of a long-term lease or PPA at a pre-defined rate.
• Based on current rate structures in Ontario and the cost of installing solar, it is likely that large Class B customers will present the best, if not the only, market for third-party owned systems in the near-to-medium-term in the near-to-medium-term.
• The economics of third party ownership for residential and small (less than 250kW) solar generators are unlikely to be attractive.
• Energy equipment leases and PPA-type agreements are already being offered by Energy Services Companies (ESCOs) by operators like as Ameresco, Johnson Controls and Honeywell, as they sign agreements to retrofit lighting, boilers etc. in exchange for a longer-term revenue streams and/or a share of realized savings.
• The Ontario Energy Board’s October 25th, 2021 Bulletin, clarified the Board’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. In conjunction with the current Net Metering Regulation, O. Reg. 541/05, we believe this provides sufficient regulatory certainty to the industry and no substantive changes to the regulation are necessary at this juncture.
Submitted December 16, 2021 11:30 AM