That solar panel of yours is a solution and a problem for the NWT

The Northwest Territories wants you to put a solar panel on your home and start generating your own energy. But it also kinda doesn’t. And that’s about to require some decisions.

Residents in the NWT who generate their own power – it could be solar but all renewable energy counts – benefit from a program that allows them to sell their excess energy to the local grid.

That program is called net metering. The amount you pay to the utility company is the net, or amount left behind, after subtracting the energy you generated and provided to the grid.

Net metering has been an NWT government program for around six years and has two goals: reducing greenhouse gas emissions and helping people to save money on their bills.

Despite dark winters and high installation costs, solar energy is an attractive option in the NWT. A solar industry website lists the territory as one of the better places in Canada to adopt solar, because you can save so much money avoiding the territory’s high energy prices and there are good rebates available in some circumstances.

However, there is a problem.

Every person who saves money by sticking a solar panel on their roof is taking money away from their local utility company. If you generate some of your own energy, you are buying less from, say, the NWT Power Corporation or Northland Utilities, and so their sales go down. If you provide the grid with extra energy, they pay you for it at a rate that leaves them out of pocket.

Generally speaking, the amount of concern NWT residents have for utility companies’ revenue is approximately zero. Power rates in the territory are four times the cost of power in southern Canada, so customers in the North don’t lose sleep at night worrying about the bank balance of the local power distributor.

Yet the impact of the utility losing a little cash ultimately lands back on the residents.

You generating your own power saves the utility company money on fuel, but many of the company’s costs don’t go down when you swap some of your power use to home-generated solar. The transmission lines are still there, the power plants are still there, and so on. Except now the customer base has ever so slightly dwindled.

That means the utility company responds by increasing rates slightly to make up the difference. So the ultimate consequence of you putting a solar panel on your roof is, in part, that everyone’s power rate creeps upward. Except now you’re generating some of your own power so, while everyone else’s power bill increases a little, yours has gone down.

A problem expected to grow

Clearly, this does not make you a bad human being. The whole point of the program is to encourage people to use their own renewable energy, bring down emissions, and save themselves some money in the process.

But a program that simultaneously ends up increasing rates for other people and losing power companies money is not going to be sustainable in the long term.

That’s why the NWT government commissioned a consultancy firm, InterGroup, to examine this exact problem. That report was handed to the GNWT in May last year.

The report demonstrates that net metering is achieving some of its goals. For example, the consultants estimate that people generating their own renewable energy have saved 465 tonnes of emissions compared to 2016 levels.

Meanwhile, net metering cost NWT power companies just under $500,000 in 2019, the report states. The consultants estimate that, depending on policy choices made in the next decade, the annual cost to utility companies could reach more than $3 million by 2030.

Robert Sexton, director of energy at the NWT government’s Department of Infrastructure, provided some context for that revenue loss.

“The total electricity sales for those three utilities is $126 million, so it’s a very small amount,” Sexton told Cabin Radio last week. “But we know the way the world is going. We know renewable energy is getting cheaper.”

If self-generated power ends up costing utilities $3 million by 2030, that $3 million is – under the present model – likely to end up being shifted onto the power bills of other NWT residents, which would not be a popular move.

An example

But there are other levers the territorial government could pull instead, and the report sets out some options.

The NWT government increasing subsidies paid to utility companies is one option. Allowing utility companies to “better match fixed costs to fixed charges” is another, meaning the territory could let utilities raise the fixed charges for every customer to reflect the fixed costs of things like transmission lines and facilities, then have a lower rate on top that fluctuates with fuel prices and other variable costs.

But the option that’s most discussed in the report is giving less money (in the form of a credit on future bills) to people who generate their own energy and sell the excess to the grid.

The report uses Fort McPherson as an example. At the time of the report, residents in Fort McPherson were being charged 68 cents per kWh of energy used. Of that 68 cents, 36 cents represented the cost of fuel and 32 cents represented the cost of everything else, like transmission lines and power plants and so on.

But if you were a net metering customer in Fort McPherson generating your own power, you were getting a credit for the full 68 cents on your bill for every kWh supplied back to the grid.

In other words, for every kWh your solar panel gave to the grid, the power company saved 36 cents on diesel, gave you that 36 cents, and then gave you another 32 cents it would have otherwise spent on infrastructure, even though you still use that infrastructure when the solar panel isn’t producing power.

The report states the rules could be changed so that net metering customers don’t get the full 68 cents (in the Fort McPherson example) but instead get a credit that’s closer to the cost of the fuel saved.

That would make net metering less attractive to people, but would still give them some money for the excess power they generate. The money saved using your own power yourself wouldn’t be affected.

According to the consultants, this change was recently made in Saskatchewan and Manitoba. The report estimates it could knock about a million dollars off the utility companies’ projected revenue loss to net metering in 2030.

Not just about money

Affordability is central to any net metering policy in the NWT, both for customers trying to save money on high power bills and for utility companies trying to maintain ageing and expensive infrastructure across vast distances.

But it isn’t the only consideration. Emissions reduction is also key, because the territory is trying to hit a 2030 target that is already less ambitious than the revised federal target but still appears out of reach unless some big changes happen.

Reliability is also a factor. Every solar panel introduced to the grid is a miniature power station that the utility company does not fully control, meaning officials have to make sure the grid as a whole is stable. If your next-door neighbour’s solar panel blinks out in the middle of a summer day, and that panel was helping to power your neighbourhood, does the grid have enough capacity to make sure you’re still getting energy?

Meanwhile, places like Łútsël K’é and Colville Lake have embarked on larger-scale solar projects and other communities are looking to do the same. Their impact must also be factored in, and previous caps on the amount of renewable generation allowed in each community – put in place with stability and the economic impact on utility companies in mind – are now being reviewed.

The situation is further complicated in places like Yellowknife that are already served mostly by renewable energy. Your power in the NWT’s capital comes primarily from hydro, with occasional diesel backup, so a solar panel doesn’t make much of an emissions dent.

“That’s an issue,” said Sexton. “There is essentially no displacement of diesel in Yellowknife from solar, but there is net metering, so householders who install solar are getting a benefit on their own bill but are – very marginally – increasing rates.

“It’s not a big impact so far. But that is one of the questions we want to address: what do we do with net metering in Yellowknife? In diesel communities there is an emissions reduction, but in Yellowknife there isn’t, so we have to balance that against the public good.”

No answers yet

The NWT government has yet to decide what it will do about any of this.

“There’s a balancing act here,” said Sexton.

“We want to get the data and the evidence to see if there’s any path forward that balances the priorities of emissions reduction, affordability, and reliability.

“How do you allow people to be part of the solution while keeping the impact to the electricity sector, in terms of reliability and cost, to a minimum? We don’t have the answer to that yet. It’s certainly something we’re working on.”

In the longer term, the advent of electric vehicles may represent at least some of the solution.

Behind much of the dilemma the NWT faces is a lack of demand. Sales of electricity are flat and there are no big new customers on the immediate horizon, so the prospect of large sums of fresh cash – to help pay for things like infrastructure – is not great.

Everyone who buys an electric vehicle, though, will suddenly become a much bigger customer for the utility companies than they previously were.

Sexton believes it’s far too early to know how much of a difference electric vehicles will make, but their adoption in the territory – which is starting to gain momentum – is eagerly anticipated.

“That’s going to be important,” he said. “If we can sell more electricity and displace fossil-fuel vehicles, that will alleviate some of the problem of sales lost through self-generation.

“We’ve had tremendous uptake. It’s hard to tell if those are just early adopters or if that’s what the trend is going to be. Vehicles are big energy users, so every vehicle makes a difference.”

Still, answers to the questions posed by net metering will be needed before electric vehicles – which face huge infrastructure barriers of their own in the NWT – are a widespread phenomenon.

The first four-year action plan under the NWT’s 2030 energy strategy is due to run out at the end of March, meaning a new action plan is on the way.

Sexton said the new plan will include actions specific to net metering. So far, what those will be is not clear.