Market Snapshot: Residential solar is financially viable in some provinces and territories, but not in others

Release date: 2018-12-06

Highlights:

• Whether residential solar will save a homeowner money largely depends on which province or territory the home is located in, but also depends on whether the home has a smart meter or not. This is because electricity prices vary a lot across the country, meaning residential solar is competitive in some provinces and territories and not in others.
• Residential solar in remote communities might be able to save homeowners money, because their electricity otherwise tends to come from more expensive generation, like diesel-fueled.
• The cost to install solar has significantly fallen in Canada over the past five years. Meanwhile, costs should continue falling and what isn’t financially viable today might be in the future.

The cost to install residential solar panels has fallen dramatically in the past ten years. While many Canadians are interested in installing residential solar to lower their environmental footprint, others may also be considering it as a way to save money on their electricity bills. In a recent report, the NEB has examined the economics of residential solar power and other sizes of solar power across the country to provide some perspective. Whether residential solar is a good financial decision largely depends on what part of the country a home is located in and whether it has a smart meter or not.^Footnote 1,^Footnote 2

Canada’s residential-solar breakevens vary widely across the country. “Break even” prices are the cost of the electricity a solar project generates, as based on how much it costs to build and run the array and how much power it produces over twenty-five years.^Footnote 4 Canada’s east and west coasts tend to have the highest break-even prices, because their cloudy climates mean these regions receive less sunlight. Meanwhile, the interior of the country tends to have the lowest break-even prices, because these places are less cloudy and get more sunlight. Differences in sales taxes across the country, which are applied to the cost of installing residential solar, are also important.

But this information alone isn’t enough to say whether residential solar is financially viable. A more rigorous analysis requires comparing the breakeven prices of residential solar with the energy charge on a household electricity bill, which is the price of electricity homeowners buy from the grid.^Footnote 5 Residential energy charges vary widely across Canadian provinces, from a low of 6.8¢/kW.h in Quebec to a high of 16.9¢/kW.h in Saskatchewan.^Footnote 6 Energy charges tend to be even higher in Canada’s territories. This is because each province’s and territory’s costs of producing power, transmitting it, and then distributing it to residential customers are very different.

Currently, solar breakevens are less than residential electricity prices in most places in Prince Edward Island and Saskatchewan, meaning homeowners in most places there would be expected to save money by installing solar. Homeowners would also be expected to save money with residential solar in many places in Ontario, where homes have smart meters and can capture “time of day” value.

This is because the energy charges in these provinces are high enough that it makes more sense for a homeowner to generate solar power than to buy electricity from a utility.^Footnote 7 Smart meters help solar economics, because residential solar replaces electricity bought from a utility during the middle of the day, when it has the highest value and price. Importantly, residential solar would also save homeowners money in Nunavut and the Northwest Territories, because energy charges there also tend to be high.

Currently, rebate programs such as the ones in Nova Scotia and in Alberta make current costs look like those in a low-cost future. This means residential solar would be expected to save homeowners money almost everywhere in Nova Scotia as well as in many places in Alberta, though Alberta would require smart meters to be installed.

Otherwise, residential solar is not currently expected to save homeowners money in Newfoundland and Labrador, New Brunswick, Quebec, Manitoba, or British Columbia. This is true whether homes have smart meters or not. The breakeven prices for residential solar in these provinces are much higher than utility energy charges. Thus, homeowners have little financial incentive to generate their own electricity when it’s less expensive to buy it from the local utility.

As it becomes less expensive to install residential solar in the future, homeowners in many places in Newfoundland and Labrador, New Brunswick, Alberta, and British Columbia are expected to save money, especially if homes in those provinces have smart meters. Manitoba and Quebec, however, have such low prices for electricity that buying from a utility will probably remain the better financial choice for the foreseeable future.

It should also be noted that electricity prices have been increasing faster than the inflation rate in most provinces in Canada. If this trend continues, residential solar will be even more competitive if installed in the future.

Date modified:

2023-11-28