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Depending on where they live, homeowners may have the choice between time-of-use and tiered billing structures from their local utility, opening up new opportunities to save with their solar investments.

Time of Use vs Tiered Billing for Net-Metered Solar

Understanding what's on offer is crucially important to optimizing solar investments, particularly for systems that are enrolled in net metering, as the different structures can significantly impact electricity bills.

The most common billing options in North America are Time of Use (TOU) and Tiered, each of which offers distinct advantages based on homeowners' consumption and usage patterns.

For now, Ontario is the lone Canadian province that offers both TOU and tiered billing, though new pilots are being explored across the country. A number of U.S. states have also embraced new billing options to incentivize responsible electricity consumption and offer greater consumer choice.

Understanding Tiered Billing

Tiered electricity rates grant homeowners a certain amount of electricity per month at a lower price, and once exceeded, additional consumption is billed at a new, higher rate. The threshold for tiered billing typically changes with the season to reflect general usage patterns, with greater low-rate consumption permitted during the cold winter months.

From May to November in Ontario, homeowners' first 600 kWh of electricity (per month) is billed at a rate of 10.3 ¢/kWh, with anything more costing 12.5¢/kWh. From November to April, the threshold rises moderately to 1000 kWh. The larger the price difference between tiers, the greater the incentive to conserve electricity.

For homeowners with solar net metering, tiered billing can help ensure the lowest rates available, as only electricity pulled from the grid — not self-produced solar and credits — counts towards the consumption threshold.

For example, if a homeowner were to use 1000 kWh per month in the summer, they'd typically pay 10.3 ¢/kWh for the first 600 kWh and 12.5¢/kWh for the latter 400 kWh. However, if the homeowner's solar installation produces a modest 650kWh over the month, then only 350kWh is drawn from the grid — keeping the property well within the lower, more affordable electricity tier.

Understanding Time of Use Billing

Time of Use (TOU) billing is an increasingly common mechanism where electricity rates fluctuate based on the season and time of day. It incentivizes consumers to not only reduce but also shift their electricity usage — particularly large loads, like dishwashing or laundry — to off-peak hours, thereby helping reduce costs and grid strain.

TOU billing is commonly broken down into three categories:

• Off-peak low-cost hours typically occur in the late night and early morning when electricity demand is lowest.
• Mid-peak moderate-cost hours most often occur in the late morning or early afternoon when electricity demand begins to pick up.
• On-peak high-cost hours almost always occur in the late afternoon and early evening when residential energy use peaks.

For homeowners with net-metered solar installations, TOU billing can be massively advantageous. For instance, a homeowner with an average-sized solar installation would typically generate most excess electricity during the day, at which point it's sent into the grid and credited at a moderately high market rate (12.2¢/kWh in Ontario). As individuals begin to get home from work in the evening, these valuable credits can then be applied to offset evening electricity usage, helping homeowners pay next to nothing on their electricity bills.

TOU billing is exceptionally lucrative as it enables homeowners to essentially engage in price arbitrage — taking advantage of changes in electricity prices to save money — something which usually requires battery storage investments.

It's important to note, however, that while TOU billing facilitates robust electricity savings, making the most of it requires homeowners to adjust their consumption habits, something that isn't always possible for everyone.

Making the Most of Your Solar Investment

Though they differ substantially, both tiered and TOU billing dramatically improve the economics of net-metered solar, so choosing the right mechanism ultimately comes down to homeowner preference and habits. TOU billing tends to offer more robust savings, particularly for those with a large electricity footprint, whereas tiered billing rates offer convenience and greater value for smaller solar installations.

Homeowners should consider their electricity needs, the scale of their solar installation, daily consumption habits, and more before finalizing their decision on time-of-use and tiered billing structures. Either way, each option offers unique advantages.