Ontario’s Save on Energy programs pay part of the cost of energy upgrades, up to half of eligible costs under the Retrofit program. The catch is timing: the application has to go in before the owner commits to buying the equipment or the work to install it.
Our lifecycle cost article made the case for judging pumps and blowers by what they cost to run, not only by what they cost to buy. In Ontario there is a second number for the same business case: what the province’s Save on Energy programs will pay toward an upgrade that cuts electricity use.
Save on Energy is the name of the energy-efficiency programs offered by the Independent Electricity System Operator (IESO). They now operate under a framework the province set for 1 January 2025 to 31 December 2036, with a total budget of up to $10.9 billion, and municipal consumers are among the segments it covers. The IESO plans the programs in three-year periods, and the current plan covers 2025 to 2027.
What follows covers what the main programs pay, the timing rule that decides whether a project qualifies at all, and what counts as a cost. Program terms change from time to time, and the next Retrofit update is expected this fall, so treat the figures here as accurate at the date of publication and confirm them with the IESO before budgeting. This is general information, not advice on any particular facility or project.
The Retrofit program covers equipment upgrades. It is open to owners or lessees of non-residential facilities, and the building types Save on Energy lists include municipal buildings and industrial facilities. It has two streams. The prescriptive stream pays set amounts for common upgrades chosen from a published list. The custom stream is for projects that are more complex or may not fit the prescriptive stream, and its incentives are calculated from actual operating conditions.
For non-lighting measures in the custom stream, the incentive is the greater of $1,800 per kilowatt of peak demand savings or $0.20 per kilowatt-hour of energy savings in the first year after the project is completed, capped at 50 percent of eligible project costs. Those rates took effect on 30 June 2025, up from $1,200 per kilowatt and $0.13 per kilowatt-hour.
Peak demand savings are the average reduction in load, in kilowatts, between 3 p.m. and 9 p.m. on weekdays from 1 June to 30 September. A project must save at least 1 kilowatt at peak or 2,000 kilowatt-hours a year, the minimum custom incentive is $1,500, and the savings must be expected to last at least 48 months.
For a load that runs around the clock, the two formulas come out almost even. A steady reduction of 1 kilowatt is 8,760 kilowatt-hours a year, worth $1,752 at $0.20 per kilowatt-hour. The same kilowatt also counts as 1 kilowatt of peak demand savings, worth $1,800. For equipment that runs around the clock, a steady cut in power earns roughly $1,800 per kilowatt, before the 50 percent cap.
In electricity-constrained areas, designated by postal code, the custom rates double for most measures, to $0.40 per kilowatt-hour and $3,600 per kilowatt, still capped at 50 percent of eligible costs. The June 2025 update added parts of Greater Windsor, Brant, Caledonia-Norfolk, Woodstock, Ramore, Ottawa and Niagara to the list.
The rule that matters most is about timing. The program requirements exclude a participant that has already “entered into a binding commitment to acquire the Measures or services required to install the Measures”, and the IESO can waive that only in limited cases. Save on Energy’s pre-project checklist puts it plainly: the applicant must “submit your application before entering into a binding commitment or the application will be ineligible.” Work may start after the application is submitted but before it is approved, at the applicant’s risk: the checklist warns of “a lower incentive” or that “the application may not be approved.”
For a municipality, an awarded contract or an issued purchase order would, in our reading, normally be that kind of commitment. The application therefore belongs in the procurement schedule, ahead of the award.
The sequence Save on Energy sets out is: open an account on its portal, submit a pre-project application, receive pre-project approval, install, submit post-project information, receive post-project approval and approval of the incentive amount, then receive payment. Post-project information is due within 12 months of pre-approval, unless the application estimated a later completion date or the IESO sets a later deadline in writing. The incentive invoice must be approved no later than 24 months after pre-approval, and payment follows within 90 days of that approval.
The 50 percent cap applies to eligible costs, which must be reasonable standard industry costs directly related to procuring and implementing the project. For custom measures they include equipment, third-party installation labour, design and engineering, energy audits not funded by the IESO, third-party project management, shipping and duties, the cost of the measurement and verification plan, disposal of replaced equipment, and required inspections.
Excluded costs include the participant’s own labour, service, administration and overhead, post-installation maintenance or repair, financing, insurance, spare parts, tools and HST. Costs covered by government grants or funding, and rebates from manufacturers or other suppliers, are also excluded, so the costs a grant pays for drop out of the Retrofit calculation.
When a project is cheap relative to what it saves, the cap, not the rate, sets the incentive. A project that saves 100,000 kilowatt-hours a year earns $20,000 on the energy formula. If its eligible costs are $30,000, the cap limits the incentive to $15,000.
Custom incentives are paid on savings, so the savings have to be shown. Under the June 2025 changes, additional engineering calculations are required once the estimated incentive reaches $15,000, and a measurement and verification plan once it reaches $120,000. The program’s M&V procedure works from an existing case and an energy-efficient case. Its measurement and verification procedures for large custom projects include a method written for replacing aeration blowers. Where blowers use at least half of the facility’s electricity, it recommends a utility bill comparison, with a baseline regression model built from utility meter data and historical wastewater flow volume. To claim demand savings, 15-minute interval data must cover the peak demand period both before and after installation.
The Energy Performance Program takes a different approach. Instead of paying per piece of equipment, it pays for savings across a whole facility, measured by comparing metered consumption with a baseline energy model. It rewards behavioural and operational changes, and pays the same rate for savings from capital and non-capital measures. Participants need 12 months of hourly interval meter data, must commit to saving at least 5 percent per facility within two years, and receive three years of annual incentives if their application is approved by 31 December 2027.
The rates doubled on 1 January 2026 for participants enrolled on or after 1 January 2025: $0.30 per kilowatt-hour saved during summer peak hours, which are 3 p.m. to 9 p.m. on business days from 1 June to 30 September, and $0.08 per kilowatt-hour at all other times. The program names owners and operators of commercial, institutional and industrial facilities in Ontario, so whether a particular treatment plant qualifies is a question for the IESO.
Pay-for-performance has been used at an Ontario wastewater facility before, under the program rules of the time. The Ontario Clean Water Agency reports that the Town of Aylmer, whose lagoon ran four positive displacement blowers, installed two high-efficiency turbo blowers at a project cost of $196,349, and received $22,770 through the IESO’s pay-for-performance program. It reports energy savings of 259,728 kilowatt-hours a year.
For large projects, XLerate replaced the Industrial Energy Efficiency Program in November 2025. It pays $300 per megawatt-hour of verified savings, or $450 in grid-constrained local areas, up to 75 percent of eligible project costs and $15 million per project, and shares 50 percent of the cost of feasibility studies. A project must propose at least 600 megawatt-hours of savings a year at a single facility, and must involve an energy-efficiency improvement “applied to, or in support of, an industrial process”. Municipal organizations are among the sectors the IESO names, but whether a treatment process meets that definition is for the IESO to decide. As with Retrofit, the application has to come before any binding purchase commitment.
Hydro One’s case study of the Municipality of Central Elgin shows what a blower project looked like in practice. At the municipality’s wastewater treatment plant, two 11-year-old blowers of 75 and 50 horsepower were replaced with one 100-horsepower high-efficiency blower on a variable frequency drive, with dissolved oxygen controls. The case study reports verified savings of 473,736 kilowatt-hours a year, worth $56,850 at $0.12 per kilowatt-hour, a Retrofit incentive of about $47,000, and a payback of 1.9 years. The case study is undated, so its incentive reflects the rules at the time rather than today’s rates.
Put the application in the procurement schedule. The application has to go in before any binding commitment, which in our reading includes the contract award or purchase order. Committing after applying but before pre-approval risks a lower incentive or a rejected application.
Measure before changing anything. Custom incentives are calculated from savings against the existing case, so the baseline should be known first.
Check the postal code. In designated electricity-constrained areas, the custom rates double for most measures.
Do the cap arithmetic. The incentive is the lesser of the rate-based amount and 50 percent of eligible costs, so the business case should show both.
Confirm the terms before budgeting. The next Retrofit update is expected this fall. In the last two updates, applications already submitted or pre-approved kept their earlier rates.
Related reading: the purchase price is usually the smaller number covers how to compare upgrades over their life, and why aeration dominates a small plant’s energy bill covers where a plant’s energy goes.
Program terms as published by Save on Energy and the IESO · Accurate as at 22 October 2026 · Confirm current terms with the IESO before budgeting
North Current develops aeration control technology that retrofits into existing wastewater treatment plants, available through licensing. Get in touch to discuss it.
Published for general information. It is not engineering advice and does not address any specific facility.