Insight > 01-13-2022
Put simply, net metering (or net energy metering, NEM) is a utility billing mechanism available in most states that offers a credit to residential and business customers who are making excess electricity with their solar panel systems and sending it back to the grid, through a process called interconnection.
SO WHAT IS NET METERING ANYWAYS?
Net metering allows consumers who generate some or all of their own electricity to use that electricity anytime, instead of when it is generated, through the process of interconnection with their local utility. Net metering is particularly important with renewable energy sources such as solar, which are non-dispatchable (when not coupled to storage). When a solar energy system is actively generating energy, the energy produced exceeds the energy that is actively being consumed at that time. Monthly net metering allows solar consumers to call upon unused energy during times when their system is not actively producing energy (such as at night, or during overcast days). Annual net metering rolls over a net kilowatt hour (kWh) credit to the following month, allowing solar power that was generated in July to be used in December.
Net metering policies can vary significantly by country and by state or province: if net metering is available, if and how long banked credits can be retained, and how much the credits are worth (retail/wholesale). Most net metering laws involve monthly roll over of kWh credits, a small monthly connection fee, require monthly payment of deficits (i.e. normal electric bill), and annual settlement of any residual credit. Net metering uses a single, bi-directional meter and can measure current flowing in two directions. Net metering can be implemented solely as an accounting procedure, and requires no special metering, or even any prior arrangement or notification.
HOW DOES NET METERING WORK?
Your solar energy system will generate the most power during the day. For homeowners, this is also when your home typically uses the least amount of power. The excess created during the day is then transferred back to the power grid so it can be shared by other consumers. You receive a credit for the power that you share. In fact, your power meter will go in reverse to reflect your contribution.
During the evening, your solar system creates no power and you typically consume a significant amount of power. At this time you will need to draw energy from the power grid. Your power meter moves forward again. At the end of the month, you will receive a credit if you contribute more to the grid than you use. This is more likely to be the case in warmer months when longer days and higher solar insolation levels mean your solar power system is producing more power. For those months that you use more than you contribute, you will only pay the net difference between what you contribute and what you use.
WHAT ARE THE BENEFITS OF NET METERING?
There are two main benefits to net metering. The first one is a financial benefit to the owner of the solar energy system. You can greatly reduce your monthly power bills resulting in thousands of dollars in savings.
The second benefit is to the power grid itself. When solar energy producers contribute excess energy to the grid, they significantly reduce the stress that is placed on the system. This allows the power grid to function smoothly and efficiently for longer periods of time. As a result, the equipment lasts longer and the cost of maintaining the grid is reduced.
HOW DO I KNOW IF I’M ELIGIBLE FOR NET METERING?
Your net metering eligibility is based on your state and local utility company. Many states and utility companies are still figuring out how their business models should adapt to this newer agreement, so you may have noticed some squabbling in this area. Check the specific net metering requirements for your state and utility. You can find helpful policy links and resources by the state at DSIRE – but also be sure to visit your state and utility website for the most up-to-date information. If net metering is set to expire after a certain date in your area, take note of that as well as what policy or policies are slated to replace it.
IS NET METERING AVAILABLE IN ALL STATES AND CITIES?
Net metering is currently available in 38 states as well as the District of Columbia. There are also 4 U.S. territories with net metering options. In addition, Idaho and Texas have voluntarily adopted net metering policies. The policies will vary from state to state. They may also vary within individual states as policy makers work to find the right solutions. Be sure to check the local net metering policies for your city and state.
IS NET METERING BETTER THAN GOING OFF THE GRID?
The decision to go completely off the grid is a personal matter, however, there are benefits to remaining on the power grid. One of these benefits is that net metering allows you to get economic value for the power you generate in excess of your immediate needs without the need to invest in a solar battery.
First of all, net metering allows you to contribute energy to your community by transferring excess power back to the grid. This community approach to energy creation will only help to improve our energy sustainability. Secondly, using the grid to supplement your solar energy system places less stress on your power system. The power grid can quickly step in when your solar system cannot generate the energy you need at night and during the winter months.
DOES NET METERING MEAN SOLAR BATTERIES ARE NOT WORTHWHILE?
Net metering gives you the economic benefit of having solar battery storage without having the upfront cost of a battery. To put this another way it allows you to store the economic value of excess solar energy without the cost of an energy storage device. Given solar batteries decay over time, this is a good deal and makes solar batteries far less attractive while net metering is available. However, there are a couple of circumstances where the general rule above may not hold true.
WHY CAN SOLAR BATTERIES SOMETIMES BE GOOD EVEN THOUGH NET METERING EXISTS?
The concept of net metering is great as long as the grid is up and functional. However, in the event of natural disasters or other unforeseen mishaps that take the power grid offline, you can still use solar batteries to power your home. With grid connect solar only your solar system has to shut down when the grid fails or is down and so this is a possible advantage of solar batteries even where a net metering scheme is in place.
The second circumstance where solar battery energy storage can still be viable even though a net metering scheme exists is where someone lives in an area that is too far away from the nearest power line to connect. This is a quite common occurrence with holiday cabins and new homes in remote and regional areas.