Net Metering

Net metering is a significant incentive for implementing a solar energy system. It is an agreement between the system owner and utility that states the payback for excess electricity that is fed back to the grid. This allows customers to earn payback from excess energy produced by their solar energy system which can help offset the cost of buying energy from the grid when production is low. 

Understanding Net Metering

Net metering allows residential and commercial utility customers to sell back excess electricity to the grid. Net metering is a billing agreement between the utility company and customer that clearly defines what the utility company will pay the customer for excess electricity sent back to the grid. Solar energy system owners will be given a credit for electricity that is sent to the grid. The meter will then run backwards when the customer draws electricity from the grid. Bi-directional meters help in measuring the current flow in two directions which is essential to a net metering agreement.

How Net Metering Works

Net metering works by providing credits to customers that allows them to purchase electricity from the grid at a discounted rate. When your solar energy system generates more electricity than you use in a course of a month, you receive a credit for the number of kilowatt-hours you gave back to the grid. When you need to purchase electricity from the grid, your credits can be applied giving you a reduced cost. Oftentimes, these credits are used in the winter months when the solar panels typically produce less. As energy costs rise and consumption also increases, net metering credits will be essential in offsetting the cost of future consumption.

Benefits of Net Metering

Net metering is a financial incentive for implementing a solar energy system that meets your electricity needs. Reduced electricity bills along with the potential for revenue are benefits of net metering. Along with producing clean energy through a solar energy system, selling excess electricity can limit the electricity produced by fossil fuels used by other customers. With environmental benefits, net metering aids in promoting clean energy production.

Net Metering Policies and Regulations

Net metering programs vary across the county. There are differences in state-level net metering legislation and implementation policies, meaning that compensation for excess energy varies by state. Some net metering policies allow you to carry credits over into future months or years, while others do not. It is important to have an understanding of net metering rules and criteria before entering an agreement. Discussion to evolve and change current net metering programs are currently taking place as alternative energy production options become more popular and affordable. Changes may generate implications; however if you are currently benefiting from a net metering agreement, it is unlikely that you will be affected by reductions. 

Limitations and Challenges of Net Metering

Net metering programs can present limitations and challenges. Before allowing your system to become part of a net metering system, the utility company does a thorough review to determine its eligibility. Oftentimes this can create a capacity limit and system size restrictions based on what the grid can handle as well as provide varying compensation rates based on the utility. Reading through your utility’s net metering policies can help to address these challenges before they are presented. 

Net Metering and Distributed Generation

Net metering programs offer a financial incentive for those thinking of installing a solar energy system and therefore aided in the growth of distributed generation. Virtual net metering is another program that allows customers to benefit from net metering even if you don’t have an installed solar energy system. In this program, customers subscribe to a local community solar farm and share net metering credits amongst other subscribers. Electricity generated by the community solar system is sold to subscribers at a discounted rate which helps to reduce energy bills. Net metering has played a significant role in supporting the transition to a decentralized energy system that incorporates renewable energy options. 

Case Studies and Real-Life Examples

Net metering customers have successfully benefited from the program helping to reduce energy costs. A family located in California looked into solar due to increasing utility costs and concerns about their carbon footprint. As a result of implementing a solar energy system, they have been able to successfully reduce energy bills through a net metering program. As a result of their experience, they proudly advocate for others to adopt a solar energy system.

Bottom Line

Net metering is a program that provides a financial incentive with environmental benefits to use excess energy produced by solar energy systems. It is important to under the net metering policies and regulations of your state and utility company in order to maximize the benefits of solar energy before entering an agreement. Net metering programs play a significant role in limiting the reliance on fossil fuels while promoting clean and sustainable energy systems.