How Net Metering Works?
If you have solar panels on your roof, chances are you might not be using all the energy they produce.
But don't worry, that excess energy doesn't go to waste!
You can actually send that surplus electricity back to the grid and receive credits in return. These credits are applied for electricity use when your system doesn’t generate enough energy to cover your consumption, such as at night or during cloudy days. You therefore are only billed for your “net” energy usage.
Since it’s introduction in 1979, most states in the US have adopted a version of net metering, also known as net energy metering
Value for Homeowners
Not only does net metering help reduce or eliminate future electricity bills, it also promotes energy independence while contributing to a cleaner environment.
You may have heard about the California Public Utilities Commission (CPUC) recent ruling on “net metering” and “NEM 3.0”.
Exploring Alternative Billing Systems:
Gross Metering and Net Billing
Apart from net metering, there are other billing systems to consider. Gross metering involves exporting all produced solar energy to the grid at a fixed price or feed-in tariff (FiT), with system owners separately paying for grid electricity. This benefits those seeking to generate revenue by selling solar output rather than offsetting personal consumption. For instance, if you own an unused property, installing solar panels and choosing gross metering can be a lucrative option. This approach allows you to earn money by selling energy back to the grid while paying for grid electricity separately.
Retail rate for excess energy
Fixed feed-in tariff for all solar energy
|Lower supply rate
|Potential cost savings on bills
|Potential cost savings on bills
|Limited financial benefit
Excess energy exported to the grid
Entire solar energy is exported to the grid
Credits offset future usage
No direct offset mechanism
Homes and businesses with excess solar production
Idle properties generating solar energy
What is a True-Up Bill?
To reconcile credits, energy charges, and any other compensation, a True-Up Bill is issued at the end of a specific billing period, usually annually or monthly. It calculates the difference between the electricity generated by the solar energy system and the electricity consumed from the grid.
If the solar energy system generated more electricity than the household consumed, the system owner may receive credits or compensation for that surplus energy. Depending on your interconnection agreement, these credits may be rolled over to the next billing cycle. However, if more energy was consumed than generated, the system owner would need to pay for the additional electricity consumed.
No Net Metering in Your Area?
Credit compensation for surplus solar varies in the US and is determined by individual states or utility companies. Each state has its own net metering policies and regulations, which can include the rate at which excess electricity is credited and how those credits can be used. Talk to your energy provider for more information.
If there is no net metering in your area, you can look into other forms of compensation provided for surplus energy. You should also focus on using the energy your solar system generates directly to save on utility bills.
Investing in energy storage solutions, like solar batteries, is another great option. They can store excess energy during the day, allowing you to use it during the night or when your system isn't generating enough power.
FAQs - Homeowners
When was net metering introduced in the U.S.?
It emerged in the U.S. in 1979, enabling consumers with small wind turbines and solar panels to utilize and sell their excess electricity to the grid.
How many states in the U.S. have adopted net metering policies?
Most states in the U.S. have adopted a version of net metering.
What are Time-of-Use (TOU) rates?
Originally, 1 kWh surplus meant 1 kWh credit, but Time-Of-Use (TOU) rates changed the game. Rates now vary based on consumption timing. Exporting surplus energy at peak times yields higher credits. With solar + storage, you can make the most of TOU rates by exporting energy during peak hours.
What is Dynamic Pricing?
Dynamic pricing gives consumers a heads-up about higher electricity prices during specific peak demand times. Instead of a small price difference every day, the gap between peak and off-peak prices is much bigger. By using electricity wisely on these days, you can save significantly. Adding solar+storage lets you save even more by storing extra energy when the rates are low and using it when the rates are high.
What is a True-Up Bill?
A True-Up Bill is issued at the end of a billing period, usually monthly or annually, to reconcile electricity generated by the solar system with grid consumption. Excess generation earns credits, and any extra consumption results in additional charges.
What is parallel generation?
Parallel generation refers to consumers directly generating electric power rather than getting it from utility companies.
Who can benefit from Gross Metering?
This system is suitable for individuals or businesses looking to generate revenue by selling their solar output rather than using it to offset their own consumption. Installing solar on idle property with gross metering can be financially rewarding.
What to do if your local power company doesn’t offer net metering?
If that’s the case, you should look into other forms of compensation provided for surplus energy. You can also focus on using the energy your solar system generates directly to save on utility bills. Investing in energy storage solutions, such as batteries, is another option. These can store excess energy during the day, allowing you to use it during the night or when your system isn't generating enough power.