Net metering is a billing mechanism for solar energy that credits customers for excess electricity sent back to the grid. Applied broadly, it could power whole communities and neighborhoods, disintermediating utilities and centrally located generators.
Net metering has opened up tremendous opportunities for a wide variety of renewable energy sources, leading to falling prices and increased deployment across the country. Net metering law is fairly straightforward to understand, even if it varies by state. Let’s explore more.
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So What is Net Metering?
Net metering is a billing arrangement that credits solar customers for the excess electricity they send back to the grid. It’s a popular policy in many states and countries. Still, it’s also been challenged by utilities that argue solar customers are getting “free” energy from the grid and not paying their fair share to support it.
Net metering is one of the simplest and most common ways to develop a solar energy system. Net metering is also one of the most misunderstood aspects of solar energy policy. Here’s an overview of how net metering works.
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How Does Net Metering in Solar Work?
The process of net metering is quite simple. When you have solar panels on your roof, they produce electricity. That electricity flows into your home and is used to power your appliances and electronics. If your solar panels produce more power than you need, the extra goes back into the grid for others to use.
The retailer sends monthly bills to all customers that include charges for purchasing power from them when needed (known as “avoided costs”) plus any additional charges based on how much power was consumed or exported during each billing period. When you get your monthly bill, you pay extra if your consumption exceeds production.
But what happens when there’s a new cloud or if it rains? Your solar panels will stop producing electricity at that moment, but it doesn’t matter because you’re still using electricity from the grid. The utility company will monitor how much energy you take from them during the day and how much you give back during the night (or whenever the clouds roll in). You can also see how much electricity you produce by looking at a meter attached to your home.
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Why Does Net Metering Exist?
Net metering was created to encourage people to use more solar power, not only because it’s clean energy but also because it helps balance the flow of electricity into and out of the grid by offsetting some other forms (fossil fuels) less than ideal.
By using solar energy, you can reduce the cost of electricity by supplementing your power bill with free or low-cost electricity during high-demand seasons.
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How do Electricity Bills Work with Net Metering?
During the summer, most homes generate more electricity than needed and draw extra power from the grid during winter.
Because the fluctuations in your household’s energy needs can be anticipated, your utility company won’t send you a check when you produce more electricity than needed.
Instead of buying extra electricity during peak-demand periods, you will store up credits that can offset your usage at other times.
While your monthly solar power production moves up and down, it is possible to produce as much electricity over a year as you consume.
If your solar power system produces more kilowatt-hours of electricity than you use in a month, you will receive a credit from the electric company.
If you produce less electricity than you use in a given month, your utility will sell the excess electricity generated by your solar panels to other customers. In these instances, you would be charged for only the amount of electricity that was used, minus what had been produced and sold off by your utility:
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Other Types of Net Metering
Although the most common way to get credits back for solar energy is through net metering, there are other options depending on where you live and what your utility offers.
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This type of net metering allows you to use your solar panels’ excess electricity and sell it back to utility companies. However, this doesn’t apply for future billing cycles, so if your electricity bill is due next month, but the sun isn’t shining now, don’t expect a credit on that one!
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Buy All/Sell All
Unlike other metering models, the buy all or sell all model allows users to sell 100% of the energy generated by their panels to utility companies. In return, they get 100% of their home’s energy from that company at retail rates, but only if it generates more power than their house actually needs.
With this type of net metering, two separate meters are required: one to measure your solar energy production and another to track how much energy you use. If the amount generated is greater than what’s used in a given month, that’s great! All you have done is offset some or all of your electricity usage by producing free power from the sun (which also helps lower our collective carbon footprint).
On the other hand, if more was used during a billing period than produced, good news! That means any excess charges will get applied towards next month’s bill making it easier for users like yourself to take advantage of time-of-use rates while still getting rewarded, as long as two separate meters are required for this type of net metering.
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Why Net Metering is Important
It Gives Customers Control Over Their Electricity Bills
Net metering allows customers to control how much they pay for electricity and when they pay it. Net metering allows customers to produce their own electricity at a lower cost than what they would pay if they only bought from their utility company. Since net metering is typically only available for residential customers, it helps keep business costs low. It makes it easier for companies to operate without having huge monthly expenses on their utility bills.
Solar Net Metering Creates Jobs
Net metering creates jobs in many different areas, including manufacturing, engineering, finance, and software development. These jobs are often filled by local workers who live nearby or by people who have relocated closer to where they work.
It also creates jobs for those installing and maintaining solar panels, storage batteries, installing, and maintaining equipment used for selling excess power generated by residential rooftop solar PV systems back into the utility grid. This means more jobs in the renewable energy sector. In turn, it helps support families who rely on these jobs for income each month.
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Net Energy Metering is Inexpensive and Low Maintenance
Net metering is inexpensive for consumers to provide for some of their own electricity needs. Solar net metering systems have no moving parts. And so relatively few maintenance costs are associated with them compared with traditional generators like natural gas or diesel generators.
Solar net metering systems also avoid the need for expensive battery storage systems. Notice that they can become obsolete if you need regular maintenance performed on them after as little as 10 years in use.
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Eliminates The Need for A Backup Generator and Battery Storage
If you still need to get net metering in place, your utility company will only purchase whatever electricity you use from them each month (or year). This means that extra energy will go to waste if your solar panels produce more energy than you use in a month or year.
Net metering removes this problem by allowing homeowners with solar panels to sell back their excess power to utilities. They sell the power at full retail value so that it can be used by other customers who need it most during peak hours.
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Solar Net Metering Encourages Private Investment
Net metering encourages private investment in renewable energy. To add more, it allows consumers to buy those systems and receive credit for their power. For example, this helps reduce the cost of installing solar panels. This is because it means consumers don’t have to pay all the upfront costs themselves.
This leads to more people installing solar panels and other renewable energy systems. This will in turn help reduce our dependence on fossil fuels like coal and natural gas, contributing significantly to global warming pollution.
Solar Net Energy Metering Protects the Electric Grid
Net metering also protects the electric grid from overloads. These are overloads caused by intermittent sources such as wind or solar power. It achieves this by making sure that homes with these systems still draw enough electricity from the grid when necessary. (for example, during peak demand times).
It also helps ensure that all customers pay a fair price for their electricity use. Without net metering, solar customers would not have to pay for the utility services they receive from the grid. This is so, even though they rely on those services whenever they switch on their lights or charge their car battery at home. This would cause costs to rise for everyone else, including people who don’t have solar panels in place.
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Supports Local Economies
Net metering also supports local economies by allowing people to become more self-sufficient and less reliant on utility companies for their energy needs. When more people are generating their own electricity, there is less demand on the grid system overall. Also, fewer power plants are needed to meet customer needs in the long run.
This can lead to increased job growth in certain areas of the country where solar power may be more plentiful than others due to geography or weather conditions like sunlight exposure and wind currents.
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Solar Energy Net Metering Reduces Pollution
When you generate your own electricity with solar panels or a wind turbine, you don’t have to buy fossil fuels from a utility company. That means you’re not contributing to air and water pollution caused by burning coal or natural gas to generate electricity. You’re also not contributing to climate change by releasing carbon emissions into the atmosphere.
These programs reduce harmful emissions from coal-fired power plants. Coal-fired plants emit large amounts of carbon dioxide and other greenhouse gases into the atmosphere.
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Net metering helps increase the on-site generation of renewable energy. Green energy that can be stored in batteries or used directly to power homes and businesses. Increasing on-site generation reduces the need for expensive new transmission lines and other infrastructure improvements.
In addition, net metering increases the resiliency of our power grid by reducing the need for large power plants that are vulnerable to weather events or terrorist attacks.
Net Metering Helps Grow the Solar Industry
A great advantage of net metering is it allows customers who install solar panels to use excess energy from their own systems to offset their electric bill at no additional cost (or often at a discount). This enables customers to save money on their electricity bills while encouraging more people to go solar by making it more affordable.
In addition, net metering encourages innovation in energy technologies. This is because it enables consumers to test new technologies without significant upfront costs or risks. These benefits create a strong incentive for businesses to invest in renewable energy technologies. As you might know, this drives down prices over time while also creating jobs and economic growth in local communities around.
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Drawbacks of Net Metering
Net Metering Increases the Cost of Electricity For Homes That Don’t Produce Their Own Power
The underlying principle of net metering is that if a homeowner generates surplus energy, homeowners can sell it back to the utility at retail rates. (i.e., the same rate they pay for electricity when they use it).
That means that people who don’t have solar panels are subsidizing those who do since they are paying more than they would otherwise have to pay if all their neighbors were generating as much power as they use. As more homeowners install panels on their roofs, this subsidy will increase. And so will rates for everyone else in the neighborhood.
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Can Disadvantage Low-income Households and Small Businesses
Net metering programs typically require homeowners and small businesses to pay an upfront installation fee for solar panels or wind turbines. Note that this can be expensive for low-income families. Some states require utilities to offer low-income customers discounted rates for installing renewable energy systems. Keep in mind that some states do not offer any incentives at all.
In these cases, low-income families may be unable to install renewable energy systems even if they want them. This is mainly due to a lack of funds or other priorities, such as paying down.
It Makes it Harder for Utilities to Schedule Power Generation
Solar panels are often installed in homes, which means they produce electricity during the day when many people work and do not use as much energy. Utilities rely on this predictable pattern of demand to schedule power generation and avoid overloading the grid. Net metering also makes it harder for utilities to respond to changing demand due to weather events or emergencies.
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All in all, net metering is an excellent thing to have. It can save you significant money on your electricity bills and allow you to power your home or business with your own solar panels. Of course, some nuances need to be considered as part of the process. But if you can afford the upfront cost of installing solar panels, then it’s something that’s worth looking into.
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