Net metering is an innovative way to save money on your energy bill. The basic principle of net metering is that when the solar panels generate more electricity than you are currently using, the excess power goes back into the grid for others to use. In some cases, you will be paid for that ‘excess’ power at a rate determined by your local utility.
What is Net Metering?
Net metering is a billing mechanism that allows the transfer of surplus renewable energy from one utility customer to another. The surplus energy is transferred at the retail electricity rate rather than what would be considered a wholesale value. While generating more power than your home or business needs, that excess renewable power goes back into the grid through net metering. Other customers can then use it in your service territory.
How Net Metering Works
Net metering allows utility customers to connect a meter between the electrical grid and their renewable energy system. When necessary, the customer can then draw power from the electric grid while also feeding any excess electricity produced by the solar panels back into the grid for other consumers to use.
This means that if your system produces more electricity than you use, it will send the excess back to the grid, and other utility customers can use it. In turn, you’ll only pay for what you need from a net-metering arrangement.
Net metering is not limited to solar energy systems – wind turbines or hydroelectric generators are also compatible.
At the end of each billing period, your utility will send you a bill for any electricity consumed during that time – whether it came from the grid or your renewable energy system. The net metering arrangement means that you’ll only need to pay for what is used rather than covering the entire cost of the system.
Your utility or state energy regulator determines the exact terms of how net metering works. Still, most arrangements allow for relatively quick 90 day reconciliations between credits and debits to your account. This means that you should see a minimal delay in getting paid when excess power is sent back into the grid through net metering.
Why is Net Metering Important?
Net metering is crucial because it allows a renewable energy system owner to offset their monthly utility bill. If you generate more electricity than your home or business needs, then this surplus power can be sent back into the grid through net metering and used by other consumers in your area.
In return for that excess generation from solar panels, you’ll only need to pay for the net amount of power that you use – whether it comes from your system or through the grid.
Net metering is crucial because it allows users to be self-reliant and independent and reduce their environmental impact. This arrangement can also help utilities meet renewable energy targets set by regulators, offer a valuable service to other customers, and provide an additional revenue stream for the owner of the renewable energy system.
Does Your State Practice Net Metering?
Most states have net metering policies in place. 42 of the 50 U.S. states and Puerto Rico currently offer some form of solar energy incentive program or requirement with one type or another connected to net metering.
That said, there are still areas where it can be difficult for solar panel owners to receive net metering credits for the electricity they produce. For example, Hawaii and Vermont only offer time-of-use (TOU) pricing – rather than a retail or full-service rate like in most other states.
This means that solar energy is not as cost-effective in these regions when compared against mainland areas with flat rates where all electricity sent into the grid can be offset using net metering.
Most state regulators will generally determine how much you’ll receive for any excess generation from a renewable energy system through either a bi-directional or non-bi-directional arrangement. The critical difference between these two arrangements is that one provides a credit term used to describe a customer’s electricity generation and consumption profile. Credits can be redeemed or used to offset future consumption.
What Is Bi-Directional Net Metering?
A bi-directional net metering arrangement is one where credits are provided to customers for excess electricity sent back into the grid from solar panels, wind turbines, or other renewable energy systems. An arrangement pays both the consumer and utility company when electricity is sent back into the grid from a renewable energy system, like solar panels or wind turbines.
The benefits of this type of net metering include:
– The customer receives credit for any excess power generated by their renewable energy system;
– Customers can access the electricity grid for power outages;
– Customers can sell surplus electricity back into the local utility company.
What Is Non-Bi-Directional Net Metering?
In a non-bi-directional net metering arrangement, only the consumer receives credits when excess energy generated by a renewable energy system goes onto the grid.
The benefits of this type are:
– The customer receives credit for any excess power generated by their renewable energy system;
– Customers can access the electricity grid for power outages;
– Customers do not need to sell surplus electricity back into the local utility company. This arrangement is more suited to regions with flat rates, where all the electricity sent into the grid can be offset using net metering, making it cost-effective for consumers.
The key to determining which type of arrangement your state will have is by checking what they call their incentive program or renewable energy requirement, as these are usually linked directly with net metering credits and tariffs.
What are the Benefits of Net Metering?
The most apparent benefit of net metering is that customers can lessen their electricity bills by using excess power generated from solar panels, wind turbines, or other renewable energy systems. However, there are several more benefits, including:
– Reducing environmental impact – one customer’s use of a renewable resource for electricity generation results in less reliance on power plants and fossil fuels;
– Reducing utility bills for the entire community – by reducing an individual customer’s reliance on traditional energy sources, everyone in your area will benefit from lower electricity prices. This is due to a reduction of demand within the grid system, resulting in less strain on existing infrastructure like transmission lines and power plants.
– Increased property value – a solar panel system can increase the resale value of your home, especially when compared against similar homes in your area without a photovoltaic (PV) cell.
– Creating local jobs – by creating more demand for renewable energy products, you’ll be supporting your state’s economy and encouraging growth within renewable energy industries. This will result in new jobs being created in these sectors.
– Increased independence from the grid – in times of power outages, your home will still have access to electricity through net metering, which can be used by you or others nearby with an alternative energy system. Your community will also benefit during a widespread outage when they can use excess electricity generated by renewable energy systems located on homes within the community.
What are the Disadvantages of Net Metering?
The main disadvantage to net metering is that it usually requires additional infrastructure like communication cables and meters, which will cost you money. This can be especially true for homes with larger photovoltaic (PV) cell systems or wind turbines connected to remote locations, such as farmhouses.
When you install a renewable energy system and connect it to the power grid through net metering, your utility company will need to invest in upgrades like new meters and cables between its network and where your panels or wind turbines are located. They may also choose to upgrade their entire infrastructure if they feel the additional costs of net metering are not being offset by the excess energy generated.
This additional infrastructure may also increase your utility company’s operating costs, which could be passed on to you through higher rates in the future. While some renewable energy systems have a relatively low impact on existing networks and grids, they will still require investments of time and money for installation and maintenance.
What is the Difference between Net Metering and Feed-in Tariffs?
Net metering involves sending electricity back to the utility provider. In contrast, feed-in tariffs apply to sell excess energy generated by your renewable system directly through a separate agreement with an energy buyer. For example, a bank or company wants to purchase green power. This is an essential distinction because net metering is usually a part of your utility company’s billing system and can be easily regulated by state laws.
In most cases, feed-in tariff schemes also require homeowners to have their own storage devices for energy collected from solar panels or wind turbines to be sold back to the grid during periods when the home is not using all of the electricity.
What are Other Names for Net Metering?
Net metering has several other names which you may hear from your utility company or local government. These are net energy metering, retail net metering, or full-requirements service.