The net metering system credits solar energy system owners for the electricity they generate. For example, a PV system installed on a residential roof may generate more electricity during daylight hours than the household uses. During the night or other periods when a home’s electricity consumption exceeds the system’s capacity, the electricity meter will run backward to give the customer a credit.
The customer is only billed for the “net” amount of energy used. About 20-40% of solar power systems’ output goes into the grid, and this electrical energy is exported to nearby customers.
More simply, net metering is a utility billing mechanism that allows residential and business customers to receive a credit if they generate excess electricity with their solar panel systems and send it back to the grid.
According to SEIA (Solar Energy Industries Association)
Net metering is the practice of allowing residential and commercial customers who generate their own electricity from solar power to feed the surplus electricity back into the grid. Net metering laws have been passed in many states. In other states, utilities may offer net metering programs voluntarily or in response to regulatory decisions.”
How Does Net Metering Work?
During the afternoon, when many people aren’t at home using electricity, solar energy systems typically produce the most electricity. The morning and evening are typically the peak times when homes use electricity. With net metering, you can account for these ups and downs in your electricity production and usage on a day-to-day basis.
When your system produces more electricity than you need, excess electricity is fed into your utility’s grid. Your meter actually runs in reverse when this happens. Whenever your system isn’t producing enough electricity, you can draw it from your utility company, just as you did before you went solar.
The “back-and-forth” between your system and the grid allows you to use your excess production and meet any shortages. Net metering allows you to cover your lack of production with the excess electricity you generate.
Over the course of a month, if your solar power system generates more electricity than it uses, you will receive a credit on your utility bill based on how much electricity you gave back to the grid. You must purchase electricity from your utility if your production is less than what you use each month. Typically, you would pay for the electricity you use minus any excess electricity generated by your solar panels.
Net Bill = [Units Exported + Incentives (if any)] – Units Imported
Net metering’s Benefits
- Net metering has many benefits as it relieves all residential and commercial electricity billing issues on a regular basis with this new and advanced technology.
- Net metering allows you to save when you go solar
- Due to net metering, homeowners receive credit for the energy their solar panels generate at the same rate they pay to their utility. In turn, your solar energy system could save you thousands of dollars in electricity costs over its lifetime.
- Since your solar panel generates electricity close to where it will be used, it puts less pressure on the grid’s distribution and transmission networks and eliminates energy loss due to voltage transmission over long distances. While some argue that net metering imposes an unfair burden on non-solar electricity consumers, several cost-benefit analyses have shown the exact opposite.
- Giving Customers Control Over Their Electricity Bills (Reduced electricity bills)
- Creating Jobs & Encouraging Private Investment
- Protecting the Electric Grid
- Benefit for the environment
- No need to install an expensive battery storage system
- Take some pressure off electric grids
- Encourages customers to move towards renewable energy
- Preserves natural energy resources