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What Is Net Metering?

What is Solar Net Metering and How Does it Work

Many consumers who are thinking about going solar have heard the term “net metering” but aren’t sure what it means.

What is Net Metering?

Simply put, net metering is a utility billing scheme available in most states that gives a credit to residential and business consumers who use their solar panel systems to make excess electricity and send it back to the grid.

How Does Net Metering Work?

When you have a solar rooftop system it can produce more energy during daylight hours than you use.

The homeowner is only billed for the “net” energy used each month with net metering, that is, the difference between the energy produced by the solar power system and the energy consumed by the house during the monthly billing period.

If your house or company is net-metered, you will see the meter running backward, which ensures that depending on local policies, you may get a credit to hedge against the energy you use from the grid when it’s not sunny or at night. You are then only billed for your use of “net” resources. The excess energy generated is put back into the grid for use by your neighbors.

The Benefits of Net Metering

Net metering can save homeowners hundreds of dollars on their utility bills each year, so making the money-saving option is a good reason to go solar sooner rather than later.

Net metering has yet another advantage. Because your solar system generates electricity close to where it will be used, this decreases the burden on the distribution and transmission network of the grid and minimizes the energy loss from transmitting voltage several miles from the nearest power plant. While some argue that net metering imposes an unfair burden on consumers of non-solar electricity, several cost-benefit net metering studies have found the opposite true.

Does My State Offer Net Metering?

Although some state regulators and utilities have proposed policies that challenge the value of simple retail NEM, there haven’t been many changes to the rules — yet.

The original retail net metering program was designed for low-solar-adopting regions. But with California, New York and other states seeing significant rises in the amount of solar installed, changes will come in the coming years. California has already adopted what is known as “Net Metering 2.0,” and at least one report has shown how there are reasons to be optimistic about the new policies relative to the Golden State’s original retail net metering method.

Check the State Incentives for Renewables & Efficiency Registry (DSIRE) for more detail on net metering and other related policies in your state. 

A lot of debates are taking place across the country on how the current programs should develop. Net metering updates may be factored in such items as a more accurate assessment of the solar energy flowing into the distribution grid; rate structures that charge more for electricity at certain times of the day (or night) or analyze where excess electricity is generated on the grid; wholesale rather than retail credits; and effect of residential solar storage batteries.

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