If you have solar panels on your roof, you are almost certainly not using all the energy they produce. All this excess is sent to the network, joining your utility's electricity supply. If you received nothing in exchange for this extra energy, solar panels would be a harder investment to justify. While home battery storage can help you save energy you don't use right away, there is a simpler (and cheaper) option available to address this imbalance.
Net metering is a way for utilities to compensate you for the electricity you produce, ensuring you get something in return for the solar energy you produce but don't use. Although net metering is the most common and well-known compensation scheme, there are also a few others – such as the net billing policy.
It's not true that powering the grid with solar energy will be a big payday each month, but if you educate yourself in advance, it could pay off for your investment in solar energy adoption in the long run. We'll explain everything you need to know about net metering policies below so you can better understand how they help you save more and recoup the cost of your solar panels faster.
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What is net metering?
Net metering is essentially a billing system to ensure you receive credit for the energy you produce that flows into the grid for the utility and others to enjoy. Your electricity meter rotates to measure how much electricity you draw from the grid. With net metering, it goes in reverse when you send solar energy back to the grid, reducing your overall bill.
“Normally, your meter can work in both directions and at the end of the month you only pay for what you take from the network,” he explained. Gilbert Michaudassistant professor of Environmental Policy at Loyola University Chicago.
This allows your home to use electricity from your solar panels during the day and electricity from the grid at night or when your solar panels cannot meet your needs.
How does net metering work?
There is some special equipment needed to connect your solar system to the larger grid. It also requires permission from your utility. When your system is installed in your home, your solar company must handle all documentation and permits from local regulators and the utility company.
According to Michaud, preparing for net metering may require installing a new meter in your home or it may just mean a simple technical adjustment to existing equipment. He believes that in most cases smart metering technology is probably already in place.
If net metering is available in your area, it should happen automatically and your utility should credit you for the kilowatt-hours your solar system is sending back to the grid. In true net metering, you're credited the same rate you pay to buy power from the utility: If you used one kilowatt-hour and sent another back to the grid, you wouldn't pay. This is changing in some jurisdictions.
What does net metering affect my electric bill?
Exactly how net metering affects your bill can vary greatly depending on the laws of your state or local jurisdiction and the policies of the utility company involved. Like net metering rates, these rules and regulations have also been changing lately.
Generally speaking, though, net metering will reduce electricity bills for most people. If your utility supports residential solar, you may even receive credits for the excess electrons you send to the grid.
Because net metering is administered by your utility company, any credits must be itemized on the same invoice you received before adding the solar panels, although you should confirm with your utility company.
Types of Net Metering
Although net metering acts as a generic term, there are variations that are more accurately called something else. Here are some that you can find in the wild.
Net metering is the most common arrangement and works by selling any excess energy generated by your solar panels to the utility operator in exchange for credits, which offset any electricity you may need to use from the grid. The credit is applied to the retail rate, i.e. the rate you pay for electricity. Only one meter is needed to track this, although your meter may need to be updated when you use solar energy.
Net billing is a way for utilities to capture some of the value of the energy you produce. Often this happens by paying you a lower wholesale rate for the energy you produce and releasing into the grid, while charging a higher retail rate for the energy you extract from the grid.
California's recent net metering update was technically a change to net billing, and the value of solar energy sent to the grid was part of the heated discussions. Supporters of the agreements said solar electricity wasn't as valuable to the grid in the middle of the day, when residential solar panels were sending it. But rooftop solar — as a clean, local energy source — provides some benefits to the grid, and opponents of California's net billing plan said the rate at which solar owners were compensated did not reflect that with precision.
Ultimately, the new net bill was expected to reduce compensation by 75% for electricity sent to the grid, but increase adoption of batteries, which were designed to recover their installation costs more quickly than power alone. solar.
Buy everything / sell everything
This less common arrangement means your solar panel is being metered separately from your household usage. Your solar production goes directly to the grid, for which you are compensated, usually with billing credits.
Meanwhile, the energy your home uses is being purchased from a utility just like any other customer. This requires two separate meters and you will pay the difference – if any – between what you buy and what you sell.
How can I save the most with net metering?
Every circumstance is different and there are a number of strategies you can employ to maximize the savings you get from your solar system, such as adding batteries or an EV charger. True electron counters can time your personal energy usage to when the solar system is at peak production, to avoid paying for grid power. With a battery and time-of-use rates, you can draw power from the grid when it's cheapest and send power to the grid when it's most expensive, maximizing your savings.
Basically, the more familiar you are with the details of your utility's rate policies and how your own system works, the more you can save and the faster you will pay off your solar energy investment.
Is net metering disappearing?
It is essential to keep an eye on changes happening around net metering policies, according to Michaud.
“Utilities are not big fans of net metering in many areas,” he explained.
As a result, some jurisdictions will not allow you to size your system to be larger than necessary for your typical energy consumption. This prevents homeowners from installing extra solar panels to accumulate those billing credits.
Some states are moving away from paying the same rate for electricity generation and use and adopting more complex formulas to determine more accurate compensation rates.
Michaud adds that utilities are also instituting fees for people with solar net metering, “which changes the economics and payback period for people investing in solar systems.”
Bottom line: Familiarize yourself with how your state, local government and utility treat net metering and any potential changes on the horizon before investing in a system of your own.