What is Net Metering?
Solar net metering is a billing mechanism that allows homeowners and businesses with solar panels to receive credit for the excess electricity they generate and send back to the grid. Think of it as a virtual battery for your solar system, using the existing utility grid to store and retrieve energy.
Here's how it works:
Solar Energy Production: Your solar panels convert sunlight into electricity (DC), which is then converted into usable AC electricity by an inverter. This electricity first powers your home's needs.
Surplus Energy to the Grid: During times when your solar panels produce more electricity than your home is consuming (e.g., on a sunny afternoon when you're at work), the excess electricity automatically flows back into the utility grid.
Bi-directional Meter: Your existing electricity meter is typically replaced with a special "net meter." This meter is bi-directional, meaning it can measure electricity flowing in two directions:
Inward flow: Electricity you draw from the grid when your solar panels aren't producing enough (e.g., at night or on cloudy days).
Outward flow: Excess electricity your solar panels send back to the grid.
Earning Credits: For every kilowatt-hour (kWh) of excess electricity your system sends to the grid, you receive a credit on your utility bill. The value of these credits can vary depending on your state and utility company's net metering policies.
Retail Rate: In traditional net metering, these credits are valued at the same retail rate you pay for electricity from the grid. This means a kWh sent to the grid is worth the same as a kWh drawn from it.
Wholesale Rate/Net Billing: Some policies, like net billing, credit you at a lower, wholesale rate for the excess energy you send back, while you still pay retail rates for the energy you draw from the grid.
Offsetting Future Usage: When your solar panels aren't producing enough electricity (like at night or on cloudy days), your home automatically draws power from the grid. The credits you've accumulated from your surplus generation are then used to offset these costs.
Monthly and Annual Settlements:
Monthly Rollover: In most net metering programs, any unused credits roll over to the next billing cycle. This allows you to build up credits during sunny months (spring and summer) and use them during months when solar production is lower (fall and winter).
Annual True-Up: Many utilities have an "annual true-up" date (often once a year) where any remaining credits are reconciled. Depending on the policy, you might be paid for these excess credits (though usually at a lower, wholesale rate), or they might expire.
Key Benefits of Solar Net Metering:
Reduced Electricity Bills: By generating your own power and getting credits for excess, you can significantly lower or even eliminate your monthly electricity bills.
Maximizes Solar Investment: It ensures you get value for all the electricity your panels produce, even if you don't use it immediately.
Uses the Grid as a Virtual Battery: It eliminates the need for expensive battery storage for most homeowners, as the grid effectively "stores" your excess energy.
Supports Renewable Energy: It encourages the adoption of solar power by making it more financially attractive for consumers.
Grid Stability: Distributed solar generation, especially with net metering, can help utilities manage peak electricity loads and reduce strain on the distribution system.
It's important to note that net metering policies can vary significantly by state and even by individual utility company. Some states have full net metering at retail rates, while others have moved to different compensation structures.20 If you're considering going solar, it's crucial to understand the specific net metering rules in your area.