What is Net Metering?
Thinking of using a renewable “green” energy technology to generate your own electricity and reduce your monthly costs? Net Metering might be the ideal solution for you.
A Little Background on Electricity Markets
Most consumers get their electricity from a utility, which is a regulated public or private entity that sells electricity to energy consumers. Historically, a utility owned, operated, and maintained electricity generation, transmission, and distribution systems, the physical infrastructure of which generally consists of generating stations, wires, poles, transformers, meters, and control centers.1
The utility may operate its own generating facilities, including power sources like nuclear, coal, natural gas, hydro, solar, or wind. Utilities that own their power-generating inputs are referred to as vertically integrated utilities. In states with vertically integrated utilities, much of the power generation and distribution is performed by a single firm.1
Like any business, utilities try to sell power at prices above what they either produce or buy it for. This lower price is referred to as the wholesale rate, and the higher price at which the utility sells power to consumers is called the retail rate. The difference between the wholesale and retail rates allows the utility to cover the cost of managing and maintaining the grid and of ensuring an adequate supply of electricity at peak hours, as well as making a return on investment1
So What is Net Metering?
Net metering allows an owner of rooftop or ground-mount solar panels to participate in the electric grid as a distributed energy producer. Solar panels first supply power to the home or business, and at times when the solar panel produces more power than the building is using the power is sent back onto the grid to be used by other customers. The meter “spins” backwards, subtracting the power sent onto the grid from the total power used by the consumer. That is how net metering gets its name—it means that at the end of the month the consumer is charged only for net electricity used.1
Policymakers enact net metering policies to encourage consumers to install rooftop solar by increasing the return on investment from solar panels. The justification for this is based on the potential benefits of having solar power as part of the grid.1 (Figure 1)
Why is Net Metering Beneficial?
One of the major benefits of net metering is that customers can offset their usage and pay less on their utility bills, since they’re producing their own energy. In addition, data shows that the benefits provided by local rooftop solar equal, or exceed, the costs to the utility or to other customers:2
- For example, California, Maine and Nevada have all done solar cost-benefit studies that show that “non-participants” actually benefit from net metering of solar customers.
- The benefits are even greater when one considers the quantifiable societal benefits of net metered distributed generation (DG), including the enhanced reliability and resiliency of the electric system, land use benefits, air quality benefits and local economic benefits.
There’s another benefit from net metering. Since your solar system is generating electricity near the point where it will be used, this reduces strain on the grid’s distribution and transmission infrastructure and minimizes energy loss from sending voltage many miles from the nearest power plant. While some claim that net metering represents an unfair burden on non-solar electricity customers, many net metering cost-benefit studies have found the opposite to be true.3
Interested in Net Metering, or Want to Learn More? Contact N-Sci!
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References
1Smith, J. T., Patty, G., & Colton, K. Utah State University. (August 2019). Net Metering in the States. Retrieved from The Center for Growth and Opportunity at Utah State University, thecgo.org: https://www.thecgo.org/research/net-metering-in-the-states/?utm_term=solar%20metering&utm_campaign=NA_GG_S_CGO&utm_source=adwords&utm_medium=ppc&hsa_acc=5827172578&hsa_cam=10168821513&hsa_grp=104663615671&hsa_ad=438447328469&hsa_src=g&hsa_tgt=kwd-298242982271&hsa_kw=solar%20metering&hsa_mt=b&hsa_net=adwords&hsa_ver=3&gclid=EAIaIQobChMI2Pj7hLm-6wIVCT6tBh0CLQM3EAAYASAAEgJLO_D_BwE
2Solar Energy Industries Association. (2020). Net Metering Facts. Retrieved from Solar Energy Industries Association, seia.org: https://www.seia.org/sites/default/files/resources/Net%20Metering%20Facts_Feb17.pdf
3SunPower Corporation. (2020). What is Solar Net Metering and How Does it Work? Retrieved from us.sunpower.com: https://us.sunpower.com/what-solar-net-metering-and-how-does-it-work