Solar Net Metering Explained: All You Need to Know

Net metering is a billing technique that allows owners of solar energy systems to get credit for the amount of power that they provide to the grid. For instance, throughout the day, a residential customer’s PV system can produce more power than the residence consumes.

If the residence is net-metered, the power meter will operate in reverse to offer a credit against the amount of power that is spent during the night or at other times when the usage of electricity in the residence is greater than the production of the solar system. 

Energy consumption is solely charged to customers based on their “net” usage. Typically, 20-40% of the solar energy system’s production is sent to the grid to power neighboring customers’ needs.

Benefits of Net Metering

Owners of solar systems get certain advantages from net metering, while the grid and society at large reap others. Some of the advantages are listed below:

  • Cost-Effective Solar Systems
  • Power Bills
  • Reduced Transmission Costs

Converts Solar Generation Into Power Bill Savings

Only the value of the solar power you use directly may be saved in the absence of net metering. Simply put, feeding extra energy into the grid is like giving it away for free.

With net metering laws in place, you can be certain that any excess solar power will be compensated for.

Take the hypothetical monthly output of 1,000 kWh from your home solar system as an example. The remaining 300 kWh will be sent back to the grid if you only utilize 700 kWh.

Even with net metering, you’d only be able to conserve enough energy to cover 700 kWh of direct use.

You may make use of all of your solar energy by taking advantage of net metering, which allows your utility to turn the excess 300 kWh into a credit against your power bill.

Your monthly power bill savings will be increased when you get credit for excess solar energy. You may utilize those savings to reduce the payback time of your solar panels, which will enhance your ROI (return on investment) each year.

Reduces Transmission Costs for Utility Companies

Power does not have to go via power lines and substations to reach your house when you install a solar energy system.

The electricity provider may buy extra energy from solar panels installed on one property and resell it to other homes in the area that don’t have solar panels.

Power companies may only sell energy from large-scale power plants if net metering is not in place. Before reaching their final destination, these energies must traverse transmission lines, substations, and distribution grids.

By reducing demand on distribution networks, net metering may lessen the likelihood of power losses that occur during transmission.

Makes Home Solar Systems More Affordable

The need to buy a separate battery is rendered moot when you can utilize the local grid as a “solar battery” via net metering. The installation of an energy storage system may often increase the cost of solar panels by 100%, leading to a payback period that is twice as lengthy.

Because you won’t be able to get credit for surplus energy without a solar battery, having access to net metering is essential. A battery is your only choice for storing excess energy for future use in this situation.

Drawbacks and Controversies Around Net Metering

Although it would be nice if solar power proponents could assure you that net metering has no negative aspects, unfortunately, this is not always the case.

Solar power is beneficial to the grid up to a certain point, when the number of linked net metered systems is low, according to studies. However, things get trickier when the net metering threshold is reached, which is usually between 5 and 10% of peak demand.

Some disadvantages of net metering are below:

  • Reduced Tariffs
  • Net Metering
  • Credits Can’t Exceed Consumption

Net Metering Availability

Solar panel owners in some regions of the United States are still left with no choice except to store their extra energy in batteries, since net metering is not yet accessible to them. In addition, utility providers are free to choose the specifics of net metering policies, but some states have mandatory policies in place.

For this reason, you could come across net metering plans that have unsavory terms, such meager reimbursement fees for excess solar power.

You may get a comprehensive map of the United States’ net metering and net billing program availability on the website of the Solar Energy Industries Association (SEIA).

Some Utilities Offer Reduced Tariffs

Credits are often not issued at the full retail cost of power under most net metering and solar buyback schemes. The net metering compensation price might be as low as 10 cents per kWh for a household who is normally paid 16 cents per kWh.

Above, we established that net metering laws differ across states and electricity companies. Not all states pay the full retail cost for each kilowatt-hour; in fact, the majority of net metering systems use a discounted solar buyback pricing.

Credits Cannot Exceed Your Annual Consumption

You will not be able to accrue credits more than your yearly energy use under the majority of net metering plans. The majority of solar energy schemes allow you to carry over any excess from one billing cycle to the next in the event that your solar generating credit is more than your consumption charges.

Accumulated surplus production over a 12-month period is often not compensated.

Throughout the United States, there are a few net metering systems that may provide you a cash payment for a billing cycle in which your credits are greater than your use. There are restrictions on the frequency and amount of these payments.

A solar energy system may be custom-built by you and your installer to meet your home’s electrical needs while minimizing waste.

Alternatives to Traditional Net Metering

In spite of the fact that standard net metering is the most common method for obtaining credits for solar energy that has been produced, there are different methods available, depending on where you reside and what your state and utility provider permit.

Net Billing

Under net billing, a homeowner’s electric bill is reduced by the full retail cost of electricity when solar energy is utilized to power their home’s appliances, but a lesser rate is credited for energy that is supplied to the grid.

To avoid selling solar energy for pennies on the dollar and purchasing electricity from the utility during peak hours, net billing encourages solar owners to install batteries in their systems. This allows them to enjoy the energy during the evening instead of paying for it during peak hours.

The most notorious use of this kind of solar metering is the net billing system in California. The worth of solar energy that is exported is almost zero on several occasions throughout the year.

Buy All/Sell All

The buy-all/sell-all form of metering differs from others in that it allows customers to sell the whole amount of energy produced by their panels to the utility company. In exchange, they get the retail rate for all of the energy that is used in their house from their utility company.

In this kind of net metering, the user is responsible for paying the difference between their energy use and generation. Two different meters are needed for this. While using buy-all/sell-all net metering, you are not required to use any of the power that your solar panels produce.

Solar Self-Consumption

A “non-export system” is an option for utility users in several regions who want to install solar panels. Your options for preventing solar electricity from going into the grid are to either utilize it, store it, or let it go.

If you want to avoid exporting power, you should add reverse-power protection devices and batteries to store any extra electricity you generate from solar panels. Otherwise, you should make the most of your solar energy system.

Is Net Energy Metering Worth It?

Yes. With net metering, you may reduce your power bills by sending any extra solar energy back to the grid in return for credits that can be used against future power bills. Saving money on a solar battery—which may cost more than $10,000—is another benefit of net metering. So, when there is more energy generated than needs to be, the grid acts as a solar battery by storing it.

What is Virtual Net Metering?

You may still take advantage of net metering in many states thanks to virtual net metering (VNEM) rules, which enable you to do so even if your house does not have solar panels installed. Subscribing to a community solar farm that offers virtual net metering is the most common way to become involved.

Virtual net metering allows the solar farm to feed its excess power back into the grid, where it may be distributed among all customers.

Your yearly power bills will go down by 5-15% because you get a discount on the energy that the farm produces and sells to you. If you’re looking for an alternative to rooftop solar panels but don’t have the necessary space, explore community solar projects in your area.

Is the California NEM 2.0 Program Still in Effect?

No, on April 13, 2023, the state of California ceased accepting applications for its (NEM 2.0) program. For solar panel owners in California, NEM 3.0 is currently the exclusive choice.

Do Net Metering Credits Expire?

Depending on your state of residence, you may or may not be required to spend all of your net metering credits in a single billing cycle; however, in many areas, these credits do roll over from one month to the next and even from one year to the next.

You may save credits for use during winter billing cycles, when your production is reduced, since your solar energy system generates a lot of energy in the summer.

Why Net Metering Matters

People all around the nation are able to produce their own power and contribute to the fight against climate change as a result of the regulations that govern net metering.

The greatest inducement for regular individuals to invest in renewable energy-generating equipment has been net metering legislation throughout the US.

Distributed generating assets, such as solar panels, batteries, and electric cars, will play an increasingly crucial role in the grid’s modernization and decarbonization efforts, benefiting system owners and the grid overall.