What is Solar Net Metering?

  • By: Jane Smith
  • Date: Jan 30 2022

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What is Solar Net Metering?

Many homeowners that are contemplating the decision to switch to solar energy know the term net metering. However, they do not know what it entails. Net energy metering is a utility rate program that requires your electric company to purchase the excess solar energy your solar panels produce at the full retail rate of electricity.

When your solar energy system produces more electricity than your home needs, your system sends the excess electricity to the power grid and your utility pays you for it. Net metering is one of the reasons rooftop solar panels are an excellent way to save your household money.

solar net metering process

States with the best net metering policies

California, Colorado, Connecticut, Delaware, Maryland, Massachusetts, Arkansas, Washington DC, New Hampshire, New Jersey, New York, Ohio, Oregon, Pennsylvania, Minnesota, Utah, Vermont, and West Virginia are the most favorable states for net metering.

house that has solar panels on top with solar net metering

Need more insight on how net metering works when you install solar panels?

First, you decide to install a net-metered solar panel system.  When your solar panels are producing more electricity than you are using, your system sends electricity back to the grid. Hence, running your electric meter in reverse. When you use more electricity than your solar panels are producing, you pull electricity back from the grid. As a result, you end up running your meter forwards. At the end of the month or year, your utility bill shows what you put onto the grid and what you took off the grid. Hence the term “net metering”.

When solar panels produce more electricity than a home uses, the excess amount of energy generated sends back to the grid. This is where net metering comes into play. When a net-metered system sends solar energy to the grid, your electric meter spins backward and your utility applies credit for the full retail value of electricity to your account.

Then at night, when your solar panels are not producing, you take electricity from the grid. As a result, you are spinning your electric meter forward again. At the end of the billing period, the utility company nets how much electricity you sent to the grid versus how much you used to determine your last bill.

solar net metering

Why does net metering exist and why is it beneficial to the electric grid?

We design net metering for two primary purposes. First, to encourage the greater adoption of solar power throughout the country. Second, utilities and the electricity grid benefit from the influx of low to no cost solar energy. Solar energy helps a homeowner save money, especially during summer months when electricity is often the most expensive.

solar net metering

Advantages of net metering?

It Decreases Your Utility Bill

The biggest advantage of net metering to solar homeowners is the utility bill savings. Net metering can cause tens of thousands of dollars in savings over the lifetime of your solar panel system.

Using a solar panel system can decrease your utility bill in each billing cycle since you are not always relying on your local utilities. However, most electric bills include some fixed charges that net metering can’t eliminate.

Net Metering increases energy production for homes and helps the utility sell any energy produced from solar energy. It will be very easy to cut down your electricity bill by reducing your electricity consumption by 5% yearly. You have the chance of generating credit through excess generation during a sunny spring or fall when solar generation declines.

Reduces pressure on the grid

Residential solar panels provide an enormous benefit to utilities (and their customers). Because they help reduce the amount of stress on the electric grid distribution system. Since solar homeowners are not using power from the grid but using their own electricity instead, there are fewer people drawing power from the grid directly.

Plus, when a solar power system sends excess energy to the grid, other non-solar utility customers use that electricity so they can meet their own energy needs.

Relieving some of the stress from the electric grid is especially important now in states like California, as heatwaves become more common and utilities can’t meet energy demands. Therefore, you will see fewer power outages.

How do electricity bills work with net metering?

It depends on the utility, but most full-retail net metering programs allow energy credits to carry over from month to month. So, if you generate more electricity than you used in a month, the excess net metering credits can offset the electricity you take from the grid the next month. Usually, you’ll have excess credits in the summer months, when the days are long and sunny. You can bank up these summer credits to cut down your electric bills in the dark winter months.

How do payback periods work?

Areas that offer full retail net metering will have much shorter payback periods than places that don’t. This is because solar homeowners will save more on their electricity bills, thus recouping their investment costs faster.

For example, a solar power system in New Jersey would have a payback period of between 4 to 5 years, thanks to net metering. A system in South Dakota could take up to 12 years to pay off because the state has no form of net metering in place.

Process of solar in how net metering works

Is going off the grid good or bad for your savings?

If you install an “off-grid” solar panel system, you do not receive the benefits of net metering, since you would not be relying on the grid as a massive battery. You would need your own batteries to keep the lights on once the sun goes down. Therefore, staying on the grid is more beneficial.

Is net metering available in all states and cities?

They technically mandated net metering in 38 states and Washington D.C. Out of all 50 states, 29 require full-retail net metering, and 17 offer some kind of alternative net metering program or tariff. In addition, some major utility companies in Idaho and Texas offer net metering to their residential solar customers, even though there is no mandate to do so.

South Dakota and Tennessee are the only states that do not have any form of net metering or alternative net metering rules. But these states might not be alone for long. Throughout the U.S., utility companies have been fighting to cut net metering programs to reduce residential customers’ solar savings and increase the companies’ profit margins. Utilities have succeeded in states like Louisiana and South Carolina, and they even slated net metering changes to happen in California, the most solar-friendly state.

The Best Solar Policy

Net metering allows you to store every unit of energy you produce with solar to be used at a later date from the grid. In fact, thanks to net metering, you can save tens of thousands of dollars over the lifetime of your solar panel system.

solar getting installed on new home

Other Benefits of using a solar power system

1. Reduced greenhouse gases

Solar power does not emit greenhouse gases which are beneficial to the environment.

2. Ongoing Free Energy

Another advantage of using solar energy is that, beyond initial installation and maintenance, solar energy is free.

3. Decentralization of power

Solar energy offers decentralization in most (sunny) locations, meaning self-reliant societies. Oil, coal, and gas are used to produce conventional electricity transport cross-country or internationally.

4. Jobs

Another helpful feature of solar energy production is that it creates jobs.

Save your money and help the environment by switching to solar. Learn more about how we can help you go solar. Click here 

solar net metering

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