There’s quite a few benefits to installing solar panels on your home. You’re using clean energy and reducing the demand for fossil fuels. You’re detaching from the power grid and becoming self-reliant. But the best benefits are the massive energy savings. Not only will you reduce, or outright eliminate your monthly power bill, but you can actually get paid for the extra electricity you produce. This is called net metering, and it’s one of the best parts of owning solar panels. So what exactly is net metering? Keep reading to learn more!
What is Net Metering?
To put it simply, net metering is when the local utility company any form of energy, such as wind or hydroelectricity. When the consumer installs solar panels, they may or may not cover their entire household energy usage. When they don’t, they still pull some power from the grid, and will still pay a small energy bill. When their household energy needs are completely covered, however, then that extra unused energy goes back into the power grid and is bought by the utility company, earning the consumer extra income and aiding in combatting grid stress. When the consumer’s solar array is producing more than the current household energy usage, the power meter will start to spin in reverse.
The consumer doesn’t have to sell the electricity back to the grid. They can also use the grid as a virtual battery, and store the extra electricity for later use in jurisdictions that support monthly or annual rollover of stored power. This earns the consumer energy credits which can be exchanged with the local energy company. This is especially useful in areas where the sunshine is variable or seasonally dependent. If you generate a lot of extra energy in June, when the weather is sunny, you can store it for later use in December, and mitigate the need to pull from municipal power sources during the winter months when there’s less sunlight. The question, ‘Are solar panels dependent on direct sunlight?’ is often asked by many users of photovoltaic energy. Read our article to discover the answer.
This can also be applied on an intraday basis. Since people tend to be out of the house during the day, consumers can generate and store their extra electricity while at work or school, then use it during peak times during the evening and throughout the night, when there’s no sun to power the solar panels (check out our detailed review of solar panel costs).
Where is Net Metering Available?
Net metering is possible only in jurisdictions that allow it. Luckily, it’s become a widespread practice, having been implemented all over the globe, although the terms may vary greatly from location to location. Some jurisdictions allow indefinite energy rollover, while others limit it to a monthly basis. The price per watt of electricity sold back to the energy company can also vary by jurisdiction, as some locations buy the energy back at wholesale prices instead of the retail price.
Net energy metering originated in the United States during the 1980s, with the first laws being passed in Idaho in 1980. Today, 38 states and Washington D.C. have laws promoting net metering, and 11 states have alternative net metering programs through utility companies. South Dakota and Tennessee are the only states with no form of net metering in place.
Laws differ greatly from state to state. Some states buy electricity back at retail prices, which is the price per kWh that a consumer would normally pay the power company. Other states buy the electricity back the wholesale price, which is the cost per kWh for the utility company. For example, Alaska buys the electricity from consumers at the retail price, while Nebraska buys at the wholesale price. The price can even vary within the state depending on the city, county, or utility company, like in Texas, where net metering itself is only available in certain jurisdictions. In Massachusetts, the price varies depending on the size and capacity of the electrical system. This variation is also seen in the types of tax incentives offered to solar investors, state by state.
Laws governing rollover also differ greatly from state to state. Most states allow monthly rollover. In those that don’t consumers must use the extra electricity within each billing cycle, or the extra electricity is granted to the utility. In other states, monthly rollovers extend throughout the year. The price per kWh can differ between wholesale and retail depending on how long the credits go unclaimed. In Florida, the electricity is bought back at the wholesale price on a monthly basis, but can be redeemed for the retail price at the end of the year.
Read also: What is Federal Solar Tax Credit?
Net Metering In Utah
Rocky Mountain Power is Utah’s electricity provider. While they do support net metering, the rules have changed over the past year. If your solar array was connected to the grid before November 15th, 2017, then you remain within the original net metering plan until December 31st, 2035. Your net consumption will continue to be evaluated on a monthly basis, and the excess will be credited towards the next month’s usage until the end of the year. Credits expire at the end of the annual billing period. Customers are assigned to a class depending on the size of their array. You will remain in the same class unless you make a material change to the size of your grid.
If you connected your solar array to the grid between November 15, 2017, and October 30th, 2020, then you are considered a transition customer. Transition customers have their consumption evaluated in 15 minute increments. You will be charged for the electricity you consume from the grid within that time period, or reimbursed for the excess electricity generated by your solar panels. The reimbursement rate is dependent on the size of your array.
If you submit your net metering application after October 30th, 2020, you will be a post-transition customer. The post-transition guidelines have yet to be released, and new customers are encouraged to keep up with new updates from Rocky Mountain Power.
Net Metering In Texas
Texas has a decentralized electrical grid, and so does not have a statewide net metering law. Utilities themselves decide if they want to implement net metering. Here’s a list of utility companies that support net metering:
- Austin Energy
- City of Brenham
- CPS Energy
- El Paso Electric
- Green Mountain
Check with your utility company for in-depth information on net metering.
Net Metering In California
California reimburses customers at the retail rate and credits rollover from month to month. So if you generate extra power during the summer, you can tap into those unused credits during the wintertime. California also allows virtual net metering, where those who live in a condo or apartment building can benefit from reduced costs if there are panels installed on the building.
California laws limit net metering when the solar array produces more electricity than the home consumes in a year. New consumers must also prove that their solar panels have a warranty greater than 10 years. The state has also recently updated its policy to net energy metering 3.0, where solar customers will receive less for the excess energy their systems produce.
Read also: How Long Do Solar Panels Typically Last?
Net Metering In New York
New York has conventional net metering and remote net metering. Conventional net metering reimburses the customer for their excess electricity, and credits for extra power can rollover from one billing cycle to the next. The rate is dependent on the customer’s classification, which is dependent on the type of account and size of the array.
Remote net metering allows customers to distribute excess electricity to other accounts under their name. This is useful for commercial or agricultural operations, where customers generate electricity at their business or farm and use the excess to power their home.
Related: New York Solar Incentives
Net Metering In Michigan
Whereas owners of PV systems in Michigan were once reimbursed at the retail rate when they put energy back into the grid, the net metering policy was recently replaced with an “inflow/outflow” system. This new policy charges solar panel owners the retail rate when they use electricity, but reimburses them at a cost-avoided rate decided by the state. Michigan utility companies must seek approval from the state utility board before setting their cost-avoided reimbursement rate.
Net Metering In Arizona
Net metering was once common in Arizona up until 2016, when the state repealed net metering laws in favor of the export model. The export model reimburses consumers at a much lower rate than the retail rate when they put electricity back into the grid. In certain areas, owners of PV systems can still receive the retail rate, and that also goes for consumers who were grandfathered in before the changes were made.
Many companies are raising the fixed rates for the grid connections, which costs consumers who generate electricity the most, as they use less municipal power but must now pay more for simply being connected to the grid. Others are lowering the cost of electricity, meaning consumers get a lower rate for their excess electricity. Many companies are now also offering time-of-use rate plans, where electricity is more expensive during peak hours, and cheaper during off-hours.
Many Arizona consumers fall under one of two major utilities in the state: APS or TES, and consumers are encouraged to check with their local provider to get more details about their export rate.
In September 2018, Tucson Electric adopted a new solar export program. Under this plan, homeowners are credited a set dollar amount for excess electricity that they send back to the grid, at a fee of 9.64 cents per KWH.
Net Metering In Nevada
In Nevada, net metering allows consumers to earn credit for their excess electricity, which can then be rolled over into the next monthly billing cycle. Eligible PV systems must be under 25 kilowatts. Consumers who are enrolled in net metering cannot be charged any differently compared to customers who don’t generate their own electricity. The reimbursement rate for net metering is set into 4 tiers, which are limited by their total applied capacity of 80 MW, meaning that once the total consumer load of any tier reaches the 80 MW limit, that tier is closed. Each subsequent tier pays a lower rate than the last. The tiers are listed below.
- Tier 1: 95% retail rate
- Tier 2: 88% of retail rate
- Tier 3: 81% of retail rate
- Tier 4: 75% of retail rate
While tier 1 is already at capacity, the other three tiers are still taking applications.
Net Metering In Maine
Maine has two systems for net energy metering. The NEB kWh Credit Program is available to all consumers and allows those who generate their own electricity to save kWh credits for their excess electricity. Their system must be under 5 MW in size, and credits expire after 12 months. Customers may build their own project, or maybe a part of a shared community project. Community projects must be registered with the Public Utilities Commission (PUC).
The NEB Tariff Rate Program is only available to non-residential customers. Power systems must be under 5 MW in size. Credits are provided on a dollar basis at a rate decided annually by the PUC. The rates are also dependent on the power company and size of the solar array. Credits expire after 12 months, and like the residential system, consumers can participate in a shared community energy project.
Net Metering In Florida
Florida Power & Light is Florida’s leading energy company. Net metering is allowed under FPL, and they give monetary reimbursements for unused credits at the end of the year, though at a cost-avoided rate. Consumers are allowed to install a system that provides up to 115% percent of their annual consumption in kWh. There are three tiers, ordered by size, which are listed below:
- Tier 1: Up to 1o kW
- Tier 2: Between 10 kW and 100 kW
- Tier 3: Between 100 kW and 2000 kW
Customers must apply for the program and have their PV systems inspected, and must pay for permits to install their systems. If customers fall under tier 2 or 3, they must provide proof of insurance and pay an application fee.
Related: Top Solar Installers Florida
Net Metering In Massachusetts
Massachusetts allows net metering if the consumer is under a regulated energy company. The state does not differentiate between on-site and virtual net metering. If you generate your electricity at a different site than where it is consumed, it makes no difference in the way the consumer is billed. Net metering is limited by the size of the PV system; no larger than 2 MW for private facilities, and no larger than 10 MW for public facilities. The state also requires that power companies cap net metering at a percentage of the company’s highest historical peak load; 7% for private systems and 8% for public systems.
Net Metering In Hawaii
Hawaii officially closed its net metering program in October of 2015. Customers who applied to the program before the cut-off date still enjoy the benefits, but new solar installations are not eligible. 60,000 customers were able to successfully apply for Hawaii’s net metering program since it began in 2001, though the closure of the program crashed the state’s solar market. Hawaii currently has an NEM Plus program which allows current NEM consumers to add power storage to their system, as long as it doesn’t export energy to the power grid.
Net Metering In Colorado
Colorado implemented its net metering laws in 2005. Consumers can generate electricity and gain credit for their excess power at the retail rate. Large investor-owned utilities credit their customers up to 120% of their electricity demand but cap the credits at 10 kW for municipal utility companies and utility coops. Excess electricity can be rolled over to next month’s bill, and the utility company must reimburse the customer if they choose not to roll it over. Solar storage systems were made available to consumers in 2018.
Net metering is offered in most of Canada’s provinces. Ontario, the most populated province, allows net metering for systems of up to 500 kW. Credits can be carried for up to 12 months, after which the credits are cleared and the billing cycles starts over again. In British Colombia, customers are reimbursed up to $8.16 per kWh after 8 months, which increases to $9.99 after 12 months if they still provide a surplus of energy.
Net metering is also available in Saskatchwan, New Brunswick, and Nova Scotia.
Denmark was the first county in the EU to experiment with net metering. They began their preliminary phase in 1998. It turned out to be efficient and a good way to incentivize solar panels in the country. The program was so successful the government extended it for four years. In 2005, Denmark signed its first official net metering regulations, making the practice a permanent arrangement.
In France, net metering is available to all customers of EDF, France’s largest utility comapny. The buyback price is set at a fixed rate by the government, which is higher than the normal retail price. Many suggest selling all of their produced electricity to the power grid and buying back what is needed at the lower retail price.
The Netherlands began their own net metering program in 2004, though at first they limited buybacks to 3,000 kWh per year. The limit was later raised to 5,000 kWh, and as of 2014, there is no limit to the amount of electricity that can be sold by consumers.
Italy and Slovenia also have net metering programs, and the Spanish government proposed their own net metering program in 2019.
In Australia, net metering programs are known as feed-in tariffs. Feed-in tariffs differ because they require a seperte meter, though the functional and financial differences are similar. Programs for feed-in tariffs exist in all of Australia’s 8 territories, including the capital territory. The tariffs have, for the most, part succeeded in expanding interest in installing solar panels around the country. At the outset, Australian consumers received over three times the retail price per kWh of energy feed back into the grid, though this has been greatly reduced over the years as more consumers adopted solar arrays. The purpose was to incentivize residential solar energy, so the programs are considered a success.
Almost every state in India allows net metering, with the first laws being enacted in Karnataka and Andhra Pradesh. Solar panels in India, the country which boasts the largest solar farms in the world, often require an application with the local government before installation, and net metering requires another separate application. A bidirectional meter is installed upon government approval. Usually, up to 30% of the transformer capacity can be stored in the grid. In 2015, Maharastra was the latest state to enact net metering for solar panels, and allows up to 40% of the transformer capacity to be fed back into the grid.
Smart Meters and Measuring Home Energy Use
Net energy metering is dependent on your home energy use and the rules and regulations set by the government and local utility companies. If you are going to implement net metering, it’s imperative that you have a smart meter. Smart meters are an upgrade from the typical analog meter, which use dials to measure your home electricity use. Smart meters use a digital screen which displays your total household energy consumption. Instead of having utility personnel come out and check the meter every so often, smart meters use radio technology to communicate with the power company directly.
The best part about smart meters is that they allow you to check your home energy usage online. You can then see your energy stats, like the total energy consumed, the energy you fed back into the grid, and your net energy consumption, which is the difference between what you used and what you sold back to the grid.
Unfortunately, smart meters can have a negative effect on net metering. Whereas analog meters feed the electricity back to the grid at a 1:1 ratio, smart meters can be used by power companies to buy the electricity back at an altered rate. They may buy back power at a varied rate dependent on the time of day or year.
You & Your Local Power Company
Net metering smooths the demand curve for electricity, making it easier for power companies to manage energy loads during peak times, which can reduce stress on the grid and avoid blackouts. Still, power companies view net energy metering as lost revenue, and in some places, they’re trying to put limits on the practice. Just in the past few years, we saw policies that aimed to either reduce the price of electricity sold back to the grid, or like in Utah, reduce the time interval for calculation net electricity consumption. Rocky Mountain Power in Utah sought to reduce the calculation time for net power consumption to 15 minutes, which would effectively end rebates from net metering. The shorter intervals mean that electricity generated in the daytime wouldn’t be available for nighttime consumption.
Power companies view residential solar energy as a threat (you might want to expand your understanding of the underlying solar energy pros and cons factors). They view the potential behind net metering as a threat to their bottom line. They argue that the decrease in revenue compromises their ability to maintain the grid. In reality, net metering takes a small percentage of revenue compared to the total customers still on the main grid. Despite net metering having a positive affect on the grid, the immediate cut to their revenue stream is more important to power companies than the greater good. Once you install solar panels and begin generating electricity, it pays to be a local advocate for residential solar. Keep up with your local power company and local and state laws, and forge relationships with others in your community who have installed solar panels on their home. A strong community is the best way to keep net metering favorable for the people.
In areas that reward municipalities and utility companies for using renewable energy, they may actually offer more money per kWh to incentivize residential solar and net metering.
Read also: Required Solar Panels for Powering a Home
How Net Metering Can Save You Money
Net energy metering pays. But there’s more than one method to get reimbursed for your unused electricity. Most people simply take credits for their unused power. This is essentially a form of energy storage in that the electricity is fed into the grid and can be tapped later with no charge. Many use this to reduce, or even “zero out” their energy bill, saving them money over the long run. Net-metering is a fundamental feature for those seeking to design so-called “passive homes” (take a look at the theory behind the concept of passive solar homes). Those who are savvy to the movement in local energy prices can generate electricity when it’s cheap and tap into their reserves when prices go up.
Instead of credits, you can receive monetary rewards and reimbursements for selling energy back to the grid. Though this is not the case in all jurisdictions, some utility companies allow you to get outright paid for the electricity you generate. In jurisdictions that have quotas for renewable energy, utility companies may be willing to pay prices that are higher than the retail prices offered to consumers. In these areas, a good move would be to sell all of your generated electricity to the grid, then buy back what you need at the lower price.
Net metering can save you money by lowering the payback period for your solar panels. The payback period is the amount of time it takes for your solar panel installation to generate enough power to pay off the original cost. With net metering, you can earn extra income, which goes toward reducing the payback period. This is dependent on your home energy usage and the local price of electricity.
With electric vehicles becoming more popular, some are beginning to incorporate them into their net metering plan. This is called a vehicle-to-grid system. It allows vehicles that are parked and plugged into the grid to discharge their electricity into the grid, then later throttle the charge rate. Since cars tend to remain parked for most of their lifetime, some view it as a viable option to increase the sustainability of personal vehicles and supplement the electricity provided by their solar array. Peak load leveling is one of the applications of V2G, where EVs can charge in the day when the panels are generating power, then discharge power into the home or grid at night.
The downside to V2G is that it may impact the longevity of the vehicle’s battery life. Lithium-ion batteries eventually corrode and lose their charge over their lifetime, and the loss in efficiency is increased when the battery is constantly charged and discharged, as it would in a typical V2G setup. For this reason, many experts dispute the environmental and economic efficiency of V2G, as the extra battery related costs outweigh any potential benefits.
Read also: Benefits and Drawbacks of Solar Energy
Net metering is one of the best parts of owning a solar array. Instead of simply producing your own electricity, your also providing clean renewable electricity to the community. In addition to reducing your power bill and earning rebates from local power companies, net metering allows you to use the grid as a virtual battery. You can feed power to the grid during the day, and tap into the stored electricity at night. Even better, you can do this over the course of a few weeks, months, or even years. Net metering is location dependent, so it’s best to check local rules and regulations to see what benefits are in it for you!
Frequently Asked Questions
What is net metering?
Net metering is the practice of selling or storing unused electricity generated from your solar panel back to the grid. This is usually done in exchange for monetary compensation, kWh credits, or lower energy bills.
What is a rollover period?
The rollover period is the period of time that you can tap into unused electricity, or credits. The rollover time can be anywhere from a month to a year. Some jurisdictions have indefinite rollover times, meaning that you can store credits in the grid for the long term.
How do smart meters affect net metering?
Whereas analog meters gave consumers a 1:1 ratio for net metering power, smart meters allow utilities to set different rates, which can either benefit or hurt the consumer. Smart meters also allow consumers to see their net electricity consumption online in real time.
What are utility companies doing about net metering?
Many utility companies see net metering as a threat to their revenue stream, and are intent on passing regulations to limit and restrict net metering. Other companies welcome net metering, as they have a renewable energy quota to fulfill in exchange for tax incentives. These companies will usually buy consumer generated electricity at a rate higher than the retail price.