What is Net Metering?

Available in many states across the United States, net metering is a billing mechanism used by power companies that allows customers with solar arrays to pay the “net,” or difference, in cost between what their solar system generates and the power they consume from the grid. Beneficial to both energy consumers and utilities alike, net metering has become an important incentive to encourage investment in solar energy systems.

How Does Net Metering Work?

No matter the size of a solar system, the amount of energy produced by the system will vary depending on the time of day, the time of year, and the weather. In other words, no system will produce the same amount of power continuously year-round.

For large industrial or commercial customers, a utility bill will include charges for electricity that are divided into two categories:

During the evening hours, the solar system is not producing any electricity and, with people home from work and school, the demand for electricity is higher than daytime hours. Even though power will need to be drawn from the grid, the credits accumulated during the day help to offset these costs, lowering the overall power bill.

What are the Benefits of Net Metering?

Net metering benefits energy consumers in several ways. First, it helps to shorten the payback period for solar equipment. Between equipment and installation costs, solar systems can be cost prohibitive. Fortunately, net metering programs offer a strong financial incentive by helping to cancel out high monthly utility bills. When customers only pay for the net energy they use, the overall power bill is significantly reduced, increasing the solar system's overall value.

Another net metering benefit is that energy credits can often be rolled over into future months when solar production may be lower. In North America, the period from March until June is often when solar credits can be banked at the highest rate. This is because the days becoming longer and sunnier while, at the same time, it is not yet warm enough to be running the air conditioning around the clock. These Spring months are noted for high production and low overall demand for power and consumers can bank energy credits at a high rate. Credits can then be used to offset energy consumed during the long, hot summer months or the dark winter months when generation is lowest.

Energy consumers may not think much about the strain they put on the utility grid, but it is always top of mind for utility companies. The power produced by individual solar arrays and sent to the grid helps to lighten the strain on the system, smoothing the demand curve, especially at peak periods, such as late afternoon and early evening. By lowering the demand, utilities can reduce the need for dirty, coal-fired “peaker” plants kick in to keep up with high demand and better manage their peak electricity loads. Net metering also supports electrical generation near the point of consumption, helping to prevent energy losses in long-distance transmission and distribution, promoting grid efficiency.

If you are interested in participating in a net metering program, contact your local utility to see which options may be available to you.