What is Solar Net Metering and How Does it Work?

Many consumers who are thinking about going solar have heard the term “net metering” but aren’t sure what it means.

In simple terms, Net Metering is a way for utility companies to bill their customers that is available in many places. It allows homeowners and businesses to get a credit for the extra electricity their solar panel systems produce and feed back into the power grid.

Installing a rooftop solar system often leads to it producing more power than the home or business uses during the day.

Under the system of net metering, the customer is only charged for the “net” energy they use each month. This is defined as the gap between the energy produced by the solar panels and the energy that is used by the building over the course of the billing cycle.

If your property is net-metered, the meter will spin in reverse, indicating that any time the local regulations permit, you could earn credits for the energy you take from the utility company when the sun isn’t shining or it’s dark. Consequently, your energy bills only reflect what you’re paying for the “net” energy used. Any surplus energy that’s produced is sent back into the grid for others in the community to use.

Utilizing net metering can lead to substantial savings of up to hundreds on annual utility expenses, making it a compelling reason to opt for solar and invest early on.

Moreover, net metering offers an additional advantage. By producing electricity close to the point of consumption, this lessens the pressure on the grid’s infrastructure used for distribution and transmission, and reduces the loss of energy that occurs when electricity has to be transmitted over long distances from the closest power station.
Although some argue that net metering places an unfair load on those who don’t use solar energy, numerous studies examining the cost-benefit ratio of net metering have concluded that it’s actually a net benefit.

1. Cost Savings:
   • Homeowners and businesses can reduce their electricity bills by offsetting consumption with the credits earned from excess solar power.
2. Incentivizes Solar Adoption:
   • Net metering provides a financial incentive for installing solar panels, making the investment more attractive.
3. Environmental Benefits:
   • By promoting the use of renewable energy, net metering helps reduce carbon emissions and dependence on fossil fuels.
4. Grid Support:
   • Excess solar energy fed into the grid can help meet the demand, especially during peak hours.

Net metering policies vary by region, so the specifics can differ based on local regulations and utility company practices.

While some state authorities and utility companies have suggested policies that question the benefits of basic retail net metering, there have only been a few adjustments to the regulations so far.

The basic net metering policies at first were made for regions where the use of solar energy was minimal. However, with California, New York, and other states experiencing a swift rise in solar energy installations, changes are anticipated in the coming years. California has introduced what’s being referred to as “Net Metering 2.0,” and a study indicates optimism regarding the new policies compared to the initial retail net metering framework in California.

There are numerous discussions taking place throughout the nation on how to improve the existing programs. Updates to net metering might include more precise valuation of solar energy entering the distribution grid; electricity tariffs that charge more during certain hours of the day or night; considerations of where the excess electricity is being produced on the grid; providing credits at a wholesale rather than a retail rate; and the role of solar energy storage for residential purposes.

If you’re currently enjoying the benefits of net metering for your solar system, you’re likely protected from major cuts; you’ll be “grandfathered” in, no matter how any changes might affect the design of rates for new solar customers.

Therefore, to make the most of the current advantageous net metering policies, don’t hesitate to embrace solar energy. Explore our Going Solar page to discover everything from the number of solar panels needed to their cost.