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basics of net metering

The basics of net metering: how it works (and can earn you money)

Net metering is a program that allows homeowners with solar to sell back their unused solar energy to their utility company. This means that homeowners with solar can actually make extra money (in the form of credits on your electric bill) for producing solar energy. It’s one of the easiest ways to see your monthly electric bill drop and one of the many benefits of switching to clean renewable energy.

What is net metering?

net metering explainedNet metering, or net energy metering (NEM), is a system used by electric utility companies that determines your electric bill based on your net power consumption. Net metering is a tremendous advantage for homeowners and business owners who produce excess solar power.

Net metering explained

Net metering allows you to be fully credited for the electricity that your panels contribute to the grid. This means you’ll only be charged for the difference between the amount of electricity you use vs. the electricity produced. Oftentimes, this can create a zero or negative electric bill, depending on your particular energy consumption and production.

How does net metering work?

The great advantage of having solar panels installed is that you can produce your own electricity easily due to the readily available resource of the sun.

Your home will use the electricity your panels produce to power your home. Any excess electricity will get sent to the utility grid. During times when your solar panels are not producing energy, such as at nighttime, your electricity meter will actually run backwards, drawing energy from the electric grid to power your home.

Here’s a short video about how solar energy works, including net metering:

How net metering can save you money

If your panels produce more power than your home uses, the power will be sent to the grid and you will receive a credit that will be applied to your monthly electricity bill.

Understanding net metering

net metering billHere’s the equation: Power Consumed from the Grid – Power Produced and Transferred to the Grid = Net Power Consumption

Let’s break it down with an example.

Let’s say your household uses 1,000 kilowatt hours (kWh) of electricity during any given month. During that month, your panels produce 850 kWh. When you get your utility bill for that month, your home would only be charged for 150 kWh of electricity because that’s all your home pulled from the power grid.

So, let’s say your house only used 700 kWh of electricity one month, but your panels produced 850 kWh. Your utility company would then credit you for that additional 150 kWh on your next bill.

Do credits roll over?

This depends on your utility company, but most net metering programs allow credits to carry from month to month. So basically, it’s like rollover cell phone minutes. Remember those? If your home produces more electricity than your home can use in a month, net metering credits can be used to offset the electricity your home uses the following month’s billing period. This means you can rack up those credits during the summer to use in the winter. In fact, this will often lead to homeowners ending up with negative electricity bills. Wouldn’t you love to see a negative on your monthly bill?

Net metering states

The laws regarding solar panel installations and solar net metering policies can vary drastically from state to state. Many of these legislative measures are designed to encourage people to install solar panels on their property to produce electricity. Some states may offer tax credits or property tax breaks, depending on their Renewable Portfolio Standards (RPS). Certain states and utility companies also offer net metering for solar as another type of incentive.

Currently, net metering is mandated in 38 out of 50 states, as well as Washington D.C. Most of these states (29) offer full-retail net metering programs, while 17 states offer alternative versions of net metering. Some states that are not mandated for net metering on a state level still offer net metering, such as Idaho and Texas.

Here are the states that currently offer net metering.

net metering states map

Benefits of net metering

how net metering works

Save on your monthly electric bill.

As we’ve already mentioned, net metering can save you a lot on your monthly electric bill. Think about the freedom of not having to worry about that bill hitting every month. And with electricity prices on the rise every year, it’s also an investment in energy price stability for the future.

Recover initial costs faster.

Net metering helps to recoup the initial investment of the cost of the solar PV system itself. And if you’re financing your system, this means a faster payback period thanks to the money you’ll be saving every month.

Reduce growing stress on the electric grid.

The pressure on the power grid is growing with more energy demands than ever before. The utility companies are struggling to keep up with the demand, causing more frequent power outages and forced down-time during rush hours.

When you have your own energy-producing solar power system, you’re reducing strain on the grid because you’re only pulling in energy during the night (unless you have a solar battery). And with net metering, you’re feeding energy back into the grid for other non-solar customers to use, reducing the grid’s overall reliance on fossil fuel energy that is beginning to run out.

Why does net metering matter?

Net metering for rooftop solar systems allows you to receive the full value for the solar electricity that your solar energy system generates. That’s why it matters!

Oftentimes the amount of electricity produced by homes and businesses is not the same as the amount of power consumed. Your solar panels will produce energy during the day, while your home may use a significant amount of power when the sun is down.

Without net metering, the solar power produced by the rooftop solar panels may not be fully credited to the homeowner. If your panels produce more energy than you use, the excess electricity is sent to the grid. But without net metering, the grid may not be able to credit you for that extra energy. With net metering, the produced electricity is fully credited to the home or business.