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Demystifying Solar Net-Metering

About the Author:

Headshot of Reed Crossley, Digital Marketing Strategist at Independent Power Systems

Reed Crossley

Reed Crossley is a Digital Marketing Strategist living in Boulder, Colorado. Reed works with a variety of energy, sustainability, and social impact organizations to do groovy things with digital technologies and achieve meaningful organizational goals. He holds a Master’s degree in Environmental Management from CU Boulder and volunteers as the Marketing Coordinator for the Boulder chapter of the Colorado Renewable Energy Society (BCRES). Ever quick with a movie reference or fun fact about the cleantech industry, Reed can be found hiking or kayaking in the mountains in his spare time. Connect with Reed on LinkedIn.

If you’ve been thinking about getting solar for your home or business, you may have heard there are generous rebates and incentives in place to encourage more clean energy in our communities. Arguably one of the most important of these incentives is what’s called net energy metering, or net-metering for short, which affords home and business owners who go solar a means of recouping their initial investment. With the right size solar energy system, you can produce enough electricity to match your home’s consumption for the entire year, effectively zeroing out your utility bills.

What is Solar Net-Metering?

Even when you leave the house to head to work or to drop the kids off at school, the solar panels on your roof are still working day after day to produce clean, renewable electricity. Solar panels require exposure to sunlight in order to work, so they’re producing the most electricity from midday until late afternoon when the sun is highest in the sky. Unfortunately, this is also the time of day when most residents are out and about, living their lives, and generally not sitting at home consuming electricity.

So what happens to all this excess electricity if you don’t have a home battery storage system to save it for later? Enter solar net-metering. Net-metering is a billing agreement with your local utility where you are compensated with energy credits based on the number of excess electrons you’ve fed back into the grid. When you go solar, you’ll get two new meters: a net meter and a production meter. The net meter will flow two ways instead of one and will keep track of how much energy your home uses as well as how much energy you are now producing with your solar array. Your utility keeps track of this exchange, and you’ll receive a credit on your bill at a rate set by your state Public Utilities Commission (PUC). This credit can then offset any electricity you need to pull from the grid to cover additional energy demand for a given month. The production meter will also keep track of your credits, also known as Renewable Energy Credits (RECs) provided your state has such a program in place.

How Does Net Metering Work?

Some days it’s cloudy and your solar panels won’t produce as much electricity. Other days you might have guests over that increase your energy consumption temporarily. In any case, there is a balance between how much electricity you need during a given timeframe and how much your system is able to produce. During the day when homes are generally using the least amount of electricity, your system is overproducing what is needed and generating net-metering credits for use later in the evening when energy demand is higher and the sun is no longer shining.

If your system generates a surplus of energy credits during your billing period, it means you’ve generated more kilowatt-hours (kWh) than you’ve consumed and you’ve effectively zeroed out your energy bill. Over time, these savings can add up, helping you recoup the cost of the initial installation and ensure manageable electricity bills for decades to come. Generally speaking, this happens in the summer months when the days are longer and the sun is higher in the sky.

Conversely, in the winter months, your system’s energy production will be lower as there is less sunlight available to convert into electricity. For months where you may draw more energy from the grid than you’re producing, you’ll only be billed for the difference in consumption.

What are the Benefits of Net-Metering?

In addition to helping recoup the initial cost of installing your solar power system, net-metering programs provide several key benefits for the community at large. First and foremost, your system is helping to reduce our nation’s overall dependence on polluting sources of electricity generation like coal or natural gas. A cleaner energy mix means less harmful pollutants entering our atmosphere and improved air quality for our cities, resulting in fewer health issues and less environmental degradation.

If you’ve been thinking about getting solar for your home or business, you may have heard there are generous rebates and incentives in place to encourage more clean energy in our communities. Arguably one of the most important of these incentives is what’s called net energy metering, or net-metering for short, which affords home and business owners who go solar a means of recouping their initial investment. With the right size solar energy system, you can produce enough electricity to match your home’s consumption for the entire year, effectively zeroing out your utility bills.

What is Solar Net-Metering?

Even when you leave the house to head to work or to drop the kids off at school, the solar panels on your roof are still working day after day to produce clean, renewable electricity. Solar panels require exposure to sunlight in order to work, so they’re producing the most electricity from midday until late afternoon when the sun is highest in the sky. Unfortunately, this is also the time of day when most residents are out and about, living their lives, and generally not sitting at home consuming electricity.

So what happens to all this excess electricity if you don’t have a home battery storage system to save it for later? Enter solar net-metering. Net-metering is a billing agreement with your local utility where you are compensated with energy credits based on the number of excess electrons you’ve fed back into the grid. When you go solar, you’ll get two new meters: a net meter and a production meter. The net meter will flow two ways instead of one and will keep track of how much energy your home uses as well as how much energy you are now producing with your solar array. Your utility keeps track of this exchange, and you’ll receive a credit on your bill at a rate set by your state Public Utilities Commission (PUC). This credit can then offset any electricity you need to pull from the grid to cover additional energy demand for a given month. The production meter will also keep track of your credits, also known as Renewable Energy Credits (RECs) provided your state has such a program in place.

How Does Net Metering Work?

Some days it’s cloudy and your solar panels won’t produce as much electricity. Other days you might have guests over that increase your energy consumption temporarily. In any case, there is a balance between how much electricity you need during a given timeframe and how much your system is able to produce. During the day when homes are generally using the least amount of electricity, your system is overproducing what is needed and generating net-metering credits for use later in the evening when energy demand is higher and the sun is no longer shining.

If your system generates a surplus of energy credits during your billing period, it means you’ve generated more kilowatt-hours (kWh) than you’ve consumed and you’ve effectively zeroed out your energy bill. Over time, these savings can add up, helping you recoup the cost of the initial installation and ensure manageable electricity bills for decades to come. Generally speaking, this happens in the summer months when the days are longer and the sun is higher in the sky.

Conversely, in the winter months, your system’s energy production will be lower as there is less sunlight available to convert into electricity. For months where you may draw more energy from the grid than you’re producing, you’ll only be billed for the difference in consumption.

What are the Benefits of Net-Metering?

In addition to helping recoup the initial cost of installing your solar power system, net-metering programs provide several key benefits for the community at large. First and foremost, your system is helping to reduce our nation’s overall dependence on polluting sources of electricity generation like coal or natural gas. A cleaner energy mix means less harmful pollutants entering our atmosphere and improved air quality for our cities, resulting in fewer health issues and less environmental degradation.

Net-metering programs also serve to benefit the partnering utility as excess solar energy being fed back into the grid means less electricity they have to produce at a centralized power facility. In regions where energy demand is generally higher, this serves to reduce the likelihood a utility will need to utilize a costly, inefficient “Peaker Plant” (typically natural gas) to meet peak electricity demand. It also lessens the need for energy providers to take more drastic steps like implementing controlled blackouts or brownouts to manage the energy needs of their customers.

Generating electricity onsite using solar panels (distributed generation) also reduces the wear and tear on the grid and means less energy is lost in transit. This increases the reliability and security of the grid and keeps operational and maintenance costs low. It also means lower capital expenditures for utilities as they aren’t having to continuously build new generating facilities to keep up with demand.

DSIRE map of net-metering programs in the United States

Is Net Metering Available in My State?

Most states have some form of net-metering policy though terms and eligibility may differ. Currently, thirty-eight states, four territories including Puerto Rico, and the District of Columbia offer voluntary net energy metering programs and seven more—Maine, Mississippi, Nevada, Georgia, Hawaii, Arizona, and Indiana—have alternate forms of compensating distributed energy generation. Utilities in Idaho and Texas have also adopted their own net-metering programs.

Net-metering provides a host of benefits to a state’s economy including job creation and additional capital investment. They’re also key elements for achieving statewide Renewable Portfolio Standards (RPS)—essentially mandates for a cleaner energy mix for a city, state or country—as net-metering encourages the adoption of solar PV and innovation of the technology. More demand for solar means more local installation and electrician jobs. It also means greater energy security for the home and community as a whole.

Programs vary in terms of eligible technologies (wind, solar, geothermal, fuel cells, etc.) and can differ in how a home or business owner is compensated for their system’s excess generation. In some states, net-metering credits may roll over month to month while others may have programs that see these credits expire at the end of the year. Depending on the program, there may also be limitations on the maximum system size that is eligible for net-metering as well as specific policies for customer type (e.g. industrial, commercial, residential).

Our Colorado customers can read more on Xcel’s Net Metering FAQ’s here.

Can You Participate in Net-Metering if You are Off-Grid?

Living truly independent and ‘off-grid’ has its perks, but these homeowners are unable to reap the benefits of a net-metering program without a means of exchanging electricity with the grid. Instead, these systems require energy storage devices to store unused solar generation for later. No access to the grid means more wear and tear on your system, particularly with the batteries as they’re having to discharge more frequently than if the home were grid-tied. An off-grid lifestyle demands homeowners be more energy conscious as they now have a finite energy budget and no grid to lean on to meet extra demand.

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