What is net metering?
Most solar PV systems are connected to the power grid. When your system generates more power than your home needs, the excess is sent to the next closest building. Likewise, you take energy from the grid whenever your home needs more than it is generating or when the sun is not shining. This ensures you always have a continuous supply of electricity.
In the days of analog meters, your meter would “net out” your production. In other words, at night when you were using grid electricity, the meter would spin forward like normal. During the day when your solar was producing electricity, the meter might slow down. If you were producing more than you needed, your meter might spin backwards because your excess electricity was flowing out of the house. At the end of the month, you would owe the electric company the “net amount” that the meter reader saw on the dial. In those days, the only conflict would be over how to handle a negative bill. More often than not the negative credit was just carried over from month to month like “roll over minutes.”
In the days of digital meters, the utility can make this process more complicated. The meter doesn’t spin anymore and the utility can actually compensate you at a different rate for the electricity you produce than the electricity you can use. With the arrival of “smart meters” purchased with rate-payer dollars, the net metering wars began and rage on to this day.
Net metering is the policy that ensures that you get compensated fairly for the energy you produce. It allows you to offset your electric bill with your solar production. Typically, this is a one-to-one credit. In other words, the solar energy you produce is equal in value to the energy you receive from your utility. So, if you produce one kWh of electricity, you reduce your bill by one kWh of electricity. States’ rules vary in how and when they calculate the net metering credit.
When you are connected to the grid, you are part of a grid-tied system. The advantage of a grid-tied system is that you do not need batteries, and you have a constant supply of energy from either your panels or the grid, whether the sun is shining or not. However, if the power goes out on the grid, your system is designed to shut down so that energy does not backfeed on the line. That means, that if the power goes out, you can’t use your solar power unless you have batteries or special equipment.
How it works
Types of net metering
The most common net metering arrangements for homes or businesses involve a single meter on a single property with energy credited to one bill or account. However, there are other types of net metering:
- Aggregate net metering: This allows a solar owner with more than one energy meter on their property to credit surplus solar energy produced from one meter to another meter. A common example is a farm with multiple buildings in which one building has a great roof for solar but very little electric demand. With aggregate net metering, the surplus energy produced at that building’s meter can be credited to a building with higher demand as a simple accounting function. In many states, aggregate net metering is limited to farms. Tenant aggregation allows multiple occupants of a single building to share electricity or receive proportional credit from an on-site, shared installation.
- Virtual net metering: Virtual net metering allows multiple utility customers or (‘subscribers’) to receive credit or share electricity output from a single solar project or installation. Community solar applications for virtual net metering allow ‘subscribers’ to receive bill credit for output or proportional share of an off-site solar installation.
Before you can install your system, your utility must first approve it. After installation, your local jurisdiction will inspect it and your installer will submit a request for interconnection to your utility. Interconnection is the process through which your utility connects your solar array into their grid, ensuring the flow of power between the two. Once approved, your utility will visit the installation, install a two-way meter, and give final Permission to Operate. Then you can flip the switch and start generating solar power. Smooth and timely interconnection is a key element of net metering.
Why net metering benefits everyone
Net metering benefits all ratepayers because net metered homes and businesses produce power when and where it’s needed with a free source of fuel. Numerous studies show that rooftop solar helps eliminate the need for significant infrastructure investments, reduces demand at peak usage times, and lowers rates. However, net metering does lower the utilities’ profits. As a result, it has become a source of conflict. Utilities and their allies (such as ALEC and the Edison Electric Institute) have used their political power to urge state regulators to undermine net metering protections and block consumer options. They falsely claim that solar users are not paying their fair share of the costs of building and maintaining the electric grid.
This controversy has led regulators and other third parties to conduct research into the value of solar. Most studies conducted (see below) have shown that the value of solar is greater than the net metering credit rate. The reality is that solar benefits the whole grid, not just solar customers. But that hasn’t stopped those with a financial interest in seeing distributed solar energy fail from waging political fights.
The reality is that solar provides benefits to the entire grid, not just to solar customers.
Evaluating net metering in your state
Every state has its own net metering policies, some favor installing solar more than others. Solar United Neighbors wants to help everyone going solar understand how their investment is being valued and ensure compensation is fair.
When looking at net metering in your state, consider these key issues:
- System capacity limit Utilities or public commissions often limit the total system capacity you may install. These policies usually cap a system’s production to no more than a certain percent (often between 100 percent and 150 percent) of the customer’s yearly electricity consumption.
- Excess generation credit rate When your system produces more energy than your home uses monthly, your utility is obligated to compensate you for that energy under net metering. Typically, on a 12-month cycle the utility will compensate you for any excess energy produced. However, the rate of compensation is not always equal to the price of energy that you purchase from the utility.
- State-wide net metering cap In some states, policies limit the total amount of energy that can be net metered. These rules can harm states and hamstring solar deployment.
- Applicable utilities Net metering laws and regulations can vary between utility territories. Municipal utilities, utility cooperatives, and investor owned utilities may have different policies, so it is important to understand how your system will be compensated.
- Policies expanding net metering Several different types of net metering exist, as shown above. Some progressive states have expanded net metering laws to expand access to solar energy.
- Additional barriers Within net metering, utilities and public commissions may deploy additional barriers to make it harder for individuals to go solar. These may include additional fees when interconnecting to the grid, lengthy processes, and confusing tariffs.
Each of our state net metering pages lay out what you need to know when considering solar energy.
Net metering resources
Data summarizing value of net metering
- Brookings Institution meta analysis – This 2016 report concludes that net metered, rooftop solar is a net benefit to all ratepayers.
- Solar cost-benefit studies – A compilation of all state-wide value of solar studies from the Solar Energy Industries Association with links to the studies.
- Wellinghoff and Tong: A common confusion over net metering is undermining utilities and the grid – This article debunks the solar “cost shift” narrative.
- Op-ed: Not a Bright Idea – Column from Indiana that explains the value of protecting net metering.
- Reversing the Grid – A 99 Percent Invisible Podcast about net metering.
- Report: Natural Gas Prices and Utility Infrastructure Spending Have High Impact on Bills; Solar Negligible – This report highlights Edison Electric Institute’s role in spreading misinformation about the impact of solar on electricity customers.
State-specific resources on the value of net metering
A number of states have commissioned studies to determine the impact of solar on the grid. The majority have concluded that net metered solar is a net benefit to all ratepayers.
- Net metering in Mississippi – This study from Synapse Energy finds net metering to be a net benefit to consumers.
- New Hampshire solar: PUC lifts net metering limits – This article describes a decision from New Hampshire’s utility commission to remove caps on net metering.
- Nevada net energy metering impacts evaluation – A report sponsored by the Public Service Commission of Nevada finds the use of solar provides a net benefit to non-solar customers.
- Solar power generation in the US: Too expensive, or a bargain? – Study concludes the combined value of distributed solar generation to New York’s rate and taxpayers is an estimated 15 to 41 cents per kWh.
- Evaluation of net metering in Vermont conducted pursuant to Act 125 of 2012 – The Vermont legislature concludes net metered solar is a net benefit to all ratepayers.
- Solar energy in Michigan: The economic impact of distributed generation on non-solar customers – A whitepaper summary of close to 50 studies on the value of solar finds that the benefits of distributed solar generation systems exceed the retail cost of electricity and the value of solar in the majority of cases studied is greater than the compensation solar customers received under net metering programs.
We continuously monitor policy changes on net metering across the country and activate our members to improve processes and prevent roll-back:
- In 2015, we mobilized supporters to prevent the West Virginia legislature from repealing the state’s Alternative and Renewable Portfolio Standard, which included the state’s net metering legislation.
- In D.C., our members filed complaints with the D.C. Public Service Commission to force PEPCO to revise its interconnection process to ensure hookups within 30 days.
- In Virginia, we worked with Blacksburg city government to establish interconnection processes and allow for timely net metering.
Learn more about net metering in your state