Credit for electricity sent to your neighbors
Rooftop solar benefits everyone. It benefits you, the solar owner, and it benefits your neighbors. For all the benefits you provide to the grid, there’s a little bit that comes back to you. That little bit is known as Excess Distributed Generation (or EDG).
You’ll receive credit for your solar generation that’s shared with your neighbors through EDG if you went solar in Indiana after net metering ended for your utility (July 1, 2022 for most utilities).
(If you installed before July 1, 2022 or have net metering, you can find out more here.)
EDG can be confusing. Here are some common questions from solar owners and answers that can help you understand what you receive for the electricity you generate, but don’t consume yourself.
- How is the electricity generated by my panels used?
- What happens to the electricity I don’t use?
- What is the credit I receive for this?
- How else have the large utilities changed how I’m credited for electricity I share with my neighbors?
- What will I see on my bill each month?
- How can I make the most of my solar system with “instantaneous netting”?
- What’s next in making sure solar owners receive fair credit for the electricity they generate, but don’t use themselves?
How is the electricity generated by my panels used?
Block #1 shows the panels, or solar array, on the roof. The panels collect sunlight and turn it into Direct Current, or DC, electricity. That electricity goes to #2, the solar inverter. The inverter converts that electricity into Alternating Current, or AC, electricity. Your home and appliances most likely use AC electricity. That AC electricity then goes to #3, your home’s electrical panel. This is where it’s sent to power your lights, computers, refrigerator, and anything else in your home that uses electricity. Any electricity you’re not using at that moment is sent to #4, the Utility Meter on the side of your house. This is where it is then sent to be used by your neighbors.
Before your solar array was turned on, your utility will have switched out your old utility meter for a new, bi-directional meter. This meter measures how much electricity you take in each month from the utility and how much electricity you send back.
What happens to the electricity I don’t use?
Sometimes your solar panels generate more electricity than you can use at that particular moment. Think about the middle of the day, your panels are pumping out electricity, but you’re at work, or you’re running errands. You may not be using all that electricity at that moment. Where does the electricity you’re not using go? If you’re hooked up to your local utility and you don’t have batteries to store it, that electricity goes out through your electric meter. The people closest to you use it instead.
This electricity you send out benefits everyone. It does so by:
- Providing clean power where it’s needed locally,
- Reducing wear and tear on the electrical grid, and
- Limiting the need for the utility to add expensive infrastructure, like additional power plants.
For every kilowatt-hour of electricity you send out to the grid, you get credit on your bill that helps lower your monthly payment.
What is the credit I receive for this?
The credit you receive will depend on the utility that supplies your electricity.
If you’re a customer of a municipal electric utility or a rural electric member cooperative (REMC), the amount of credit for the electricity you send back, and how it’s measured, will vary. You will need to check with them. You can do so either by going to the utility’s website or calling them to see what their rate of credit is for the electricity you send out.
If you’re a customer of one of the five large investor-owned utilities or IOUs (NIPSCO, CenterPoint, Duke, AES, or I&M/AEP), then you will receive an Excess Distributed Generation credit, or EDG credit. That EDG credit is equal to 125% of the average wholesale price of electricity for the prior year. The wholesale price is what the utilities pay for the electricity that they send on to you.
Wholesale prices go up and down. The EDG rate will be updated annually for each of the five large IOUs. These updates will reflect what the average wholesale price was in the previous year, plus 25%.
EDG replaces a previous and more fair system of credit called net metering. The IOUs lobbied the state legislature to do away with net metering. The Indiana General Assembly acted by replacing it with EDG. Solar United Neighbors has worked with many individuals and state organizational partners to preserve and bring back net metering. We’ll continue that work.
2023 EDG credit rates by utility
| NIPSCO | $0.08085/kWh |
| AES Indiana (IPL) | $0.09229/kWh |
| I&M | $0.08482/kWh |
| Duke Energy Indiana | $0.090476/kWh |
| Centerpoint (Vectren) | $0.08792/kWh |
How else have the large utilities changed how I’m credited for electricity I share with my neighbors?
The Indiana Utility Regulatory Commission (IURC) approved another request from Indiana’s large IOUs to change how EDG credits are measured.
With net metering, all the electricity you sent out was totaled at the end of the month. That number was then taken off the amount of electricity you received from the utility. This is called monthly netting. Each month when the utility tallies up your bill, the utility is netting, or taking the difference between, electricity you sent out and the electricity you received.
Here are a couple of examples of how that works. The examples assume a retail electric rate of 15 cents per kWh and EDG credit of 4.5 cents per kWh:
Net metering example 1 – You use more energy from the grid than you send out
| Electricity you used from the utility in a month | 500 kWhs |
| Electricity you sent out to the utility in a month | 300 kWhs |
| The amount of electricity you pay for on your bill (500 kWhs - 300 kWhs) | 200 kWhs |
| Your total bill for electricity used (200 kWhs x $.15) | $30.00 |
|---|
Net metering example 2 – You use less energy from the grid than you send out
| Electricity you used from the utility in a month | 500 kWhs |
| Electricity you sent out to the utility in a month | 600 kWhs |
| The amount of electricity you pay for on your bill | 0 kWhs |
| EDG credit that you roll over to your next month’s bill (500 kWhs - 600kWhs) | 100 kWhs |
| EDG credit (in dollar amount) that you roll over to your next month’s bill (100 kWs x $.045) | $4.50 |
|---|
This has been the way that solar customers earned credit for electricity they generated but did not use. We (along with a number of other organizations) believe that this is the appropriate way to measure solar credits even under the new Indiana law.
However, the large utilities received permission from the IURC to use what they call “instantaneous netting.” This is really no netting at all. With this method of measurement, all the electricity you send out is credited at the rate of 125% of the wholesale price. Here is how that works for the same hypothetical customer using the same assumptions as above:
Instantaneous netting example 1 – You use more energy from the grid than you send out
| Electricity you used from the utility in a month | 500 kWhs |
| Electricity you sent out to the utility in a month | 300 kWhs |
| Electricity use charge for the month (500 kWhs x $.15) | $75.00 |
| EDG credit (in dollar amount) for the month (300 kWhs x $.045) | $13.50 |
| Your total bill for electricity used ($75 - $13.50) | $61.50 |
|---|
Instantaneous netting example 2 – You use less energy from the grid than you send out
| Electricity you used from the utility in a month | 500 kWhs |
| Electricity you sent out to the utility in a month | 600 kWhs |
| Electricity use charge for the month (500 kWhs x $.15) | $75.00 |
| EDG credit (in dollar amount) applied to your bill (600 kWhs x $.045) | $27.00 |
| Your total bill for electricity used ($75.00 - $27.00) | $48.00 |
|---|
In both of these two examples, rather than getting a fair and equal 1:1 credit to cover the usage of electricity you receive from the utility, you get a much lower amount of credit for that electricity. But there is another significant difference between the two. Going from monthly netting to “instantaneous netting” more than doubled the total monthly bill in Example 1, and moved Example 2 from a net credit that would be carried forward to the next month to a $48 bill.
Estimates are that “instantaneous netting” more than doubles a household’s monthly electricity charge vs. monthly netting. And, it approximately doubles the payback period on a typical rooftop solar system. “Instantaneous netting” makes solar too expensive for many households that want to go solar.
Solar United Neighbors and our partner organizations believe that state law only allows monthly netting. We have challenged the use of “instantaneous netting” in the courts. The case is currently before the Indiana Supreme Court. Oral arguments are scheduled for September 15, 2022. Our hope is that the Court will make a final decision on the case by the first half of 2023. You can find more information about the importance of preserving monthly netting here.
What will I see on my bill each month?
Your bill will reflect the difference between these two amounts:
- the cost of the electricity you use from the utility, and
- the amount of credit off your bill for the electricity you send out.
What the bill won’t show is the amount of electricity from your array that you used immediately at your home. It will only reflect the amount of electricity you don’t use at your home and that you then send out.
How can I make the most of my solar system with “instantaneous netting”?
People decide to go solar for a lot of different reasons. One of those reasons is reducing their electricity bill.
If that’s a determining factor for you in deciding to go solar, great! It’s important, then, to remember that, as with all netting practices, the credit you receive towards your monthly bill only applies to the electricity that you don’t consume yourself.
Therefore, the key task with “instantaneous netting” is to minimize the amount of electricity you send out. You want to use as much of your solar-generated electricity at your home or business that you can. In order to do that, a solar system must be sized correctly. Assuming no other changes to your electricity consumption, you’ll want a system that on average, only provides a portion of the electricity that you use. That often is around 50% of your monthly electricity usage. The actual number will depend on specific features of your personal energy consumption and how your solar installation is designed.
While there will still be moments that you send electricity out, and thus receive the lower “instantaneous netting” credit for it, those moments will be few, assuming your system is properly designed to maximize self consumption.
You can also use other approaches to maximize the amount of your solar energy that you use at home. This includes shifting when you use electricity to better align with when your panels are producing electricity. For example, if you have an electric vehicle, you can program it to charge during the daytime instead of overnight. Or, you can install a package of equipment and software that helps you manage certain energy intensive appliances, like an electric water heater. You can also ask your solar company about adding battery storage to your solar project, though the additional costs of adding batteries may be cost prohibitive.
Another important thing to do is to upgrade the energy efficiency of your home. You will get the biggest return on the investment you make in your home if you combine a properly-sized solar array with energy efficiency upgrades.
What’s next in making sure solar owners receive fair credit for the electricity they generate, but don’t use themselves
States all over the country recognize the value and benefits that customer-owned rooftop solar brings to all electricity users. They do so by using net metering to calculate credit for solar-generated electricity. Unfortunately, in 2017, the Indiana State Legislature went along with the wishes of the large IOUs. It voted to end net metering by July 1, 2022. It replaced it with EDG. That decision was made worse with the implementation of “instantaneous netting” or “no netting” regime approved by state regulators at the IURC.
As mentioned above, the Indiana Supreme Court will decide soon on how the electricity you generate but don’t use at your home is credited on your monthly bills.
Solar United Neighbors is continuing the work to provide solar owners with fair credit for the benefits they provide the electric grid.
You can be a part of that effort by joining our Solar Action Team. The team is made up of folks just like you from around Indiana. We meet once each month on-line to receive an update on what’s happening with solar in the Hoosier state. We work together to find out how we can advocate for better solar policies with lawmakers and other policy makers. Join the Solar Action Team to help make a better utility system for all Hoosiers!
If you have other questions about your bill, the credit you receive for the electricity you send to the grid, or other solar issues, email us at: inteam@solarunitedneighbors.org.