What is net metering?
Most solar systems are connected to the electric grid, or “grid-tied.” The electricity generated by your system can flow to and from the grid.
⬅️ Utility electricity flows into your home in moments when you need extra utility electricity. This ensures that you have a continuous supply of electricity, even at night and on particularly cloudy days.
➡️ Solar electricity flows out of your home in moments of over-production. Your excess electricity is then used by the house next door, or the neighborhood library.
So how do you get credit for the extra electricity you produce? And how does that affect your electric bill? The answer: net metering.
On this page, you’ll find:
- How net metering works
- A key element: interconnection
- Net metering in your state
- Additional types of net metering
- Our work
In the old days of analog meters, your utility meter would spin forwards when you consumed electricity from the grid, and backwards when you produced electricity from your solar array.
The meter would then “net out” the difference at the end of each month. The resulting bill would reflect the “net amount” that the meter reader saw on the dial.
Solar electricity your system produced
Utility electricity you consumed
The same concept holds true today — only with digital meters, not analog. If your monthly solar electricity production actually surpassed your utility electricity consumption, you’d end up with a negative bill credit. That credit may be carried over to the next month’s bill like cellphone roll over minutes.
This arrangement is called net metering. Net metering is the policy that enables you to be compensated for your solar electricity production, allowing you to offset your electric bill with that production.
Net metering is a state-level policy — passed by state legislatures and varying from state to state.
In most states, net metering allows for a one-to-one credit for your solar electricity. In other words, the electricity you produce is equal in value to the electricity you receive from your utility.
So, if your solar array produces one kWh of electricity, you can directly reduce your electric bill by one kWh. If that kWh of solar electricity is generated when you don’t need it, you’ll receive a credit for the full retail value of that kWh, which you can then use to offset your electricity consumption at a later time.
States’ rules vary in how and when they calculate the net metering credit, see below for state-specific information.
A key element: interconnection
Interconnection is the process through which your utility connects your solar array into their grid, allowing for the flow of power between the two.
Before you can install your system, your utility must first approve it. Your installer will submit the preliminary interconnection paperwork with your utility on your behalf, making sure the size and location of the solar array is approved by the utility.
Once your system is installed, your local jurisdiction will inspect it and your installer will submit a request for interconnection to your utility.
Once approved, your utility will visit the installation and install a two-way meter, which allows for more accurate reading and reporting of your solar electricity production. Once the two-way meter is installed and your utility gives you formal “permission to operate,” you can flip the switch on your solar array.
Smooth, timely, and cost effective interconnection is a key element of net metering.
Net metering in your state
Each state has its own net metering policies. Understanding those policies is key to making sure your solar investment is valued properly and compensated fairly.
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 (system size) you may install. These policies usually cap a system’s production at no more than a certain percentage of your yearly electricity consumption, often between 100 and 150%.
Excess generation credit rate
When your system produces more electricity than you need, it’s called “excess generation” or “excess production.” And thanks to net metering, your utility has to compensate you for it.
Typically, utilities will compensate you for any excess electricity you produce on a 12-month cycle. Where this is the case, you can use your excess production credits for up to a year.
The rate of compensation for this excess solar production varies greatly between utilities. Many utilities credit excess generation at the full retail rate, enabling the “one-to-one” crediting discussed above.
However, some utilities are moving towards crediting excess generation at a lower rate. Where this is the case, you’ll want to install a system that will enable you to consume as much of your solar electricity on-site as possible.
Statewide net metering cap
In many states, policies limit the total amount of energy that can be net metered. These rules harm states by hamstringing solar deployment. In many cases, the statewide net metering cap was set very low (often less than 3 or 4% of total utility electricity sales) when legislators enacted it years ago.
Many states are looking into raising this net metering cap in order to support the continued growth of solar.
Net metering laws and regulations can vary between utility territories. Municipal utilities, rural electric cooperatives, and investor owned utilities may have different net metering policies and enforcement mechanisms.
For example, many state net metering programs are only enforced by state regulators for larger investor-owned utilities. Many times, rural electric cooperatives and municipal electric authorities are exempted.
Policies expanding net metering
There are several types of net metering (see next section). Some states have passed laws that allow for virtual or aggregate net metering in order to broaden access to solar energy for residents and businesses.
Within net metering, utilities and public service commissions (i.e. the utility regulators) may deploy additional barriers to make it harder for residents to go solar. These may include additional fees when interconnecting to the grid, lengthy approval processes, and confusing tariffs.
Additional 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. Think residential solar panels: they’re installed on a single property, feed into a single electric meter, and that meter is associated with the single utility account of the homeowner.
However, there are other types of net metering, too. Here are a couple:
Aggregate net metering
This common policy allows a solar owner with more than one electric meter on their property to credit their surplus solar electricity from one meter to another meter (on the same property).
Aggregate net metering is most common on farms, and is commonly referred to as “Agricultural Net Metering.” A farm may have multiple buildings (each with its own electric meter), of which only one roof is good for solar. Often times, that good-for-solar building may have very little electric demand (e.g. a barn).
With aggregate net metering, the surplus electricity produced at that building’s meter can be credited to one of the other buildings on-site that has higher demand (like a house). 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. As of October 2016, 17 states have meter aggregation policies.
Virtual net metering allows for Community Solar. Multiple utility customers (called ‘subscribers’) sign up to receive credit for the electrical output of a single solar project somewhere in their community.
Community solar applications for virtual net metering allow ‘subscribers’ to receive bill credit for output or proportional share of an off-site solar installation.
- Common utility billing questions for new solar homeowners – A Solar United Neighbors original article about how to make sense of your electric bill after going solar, taking into account net metering and the generation of excess solar production credits.
- Database of State Incentives for Renewables & Efficiency (DSIRE) – The DSIRE database is administered by the NC Clean Energy Technology Center and catalogs the different energy policies in each state. You can filter by state to learn more about the net metering policies in your state.
- Fighting the Myth of the Solar Cost Shift webinar — a great webinar hosted by Solar United Neighbors on how distributed solar is a net benefit to all customers and fighting the utility myth of a solar “cost-shift” with Karl Rábago, Rábago Energy and Nicole Sitaraman, Sunrun.
- Reversing the Grid – A 99 Percent Invisible Podcast about net metering.
- State Net Metering Policies overview – This resource from the National Conference of State Legislatures provides background on the different types of net metering policies across the country and in which states they apply.
- Financial Impacts of Net-Metered PV on Utilities and Ratepayers: A Scoping Study of Two Prototypical U.S. Utilities – A report from the Lawrence Berkeley National Laboratory finds that even a dramatic increase in rooftop solar adoption would have minimal impact on utility rates.
- Two victories for net metering – A Solar United Neighbors original article detailing the recent decisions of Nevada and Colorado to extend their net metering programs.
- Punishing solar customers for disrupting outdated electric model is wrong – Vote Solar explains why net metering is a fair way to account for the electricity solar homeowners generate.
- Check out our Net Metering webinar to learn from our panel of experts who share best practices from states with strong net metering policies and cautionary tales from places fighting challenges to net metering and that have adopted alternative compensation structures for distributed solar.
We continuously monitor net metering policy changes across the country. Some states are expanding net metering while others are attempting to roll it back. Solar United Neighbors remains the only organization dedicated to activating solar owners to support net metering advancements and fight against net metering attacks in their backyard.
- Nationally, we partnered with Vote Solar, Earthjustice, and others to protect net metering from a petition at the Federal Energy Regulatory Commission (FERC). The petition proposed a national ruling on net metering that would have undone state net metering laws. We generated 20,000+ comments in opposition and FERC dismissed the petition.
- In West Virginia, we mobilized supporters in 2015 to prevent the repeal of 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 ensure interconnection within 30 days.
- In Virginia, we made sure the interests of solar homeowners were protected in a closed-door solar policy forum between state official and utilities, thwarting a proposed attack on net metering.
- In Florida, we’re fighting a decision by the Jacksonville Electric Authority to severely cut the net metering credit.
- In Ohio, our members advocated for net metering improvements during the Public Utilities Commissions of Ohio’s 2017 workshops on net metering rule review.
- In Maryland, we’re engaging in the Public Service Commission’s PC44 “Grid of the Future” conference to push for improved interconnection rules like increasing the allowable size for Level 1 solar arrays