Net metering is a billing arrangement where you receive credit when your solar PV system sends excess electricity back to the grid. When your system under-produces (like at night), you consume power from the grid. Utilities then charge or credit you for the “net” usage.
Key Points
- Saves Money: Credits can offset future electricity use from the grid.
- Billing & Overproduction: Some states/utilities let unused credits roll over to the next billing period; others may pay wholesale rates for your surplus.
- Variations by State: Policies differ widely, so research your local net metering laws.
*The adoption of onsite (behind the meter) solar varies state by state due to state net-metering laws.
What is Net Metering? #
Net metering is a billing arrangement with the utility that offers credits when a solar PV system overproduces and sends excess electricity back to the grid. If the building does not require all the electricity that the solar system produces at any given moment, the energy feeds back into the utility grid, thus qualifying the owner for a “credit” on one’s electric bill. When one consumes energy from the grid, the utility meter spins forward, and when a solar system sends energy to the grid, the meter spins backwards. The “credit” can be used to cover costs that one would otherwise incur when using electricity from the grid at night (when solar is not actively supplying electricity to the building).
How does Net Metering save money? #
Savings will vary by state and utility company. The reduction in kWhs pulled from the grid results in savings related to all charges that are based on kWh usage: including generation, distribution, and transportation charges. The customer still pays all fixed charges and applicable demand charges. In most instances, when the solar PV system produces less solar power than the building consumes over the course of a billing period (usually a month), the utility will bill the customer for the net kWhs used. In other words, the building owner will receive the full 1:1 retail value for each kWh the system produces.
How does Net Metering compensation for overproduction work? #
Forms of compensation will vary by state and utility company. Generally, the building owner should be charged only for the net kWhs used within a billing period. In most instances, if more energy is generated by solar than consumed over a billing period (month or year), the utility will roll over those credits to the next period. This credit may be in the form of a “kWh” credit, or a monetary credit based on the retail or wholesale rate at the end of the billing period.
Net metering occurs in the areas that display overproduction from solar. In these cases, solar generates more power than the actual usage, causing the utility meter to spin backwards. That excess power is sent back to the grid, while “credits” accumulate on the account.
Savings occur in every green area where solar produces power. For example, although the system is not overproducing during the last day, solar is still helping to offset/reduce the amount of electricity being pulled from the grid.
A detailed explanation on what is happening during a Typical Week: #
WEEKEND: On Saturday and Sunday, the building load is very low. Solar power is generated throughout the day with plenty of sun, which causes a lot of energy to be exported to the grid (accumulating credits). Credits are being used up at night while there is still some electricity load.
MONDAY: The building energy load spikes, causing debits on the account. Solar generation doesn’t show a consistent curve since it’s cloudy outside. For the most part, the building is pulling power from the grid (at a reduced rate), and energy is exported for a small amount of time in the middle of the day.
TUESDAY: A nice, sunny day. In the morning, the building starts pulling power from the grid as the energy load shoots up when workers arrive. Then, the load from the grid starts to slowly reduce as some of the electricity is produced by the solar array. Then, eventually, the building exports power back to the grid (accumulating credits), before the cycle reverses again.
WEDNESDAY: No net-metering occurs because of the lack of sun. However, the load from the grid is reduced and savings still occur. The net of the debits and credits appears in the middle.
Why is Net Metering Important? #
Net metering ensures the solar owner is credited for those natural swings in daily production. Depending on one’s building’s energy usage and time of peak demand, net metering can help maximize the owner’s savings from solar power. Understanding net metering laws can help determine the ideal size of the PV system after factoring in daily, weekly, monthly, or annual estimated energy usage.
For those considering onsite solar, these net metering regulations should guide the solar company to design your system in the most cost-effective way. After evaluating one’s electricity usage, the solar provider should factor in net metering compensation to get the best return on investment, combined with understanding how much PV generation one prefers.
What if a given state or utility does not offer Net Metering? #
If a state or utility does not offer net-metering, one will likely receive less value, or no credit at all, when solar electricity is sent back to the grid. In some instances, any time power is sent back to the grid at any given moment (as compared to a net basis over a billing period), the utility will provide a monetary credit based on the retail or wholesale rate at the end of billing period. Note: this excludes distribution and transmission charges, so it is a lower credit than if there was net-metering.
Want to see how net metering credits appear on an actual bill? Look at the examples in Section 2.6: How Do I Read and Understand My Commercial Electrical Bill
Curious how net metering policies influence the financial return of a solar project? Explore Section 4.4: What Is Levelized Cost of Energy (LCOE), and Why Does It Matter?
Wondering how different utility rate structures interact with net metering? See Section 2.7.5: How Does Utility Rate Structure Affect Solar Savings?