What is Net Metering?

According to DSIRE Solar Portal (Database of State Incentives for Renewables & Efficiency), 43 US states (and Washington D.C.) utilize a form of net metering and have enacted net metering policy.  Procedure and policy can vary for each state.

Net energy metering (or “net metering”) is a special billing arrangement that provides credit to customers with solar photovoltaic (PV) systems for the full retail value of the electricity their system generates. Under net metering, the customer’s utility meter keeps track of how much electricity is consumed by the customer and how much excess electricity is generated by the system and sent back into the utility grid (note 2-way arrow on diagram below).

Grid Tie Diagram

At any time of the day, a customer’s solar PV system may produce more or less electricity than they need for their home or business. When the system’s production exceeds the customer demand, the excess energy generation automatically goes through the electric meter into the utility grid, running the meter backwards to credit the customer account. At other times of the day, the customer’s electric demand may be higher than the renewable energy system is producing, and the customer relies on additional power needs from the utility.  At the end of the month, only the net consumption is billed to the customer. 

The bill has the amount of electricity consumed, minus the amount of electricity produced.  The utility acts similar to a “battery”, crediting the energy account for later use if production surpasses the consumption.

Read on to find out why net metering is beneficial to small energy systems.


3 Reasons Net Metering Is Important for Homeowners

  1.  A widely-accepted, standardized protocol for connecting grid-tie systems that ensures safety and power quality.
  2. Allows homeowners to receive full value of their electricity they produce – without installing battery storage.
  3. Provides a simple, affordable, and easily administered mechanism for encouraging the use of renewable energy.

How Does Net Metering Benefit Utilities?

Not just beneficial to homeowners, utilities also gain from net metering.  Using net metering allows utilities to avoid administrative and accounting costs of metering .   In addition, net metering scales down strain on distribution systems.  Its important to note that PV systems which are net metered can potentially reduce the peak load demands of the utility, helping utilities better manage their peak electricity loads.  Peak load demands cause the electricity rates to rise, which means the utility saves money by utilizing net metered PV systems to offset costs.

As policies and technology evolve, best practices and regulatory reforms for net metering have grown.  According to the Interstate Renewable Energy Council (IREC), new trends in net metering include Aggregated Net Metering (ANM) and Virtual Net Metering (VNM).  See IREC for more details on these trends.



Need more information on Net Metering?  Check out:

FreeingTheGrid.org for your state’s grade for interconnect and net metering policy

Solar Energy Industry Association (SEIA) page on Net Metering and Distributed Solar Generation.

Interstate Renewable Energy Council (IREC) page on Net Metering