Net metering is a two-way billing arrangement between utility companies and customers designed to account for the two-way flow of electricity between the power grid owned by utility companies, and customer-owned power generators such as rooftop solar panels.
Typically established through state legislation, net metering ensures that utility customers who generate their own electricity can distribute any surplus power they produce back into the grid and get credit for it added to their utility account. Net metering customers then apply their accrued energy credits to pay for energy that they withdraw from the grid to power their homes during times when their solar array is inactive.
How Net Metering Benefits Consumers
Net metering turns the expense of installing solar panels into an asset for homeowners in a few different ways. Since solar panels only produce power while sunlight is hitting them, homeowners need a reliable power supply to draw from during times when the sun doesn’t shine, like nighttime or cloudy days. There are two main ways to turn a solar-electric generator into a permanent and reliable household power supply:
- By installing a battery storage system
- By connecting to the grid
Although the price of battery banks designed for the residential solar market, like the Tesla Powerwall, are trending downward, they still cost several thousand dollars. It’s true that when you include a battery storage system in your solar installation, the cost of the battery gets combined with the rest of the installation costs and tallied in the federal tax rebates available to new solar customers.
Still, for most people, connecting to the grid and taking advantage of net metering is still the better option because it allows you to “bank” power credits, lower your annual utility bills, and build equity in your home for a lower upfront cost.
Let’s Explore Each of These Benefits in More Detail
- Power Banking: Most rooftop solar-electric generators are designed to meet or exceed 100 percent of a household’s energy demand. But solar panels are most productive right in the middle of the day, when the demand for electricity is at its lowest. Without net metering, homeowners would only be able to use electricity generated by their solar array in the same instant that it gets created—daytime when the skies are reasonably clear. With net metering, the grid acts as a power bank that customers can use to capture all the energy produced by their solar array and use it on demand.
- Lower Monthly Utility Bills: With net metering, your electric bill charges you only for the difference between the energy you produce and feed into the grid and the energy you withdraw from it. If you consume more than you produce, you get billed for the difference. Even then, your bill should only be a fraction of what you paid before installing your own net-metered energy supply. If you produce more than you consume, your monthly bill could be no more than the nominal $5-$10 monthly connection fee your utility company charges, and your unused energy credits would roll over to the next month. Without net metering, you could still connect to the grid and send surplus solar energy back into it, you just wouldn’t get credits added to your account for it, which means your monthly energy bills wouldn’t go down as much.
- Home Equity: Once your solar panels start generating power, the money you once paid toward monthly electric bill can be reallocated toward paying off your solar array. Meanwhile, the energy credits that accumulate in your utility account from net metering should cover most, if not all of the cost of electricity you draw from the grid at night or on overcast days when your solar panels are inactive. So rather than paying a monthly expense to a utility company, you’re paying into your own home equity, increasing the value of your home, and powering more of your lifestyle on renewable energy. In fact, studies show as long as you own your solar energy system—as opposed to leasing it—your home will resell faster and for more money than comparable properties without solar.1
How Net Metering Benefits Utility Companies
Although some utilities view net metering as lost revenue, the truth is it makes energy transmission more efficient and customer demand more manageable using equipment that utility companies never had to pay for.
Transmitting power across long distances, like the span between a coal-furnace power plant and utility customers, results in efficiency losses. The greater the distance, the more resistance there is to convert electric energy into heat energy resulting in a net loss of power output.
By providing an incentive for customers to feed their surplus solar power back into the grid, net metering creates distributed power supply that can be dispatched more easily to other customers nearby, improving the overall efficiency of the power grid. That means, customer-owned, distributed power sources help utility companies meet energy demands more quickly and efficiently and reduce the need to build more expensive, fossil fuel power plants.
Find Out if You Qualify for Net Metering
Every state that has net-metering policies in place counts solar among the eligible technologies. If you’re thinking about going solar and you live in a state with net metering policies in place, it’s more likely you should be covered. But it’s not guaranteed.
If you like the idea of solar energy, but you’re unsure if circumstances are right in your area, here are a few details to find out more about.
- Find out if your state has policies in place requiring utility companies to offer net metering and find out if your utility company is included in the state requirement. Most states with net-metering laws only require for-profit, investor-owned utilities to offer it. Colorado, on the other hand, requires all utility companies to offer net metering.
- If your utility company offers net metering, find out if they offer it voluntarily or because of state law. It’s not unheard-of for a utility company to offer net metering without a state-enforced mandate. Just keep in mind, what they offer freely, they can change freely whenever and however they like.
- If net metering is available to you, find out the rate your utility company pays you for the power your solar array would feed back into the grid. In many cases, utility companies pay customers the same retail price that customers pay the utility company for electricity. In other cases, utility companies are allowed to pay customers less than the retail price for electricity. Utah, for example, currently pays net-metering customers 92 percent of retail price.
- Find out if your state has a net-metering cap. If it does, find out how close the state is to meeting it. Installing solar panels after the state net-metering cap has been reached means you won’t be eligible for net metering without further legislation to increase the cap.
Because the electric power infrastructure in each state is made up of a unique combination of publicly-owned municipal utilities, nonprofit rural utility cooperatives, and for-profit, investor-owned utilities, net metering policies are a unique reflection of state and local economic and political influences.
That is to say, from one state to the next, the details of net metering are unique and complex. Even among utility companies within the same state, net metering practices can differ. Utility customers who are considering going solar should look into the finer points of net metering offered through their utility company, the laws in place that regulate and enforce net metering practices, as well as state and federal tax incentives that may help make investing in solar the most equitable investment possible.
If you see your home state is on that list and you’d like to find out more about the advantages of going solar, our local solar experts can fill you in on the details of net metering policies in your area and give you a rundown of the installation process, solar financing, and more.
The best time to go solar is right now! Residential solar generators are more readily available than ever before.
Contact us today for a free personalized quote and benefit from the unprecedented opportunity.
 “Do Solar Panels Increase Property Value? | Energysage “. 2017. Solar News. Accessed April 4 2019. https://news.energysage.com/home-solar-power-increase-property-values-across-us/.