Net-Metering in a Nutshell

by Emma Hibbard

No matter where you live you have probably noticed the increase in solar panel development, or perhaps you have even read our website section on getting residential solar and are in the process yourself. Either way, you may have come across the term net-metering, so what is it?

 Subtract the energy you consume from the energy you produce and the result is your net energy. Consuming more than you produce results in negative net energy and you owe the utility. Producing more than you consume results in positive net energy that can be sold back to the grid. Image: Climable.org

Subtract the energy you consume from the energy you produce and the result is your net energy. Consuming more than you produce results in negative net energy and you owe the utility. Producing more than you consume results in positive net energy that can be sold back to the grid. Image: Climable.org

Electric companies use meters to measure and record how much power you consume over the course of a month and then bill you using a charge per kilowatt hour. For buildings that generate their own energy (with solar panels, for example), net-metering is the ability to sell back unused power to the electric grid. For example, if your home has solar panels that produce 800 kWh and you consume 600 kWh, then you could sell your 200 kWh surplus back to the grid. The 200 kWh is compensated with credits toward your next electric bill. The electric grid has an interest in buying back electricity to reduce strain on the grid, particularly during peak demand hours.

Net-metering is even available for those without solar installed on their own homes through virtual net-metering. This applies to community solar participants; the physical panels are installed in a separate location from where energy is consumed. Consumers then receive their ‘share’ of the system via virtual net-metering credits applied to their electric bill in the same way that net-metering credits are applied to personal solar.

The ability to net meter is dependent on 1.) whether your utility allows it and 2.) whether there are net-metering caps in your area. Net-metering caps limit the amount of energy that can be sold back to the grid for a utility, often with separate caps for public and private. However, residential solar produces much less energy than large utility-scale systems that caps target. In many cases, small residential systems are actually exempt from net-metering caps.

 Net-metering policies vary from state to state with some government-regulated utilities required to allow net-metering (blue), others offering alternative state-mandated compensation for energy generation (green), and others with no mandated rules but some utilities allowing customers to participate in net-metering (yellow). Image: Climable.org

Net-metering policies vary from state to state with some government-regulated utilities required to allow net-metering (blue), others offering alternative state-mandated compensation for energy generation (green), and others with no mandated rules but some utilities allowing customers to participate in net-metering (yellow). Image: Climable.org

Whether legislators should add caps to net-metering is a contested issue. Utilities argue that solar energy producers are already compensated via subsidies so caps alleviate unfair financial burden from higher rates on non-solar consumers. On the other hand, advocates argue that net-metering facilitates the adoption of solar energy at the state level and caps disincentivize more people from getting panels. If they can’t sell excess power back to the utility, then their return on investment is lower. Removing caps helps the clean energy industry to grow faster, adds green-collar jobs, and helps cities and states reach emission reduction goals faster.

There is no question that solar is a growing industry, with an average annual growth rate of 59% over the past 10 years and prices dropping 52% over the past 5 years. Combined with increasing consumer push for access to solar and clean energy, state and utility policies are molding and developing to either accommodate these developments or resist them. We believe net-metering caps should be removed in order to advance our energy systems towards a carbon-free future. If you agree, we encourage you to reach out to your legislators to let them know.