Net Metering is a program where solar panel owners can “sell” electricity back to the grid or power company. It is normally computed as net metering credits rather than actual cash transactions. This trade acts sort of like power storage for the homeowner. When a home system is powering the home and producing excess power, transfer from the home to the grid occurs. If a home system doesn’t produce enough power, that stored power is transferred back to the home.
While net metering has been sold as the be-all-end-all solution to solar power woes and cost-saving, we examine the pros and cons of this unique program. Net metering contracts differ widely from one power company to the next. Knowing what to look for in a net metering contract can make a big difference in your potential cost-saving from a net metering program.
Understanding How Net Metering Works
It is common for a solar panel system to produce more renewable energy from rooftop solar panels than necessary to accommodate household energy needs. The excess generation of electricity can be routed back through the distribution system (the grid).
During peak daylight hours, the excess electricity generated by solar customers can be routed to non-solar residential customers at their full retail rate. On average, a household solar system may return the excess output of 20 to 40 percent of total energy production to the grid. This benefits utility companies by reducing the drain on the electric grid.
Net metering credits are not always applied at the full retail rate for the excess electricity sold to the electric grid. In short, the utility company may offer homeowners wholesale or lower pricing for energy flowing into the grid while still maintaining full retail pricing for energy flowing back to a solar-powered home during times of low output.
Net metering programs encourage people to install solar panel systems. They also serve to create a source of low-cost energy for the utility company. Those excess kilowatt-hours can then be sold to non-solar consumers at the full retail rate. However, in some areas, net metering policies are not beneficial to homeowners.
Net Metering Is Not Available Everywhere
Every state applies regulatory control over energy differently. As a result, net energy metering is not available in all states. This creates a wide variation in the availability of net metering.
To find out the policies applicable to your home does require some research. We have provided some general information below to get you started.
How to Find out About Net Metering in Your Area
To learn what net metering rules apply to your state requires a bit of research. Fortunately, solar power installers usually have information on local laws and policies. Your local municipal energy company can also supply information on net metering in your area.
There are currently 38 states, four territories, and Washington D.C. that offer net metering options. Texas or Idaho also have net metering programs that differ slightly from programs available in other states.
Distributed generation compensation rules use in Georgia, Hawaii, Arizona, Nevada, Indiana, Mississippi, and Maine. While similar to net metering, these states offer a lower compensation structure that is not a full retail rate, making them less advantageous for solar owners.
In Minnesota, net metering offers. They also offer a system based on the Value of Solar (VOS), known as the Value of Solar tariff, as an alternative to net energy metering.
How to Bank Net Metering Credits
Net metering is mostly seen only on paper in your utility bill. Although some states will send you a check for the excess energy produced by your photovoltaic system, most only offer net metering credits.
During the summer months, a solar energy system will produce more energy than during the winter months. When permitted by the policy, the excess generation can be “banked” during the summer months for use by the homeowner during lower production months in the winter.
Does the Meter Really Run Backward?
Yes. The household meter will run backward when energy flows back into the municipal energy grid from a solar-powered home.
Laws About Net Metering
Solar net metering laws can vary widely from state to state. Most residential areas maintain connections to municipal systems if their solar system experiences a failure of any sort.
Sorting out the benefits of net metering can be a complicated endeavour. Basic laws regarding net metering are divided into two basic categories; Conventional and Aggregate net metering.
Conventional and Aggregate Net Metering
This calls individual net metering. It describes an instance where the source of energy generation is connected to a single electric meter. This is the type of setup normally associated with single-family homes or stand-alone brick-and-mortar businesses. Recent provisions have allowed the inclusion of some multi-meter properties.
Also known as Virtual or Community, aggregate net metering opens up for different customer types. These include multi-unit residences, non-profit organizations, multi-property owners, renters, and some municipalities. Normally, these customers would not permits to participate in programs or would not benefit from them. Currently, only 17 states permit aggregate net metering.
Although we cannot do a break-out analysis of every state, we did a small sample of states below to show the differences in how the programs apply.
Virginia has increased the use of solar energy with a current national ranking of 11th. The number of homes with solar panels installed is approximately 280,993. With prices falling over the last five years, growth projects to continue.
The net metering program in Virginia is pretty straightforward. Credits are award for each kilowatt-hour of renewable energy sends to the grid. Credits use during periods of low energy production.
There are also federal solar tax credits available when installing new solar panels. Additionally, homeowners can see an increase in the value of their homes. Although the increased home value may also impact property taxes, Virginia law permits localities to include exemptions or partial exemptions for residential property taxes.
Nebraska ranks 46th nationally, with only 7,931 homes currently powered using solar energy. Although the state has experienced the same price decreases, homeowners have not capitalized on those cost savings.
The state does participate in solar net metering. Information regarding specific policies and statistics can be found on the Nebraska Department of Environment and Energy website.
California ranks 1st nationally. There are 8,548,370 homes power by solar panels. Almost 25 percent of the state’s electricity derives from solar. In fact, all new homes in California require to have solar.
California includes a lot of incentive programs to promote renewable energy. There are property tax exclusions recently reinforce under SB 364. Recognizing the beneficial impact that solar energy has, California continues to lead the way in creating jobs and opportunities in the solar industry.
Net metering is undergoing a review in the state. Advocates are fighting for a more comprehensive program that will create additional benefits for homeowners. These changes may revolutionize the standards on what allows and what it currently prohibits.
Net Metering — All the Good Stuff
If you have considered installing solar panels, you are probably aware of some of the incentive programs offered. The most well-known is the federal Investment Tax Credit (ITC). The program can provide savings up to about 26 percent on new system installations. Although this credit only applies if you purchase the system, it can greatly reduce the cost of installing solar panels.
Some of the advantages of net metering:
- Reduced electricity bills
- Battery systems are not necessary with a net-metered system
- Relieves stress on the existing electric grid
- Encourages use of renewable energy
- Serves to preserve natural energy resources
- Beneficial environmental impact
Additionally, with the increased usage of solar panel systems, jobs create within the solar industry. This removes some of the negative impacts suffered by lost fossil fuel employment, such as coal mines.
Net Metering — Yes, There is a Downside
Although it is possible to achieve a zero balance electric bill during peak production, few states offer cashback options. That means that any amount of electricity generated that exceeds your usage will either remain banked for future use or revert to the utility company for distribution to other utility customers.
Some utility companies require a monthly fee, usually attributes to a “customer fee.” These fees must pay regardless of how much excess electricity your system routes to the grid.
Some areas remain reluctant to promote net meter programs even though they generate more electricity and ease stressed and outdated distribution systems. Net metering policies have not kept up with the increasing use of solar electricity.
Because it maintains on a state-by-state basis, uniformity in the handling of excess electricity is mainly unregulated. This often leads to increased costs to non-solar utility customers.
Going solar can result in cost savings, but the advantages will remain hit-or-miss until the policies meet current growth patterns. Net metering is an excellent cost-saving program for many households. However, the programs are under assault from utility companies trying to lower the rates, or net metering credits, offered for electricity produced by solar customers.
Determining If Net Metering Is Right for You
The first hurdle is to determine if you are in a state that has a net meter program. Once you establish eligibility for a program, you should take many precautions and preparations before signing a net metering contract.
Evaluating Your Electricity Usage
While we cannot determine the value for each consumer, we can help you determine if a program may benefit you. The first step is to evaluate your electricity needs, or how much electricity your household consumes on a given day, week, and month.
This starts with your current energy bill. Most statements list the monthly usage in kilowatt-hours, in addition to showing an average daily usage. Once you know your average usage, you can calculate the average amount of electricity produced by a solar panel system.
If you don’t have access to past electricity bills because you just purchased your home or are shopping for a new home, you can use an energy use calculator. These online tools offer a reasonable estimate of energy usage based on the size of a home, installed appliances, family size, and other variables.
Questions to Ask Your Installer
Asking your solar equipment installer about local net metering is a good idea. Although the installer may not answer your questions in-depth, they can usually offer a good starting point. Some additional questions you should consider asking your installer include:
- Does the system design include a forecasted yearly output?
- How much will average savings go solar offer?
- Is there additional paperwork or permits required for interconnection?
- Are there additional fees for permits or connecting to the municipal grid?
- Will I still have solar electricity during a blackout if my solar panels connect to the grid?
- What program incentives and rebates will I qualify for?
- Does my area allow shared solar or aggregated solar?
Your installation company will also be able to answer questions about building and fire codes, safety inspections, and the life expectancy of the equipment. They will probably not know specifics about requirements within a Homeowners Association or whether the value of your home will increase.
Questions to Ask Your Power Company
The first question is whether or not your state offers net metering. The utility company should offer you a pricing structure to explain how they calculate credits if the power company.
Ask about the metering credit structure. Be cautious of programs using a Time of Use (ToU) pricing scale. While offering you wholesale pricing for the electricity you send to the grid, they bill utility customers a peak retail rate for electricity use during certain hours of the day. This returns net metering credits to solar customers while creating a greater profit for the utility company.
Find out if your utility company has a roll-over program for net metering credits. This allows you to roll over unused credit from one month to the next.
Other questions to ask your utility company:
- Is aggregate metering required for multi-unit buildings such as a duplex?
- Does excess power generation affect property taxes or tax incentive programs?
Tax incentives can be a great deal for new solar producers. Some of the types of programs to check on are:
- Property tax incentives
- Corporate income tax incentives (if your solar installation is on a business)
- Personal income incentives
Depending on your state of residence, there may be other questions for your installer and the local municipal utility supplier. Two areas you should familiarize yourself with are billing statements and benefits documentation.
To Sign or Not to Sign? Contract Decisions
The bottom line is that you need to be fairly knowledgeable about the programs in your area. Some utilities have programs that are very beneficial for electricity production from solar panels. Other utilities offer slanted programs toward corporate profits, resulting in lower savings for solar electricity producers.
Read all contracts thoroughly, including the small print. Ensure that you know all fees, additional connection charges, and provisions for using accumulated credits. Do not be afraid to ask questions. Without national control of policies, the programs will continue to be a hotbed of contradictory policy from one state to the next.
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