What is Net metering?
Net metering allows the exchange of any surplus energy produced by your solar system for utility energy credit to be used during periods when the solar system is not producing enough energy to meet your needs.
This means that the electric meter outside of your place spins "backward" (it's a good feeling), when power is flowing from the building to the utility grid and spins "forward" when electricity is coming from the utility grid to the building (and you get billed for it, since you "spend" that electric energy).
At the end of the month, only the net consumption is billed by your utility company. It is the amount of electricity consumed, less the amount of electricity produced by you. The utility acts much the same as a battery, crediting the energy "account" for later use if production exceeds consumption (again, it's a good feeling!).
For example, during the middle of the day the solar system installed produces 3 kilowatt-hours. But the building uses only 1 kilowatt-hour during that time. Therefore, the "account" will be credited for 2 kilowatt-hours.
Later in the evening, when you come home from work, turn on all the lights, TV, computer, charge your laptop, charge your cell phone, use the microwave oven and so on, you may use 2 kilowatt-hours for the whole evening, then you go to sleep and turn everything off.
So, 2 kilowatt-hours have been used and the "account" now ends up with a net zero balance and owes to the utility nothing for that day. Then, tomorrow, it's a new day with new energy production by your solar system...
The net metering protocol is a big benefit to small renewable energy systems. There are 3 main reasons net metering is important:
- As increasing numbers of primarily residential customers install renewable energy systems in their homes, net metering provides a simple, standardized protocol for connecting their systems into the electricity grid that ensures safety and power quality.
- As many residential customers are not at home during the day using electricity and when their systems are busy making electric energy and producing power, net metering allows them to receive full value for the electricity they produce without installing somewhat expensive battery storage systems.
- Net metering provides a simple, inexpensive and easily administered mechanism for encouraging the use of renewable energy systems that have important local, national and global benefits.
What are the benefits and costs of net metering?
Net metering provides a variety of benefits for both utilities and consumers. Utilities benefit by avoiding the administrative and accounting costs of metering and purchasing the small amounts of excess electricity produced by these small-scale renewable generating facilities. Yes, your 3 kW solar array on your roof is theoretically an "electric power plant" and you are in fact a "power producer" interacting with the grid, but it's a small fish in a big pond.
On the other hand, as more people install solar systems on their buildings, net metered PV systems can potentially reduce the utility's peak load demand. Because peak load generation is often expensive ($15-$20 per kWh), this results in significant savings for utilities (and trust us, they know very well about that and they appreciate it).
To see the cost of electricity in USA click the picture below for a close up view.
Consumers benefit by getting greater value for some of the electricity they generate, being able to interconnect with the utility using their existing utility meter, and being able to interconect using widely-accepted techical standards.
The only cost associated with net metering is indirect; the customer buys less electricity from the utility, which means the utility gets less money from the consumer, losing some of the profit.
The reason is that any excess electricity that would have been sold to the utility at the wholesale or "avoided cost" price is instead being used to offset electricity the customer would have purchased at the retail cost. So, it's a win-win.
In most cases, the revenue loss is comparable to the customer reducing their electricity use by investing in energy efficiency measures, such as compact fluorescent lights and more energy efficient appliances, for example.
The bill savings for the customer and the corresponding revenue loss to the utility depends on a variety of factors, specifically the difference between the "avoided cost" and full retail prices the utility charges.
In general, approximately, the difference will be from $20 - $30 a month for residential-scale PV system (3kW) and about $40 - $60 a month for a farm scale wind turbine (10kW). Any revenue losses associated with net metering are, at least partially, offset by the administrative and accounting savings.
Using the existing meters
The standard kilowatt-hour meter used by the vast majority of residential and small commercial customers accurately registers the flow of electricity in either direction, backward and forward.
This means, the "netting" process associated with net metering is happening austomatically. The meter spins forward when the consumer needs more electricity than his solar array is making up there and spins backward when solar panels make more electricity than the people inside the house need.
Some utilities use a meter that records the number of time the meter spins, not registering at all if it's moving forward or backward. This type of meter will bill the homeowner for electric power he/she produced! Obviously, this meter is inadequate and will need to be replaced during the solar system installation.
Current worldwide status with net metering
Currently, many US states have some form of net metering. Germany, Japan and Switzerland also have and use net metering.
Many US state net metering rules were enacted by state utility regulators pursuant to state implementation of the federal PURPA statute. In recent years many states have enacted net metering laws legislatively.
If you have any questions about net metering or anything else you are unclear about, please email us and we will be glad to help.