Ultimate Guide to Net Metering

If you’ve done any research on solar power, you probably already know that installing a solar power system can save you money on your electrical bill. But did you know that your solar power system could actually help you earn money? It’s possiblethrough the magic of net metering.

What is net metering?

Net metering refers to a special billing arrangement in which your solar power system sends excess power back to the utility grid. Your local electrical utility provides you with a discount on your electricity bill or, if you produced more energy than you used in a given month, a credit toward future energy bills.

For instance, suppose that you’re out of the house all day while your solar panels are soaking up sunshine. Without a net metering arrangement, that energy will just go to waste, since you’re not home to use it. But under net metering, it will get piped back to the electrical grid for other people to use. In other words, net metering turns your home into a miniature power plant!

Best of all, you’ll get paid for the energy that your solar system is producing. The amount of energy you produce in a given billing period will show up as a discount on your electrical bill. This energy credit can help you offset the cost of purchasing electricity when your system is not producing as much during the winter or at night.

How much will I save?

The amount of money you’ll save through a net metering arrangement depends on how much energy your solar system produces and how much energy you use. The more your system produces and the less you use, the more of that energy will be shunted back into the grid, and your earnings from net metering will increase. If you have a high-efficiency system with substantial wattage, you could eliminate your electrical bills completely.

What do I need to do?

Just contact your electrical utility when you’re installing your solar system. They’ll replace your standard electrical meter with a special bidirectional meter. This meter will record both when electricity is used and when it goes back to the electrical grid, and provide you with a net reading that shows the difference between the two.

If your solar panels are leased or installed by a third party, they might set up a net metering arrangement for you automatically, though you should ask them ahead of time if they will. If there are service charges for them to arrange it the net metering connection, you might want to set it up yourself to save money.

Where is net metering available?

Net metering is common in most states in the United States. Tennessee, South Dakota, and Alabama do not offer net metering. Idaho and Texas don’t have statewide net metering policies, but they do allow electrical utilities within the state to voluntarily offer net metering. Hawaii, Georgia, Mississippi, and Nevada have statewide distributed generation compensation programs that are similar to net metering, but have some slight variations. (Nevada’s situation is discussed in detail below.)

What are the limits to net metering?

In most cases, net metering is only available for solar producers with systems below a certain energy production threshold. In Virginia, for instance, if you’ve installed a 10 kilowatt system, it will not qualify for net metering. (This shouldn’t pose a problem for most homeowners, since the average residential solar system is just 6 kilowatts.)

Many states also have limits on how many homes can enter into net metering arrangements. To use Virginia again as an example, only 1 percent of each electric company’s energy can be produced using net metering. The lucky solar producers who get to cash in on net metering are decided on a first-come, first-served basis.

Your state and/or your local electrical utility determine the limits on what types of systems qualify for net metering and how many homes are allowed to enter into net metering arrangements.

Net metering in California

Net metering in California is a bit different than elsewhere in the country. Three of California’s largest electrical utilities (Pacific Gas & Electric in northern California, Southern California Edison in southern California, and San Diego Gas & Electric in the San Diego area) require consumers to switch to time-of-use rates when they install solar panels.

Under time-of-use rates, electricity is more expensive at certain times than others. For instance, when using electricity during evening peak hours on the weekdays, you might be charged a higher rate than you would if you’re using energy early in the morning or during another time when electricity is not typically in demand. Time-of-use rules allow electrical utilities to provide more affordable energy and encourage responsible energy consumption.

The net metering framework still applies under California’s time-of-use arrangement, but the amount you earn will vary over the course of the day. You’ll earn less through net metering during periods when electricity is less expensive and in lower demand. Conversely, you’ll earn more during periods of peak use, typically defined as noon to 6:00 in the evening.

Since the peak period is in the evening, you could maximize the amount of energy you send back to the grid in two ways. First, you could install your panels on west-facing areas of your roof, since they’ll be best able to absorb energy from the setting sun. Second, you could cut your energy use overall, especially during peak periods when the energy you send back to the grid will yield the largest discount on your energy bill.

Net metering in Nevada

In Nevada, net metering regulations have been recently adjusted. While consumers do get credit for excess energy generation exported to the grid, the credit they get per kilowatt-hour of electricity exported is less than the rate per kilowatt-hour they pay for using electricity from the grid. (In a traditional net metering situation, the two figures would be the same.)

Net metering customers will now earn 95 percent of the retail energy rate for the first 80 megawatts of solar energy installed in the state. For every additional 80 megawatts of solar installed, the percentage of the net metering credit solar power producers earn will drop by 7 percent.

For instance, when Nevada has 240 megawatts of solar panels installed statewide, solar producers will earn a net metering credit valued at 81 percent of the going rate of electricity. This steady drop in the value of Nevada’s net metering credits will continue down to a low of 75 percent. Fortunately, once your solar system has been installed and you’ve had a net metering credit rate assigned to it, the rate is locked for 20 years, removing uncertainty about future savings from your solar array.

To find out more about your energy solar panel options, compare installers in our network right away. We take your individual situation into account, and we match you with a solar panel provider that helps you to meet your financial goal.