What is Net Metering?

Does your local utility company offer net metering? Net metering is a program that allows residential customers to be credited for excess energy that their solar panels may produce. The way a homeowner is incentivized to produce excess electricity can be a determining factor in a solar investment.

How Does It Work?

On a sunny day, a solar system may generate more energy than a household is consuming. When this happens, energy production is sent back to the utility electric grid. At night, the system is not generating power because there is no sunlight. Naturally, the highest production months will be the ones when the days are long and sunny. The lowest production months will be the ones when the days are shorter and less sunny. That is not to say that a solar system will not produce any power on a cloudy, rainy, or snowy day. Essentially, a special meter is installed so the utility company can measure the difference between the household energy consumption and the solar energy production. Net metering policies vary by state and can result in fluctuations on an energy statement.

What’s the Catch?‍

‍While many states offer a 1:1 credit for solar production vs. consumption, some do not. For example, Washington offers a 1:1 credit, which means that for every kWh produced and sent back to the utility grid, the customer is given a credit for that kWh. In contrast, Utah offers only a credit of $0.056/kWh produced while the retail rate to residential customers averages $0.12/kWh. The ways that these credits can be used by a property owner differ as well. Some jurisdictions calculate the credit/consumption rates monthly while others do it annually.

These calculations are constantly subject to change and are ever evolving. Public utility commissions can approve mandated customer fees. These fees are allocated to covering additional expenses and helping the utility companies maintain their infrastructure. Solar production that imposes additional costs to utility companies during peak usage, sending more power to the grid during certain times, can result in customers being responsible for paying “demand charges.” Many utility companies charge what is called an “interconnection fee” when homeowners go solar. This is a flat rate paid by customers who have solar. For example, in California, that fee is approximately $10/month. In certain states, this can make acquiring solar less financially rewarding.

You can check the net metering policies in your state by visiting the DSIRE Detailed Summary Maps.