What is Net Metering And How Does It Work?

Net Metering is an Ultimate advantage of going solar. As solar panels work under direct sunlight, they produce excess energy during sunny days, which consumers do not always use.

Therefore, sending this energy to the local electricity grid and getting bill credit is a major benefit of having a net metering meter.

If you decide to go solar, the net meter can financially benefit you so keep reading to get key information about net metering programs.

How Does Net Metering Work?

Net metering works when your solar panel produces excess solar energy than your home uses. The extra energy goes back to the grid and you get a bill credit.

This bill credit can be redeemed for using grid electricity when the solar panel is not generating during the night or on overcast days.

Typically Your meter net can go both ways and at the end of the month you just pay for what you use from the grid”, briefed Gilbert Michaud, assistant professor of Environmental Policy at Loyola University Chicago.

When you compensate for the electricity used from the grid, you further reduce the bill and save more money over time.

Utilities charge solar owners for the “net” energy usage meaning the difference between the energy produced and used. Utility companies might give solar users a full dollar value or a difference of 1:1.

The production and usage can be waived by an hour and throughout the year. You can check the times when solar panels produce peak energy and when the home consumption is highest from the chart below from the Institute for Local-Self Reliance (lLSR).

Knowing the consumption and production rate of the panel and home can get you a reasonable credit when you send electricity to the grid during low consumption hours.

Types Of Net Metering

Net metering is the more renowned term that you may encounter during your solar journey. However, there are a few other terms you must be familiar with, such as net billing or buy all/sell all.

There is a subtle difference between these terms so let’s explore how you can differentiate between them.

Net Billing

While net metering gets you bill credit, in net billing utility companies take a little value of the energy produced. This means your utility company might pay you a low wholesale rate for the energy you send back to the grid while charging you a higher retail rate for the energy you use from the grid.

Every state has a different approach to net meter plans, California recently changed its net metering to net billing. The arguments between the opponents and proponents were heating but in the end, net billing was accepted.

 The net billing was expected to decrease the compensation for sending electricity to the grid by 75% but the use of solar batteries was projected to increase.

Buy all/Sell all

It’s a little different and uncommonly known method of net metering. Buy all/Sell all means all the energy generated by your panel goes to the local grid and you purchase electricity from the utility like any other consumer.

However, you are credited for the difference in electricity you buy and sell, if any. This method requires two separate meters.

What is the Difference Between Net Metering and Solar Buyback Plans?

The literal aim behind net metering and solar buyback is the same, crediting solar owners for the energy they send to the grid. However, there are some differences that a solar expert can describe the best.

Depending on local laws and regulations by electricity providers, there are three ways to manage surplus energy.

1. Net metering provides the full value of each kilowatt-hour sent to the grid as a bill credit.
2. In Solar Buyback, utility companies can offer different rates for kilowatt-hours consumed and solar energy sent back to the grid.
3. Also in buyback programs, utilities compete to buy back the excess energy produced by your panel.

If your state is not offering any net metering or solar buyback program, you will not get any bill credit. In this case, you can install a solar battery system such as Tesla Powerwall to store excess energy and use it at night or in rainy weather.

What is the Difference Between Regulated and Deregulated Market?

The energy market plays an important in net metering ultimately providing the best options for solar owners. Two types of markets concern with solar industry. Regulated market and Deregulated market.

In a regulated market, solar owners have no choice but to select their provider as the monopoly in the market owned by local utility. In a deregulated market, consumers can choose any energy provider among available options. Texas has always been a degrelated state since 1999. Deregulation increases the REP and acts as a competitive force in the utility industry.

Is Net Metering Worth It?

In a world full of expensive electric costs, generating your energy by residential solar panels and selling the extra production can give a real return on investment.

Net metering helps you get a profit over the excess energy you produce, otherwise the surplus production is wasting away.

People who can not install costly solar storage batteries have the great advantage of having a solar net meter. They can simply get rid of bills they get while consuming grid electricity at night and on extreme weather days.

For instance, if your solar panels generate 1000 kWh of energy every month and your home uses 600 kWh, you are just saving a value of 600 kWh, and the rest 400 is wasting away without net metering.

But with net metering, you can get credit for the remaining 400 kWh and maximally reduce or even zero out your consumption bill from the grid electricity.

Limitations of Net Metering

Net metering is the overall best way to increase energy savings and boost ROI, however, there are a few limitations that you may have to face.

Some utility companies offer lower tariffs than retail rates. For example, if you are buying grid electricity at 16 cents per kWh, you will sell solar energy at 10 cents per kWh. 

You can not exceed your annual consumption because utilities will not accumulate credits that are higher than your annual energy use. Some programs do give cash for the billing cycle where credits exceed your consumption but most companies do not follow this rule.

Working with the solar installer to design a solar panel system that generates energy tailored to your needs is a way to go, especially when you do not have a reasonable net metering program.

Are Net Metering Policies Changing?

Net metering laws or programs are available in more than 40 U.S. states and regions. These policies protect net metering and provide a way for solar owners to increase their energy savings.

However, policies in many states are changing or up for debate. The compensation solar owners get with net metering or buybacks saves and makes money for them in the long-term but now we are seeing some changes in this industry.

We have already mentioned the upgradation in California’s net metering policies but other states are also adapting to some new regulations.

Some states are coming up with smart “ successor” programs. With this program utilities pay solar owners for each kWh according to the value of solar energy developed through careful study.

Others are paying solar owners wholesale rates of energy which is lower than retail rates. These differences mostly happened dur lobbying, politics, and the dollar’s power.

Some states are ending net metering for new solar owners and are setting deadlines.

• In Idaho, new solar owners will be subjected to new rules as the state’s Public Utilities Commission is now posing a rule to decrease compensation for excess solar energy generation.

• Arkansas is also changing rules. To get net metering, consumers will need to install solar panels by 30  September 2024.

• In North Carolina people who installed solar panels after July 2023 did not get net metering. However, they can sign up for an almost similar “Bridge rate” program if they get solar panels by the end of 2026. 

Now that the policies are massively changing, we recommend potential solar owners go through local utility laws and see what benefits they can get by choosing net metering or similar programs offered in their state.

If you do not have any applicable policy in your state solar battries are your last option to use extra energy in the hours of need.

How can I Protect my Solar Investment?

Policymakers sometimes overlook the benefits rooftop solar energy gives to utilities and their ratepayers. Also, it is very unfair to not compensate for the true value of the solar energy generated by homeowners.

Therefore, laws and policies to protect net metering in states like Texas are very important. Solar United neighbors started a petition to protect credit for Texas solar owners.

Sign-up for this petition helps solar owners get fair credit in Texas’s deregulated market. If there is no fair law regarding buybacks or metering, solar owners who can not afford batteries will left with no option to protect their energy savings.

Final Analysis

Net metering programs urge solar users to invest in green energy by saving potentially on their investment. Solar net metering and buybacks also make solar panels more valuable and people can get their ROI in a few years.

However, with changing policies, these programs are becoming more complicated. That’s why we urge you to go through the terms and conditions of these programs and see what benefits you the best.

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