How does net metering operate? What is it?

A utility rate program known as net metering, sometimes known as net energy metering or NEM, obligates your electric provider to buy any excess solar energy your solar panels produce at the full retail rate of power.

The excess electricity generated by your solar energy system is therefore transmitted to the power grid when it is greater than what your home requires and your utility company pays you for it. Rooftop solar panels are such a terrific method to cut costs because of net metering! The states with the finest net metering laws are actually the best for installing solar, not the ones with the most sunshine.

Let’s examine how net metering can quickly put money back in your pocket in more detail.

How does net metering work?

In other words, net metering allows you to receive credit for the solar energy you send back to the grid and offsets the electricity you will eventually purchase from the utility, allowing you to receive the full economic value of all the solar energy your solar panels create. Your monthly electric expenditures may be completely eliminated if your solar system is sized properly.

When the sun is shining in the middle of the day, solar panels produce the greatest electricity. The issue is that you use the least amount of electricity towards the middle of the day. As a result, at that moment, your home requires far more electricity than your solar panels are producing.

Solar energy systems send their excess power to the grid when they generate more electricity than a home can use. This is the situation when net metering is useful. Your electric meter spins backwards and your utility applies a credit for the full retail value of electricity to your account when a net metered system sends solar energy to the grid.

When your solar panels aren’t producing throughout the night, you draw power from the grid, which causes your electric meter to spin once more. The phrase “net metering” refers to a billing method where the utility computes your final bill by netting the amount of electricity you used and sent to the grid at the conclusion of the billing period.

Do net metering credits carry over from month to month?

Depending on the utility, energy credits can typically be carried over from month to month in full-retail net metering programs. Therefore, if you produce more electricity than you consume in a given month, you can utilize the extra net metering credits to offset the electricity you need from the grid the next month.

Typically, during the summer, when the days are long and sunny, you will have extra credits. These summer credits can be saved up to lower your electricity costs during the gloomy winter months.

Depending on your utility’s true-up policy, also known as how frequently they buy out credits, which is typically found under their net metering policy, you can determine how and if credits actually can carry over from month to month.

What are the benefits of net metering?

Utility bill savings

The reduction in utility costs is net metering’s main advantage for solar home owners. Over the course of your solar panel system’s lifetime, net metering can result in savings of tens of thousands of dollars.

As we previously stated, solar panel systems can be created to fully offset a solar customer’s energy use expenditures within a billing cycle. However, net metering cannot completely eliminate some fixed charges found on the majority of electric bills.

Shorter payback periods

Payback times will be substantially shorter in areas with complete retail net metering than in those without it. This is due to the fact that solar-powered home owners will save more on their electricity bills and accelerate the amortization of their investment.

Due in significant part to net metering, a solar power system in New Jersey, for instance, would have a payback period of between 4 and 5 years. On the other hand, a system in South Dakota might take up to 12 years to pay for itself as there is no type of net metering there.

Your solar system’s payback period is impacted by a variety of factors, not just net metering. How long it takes for your solar panels to pay for themselves will depend on a number of factors, including the size of your photovoltaic system, how much electricity you use, the cost of installation, and the availability of solar incentives and rebates in your area.

Reduces pressure on the grid

Because they lessen the strain on the electric grid distribution system, residential solar panels are very advantageous to utilities (and their consumers). There are fewer people directly using power from the grid since solar homeowners are using their own electricity rather than the grid.

Additionally, when a solar system delivers extra energy to the grid, other utility customers who do not use solar energy use that energy to meet their own energy needs. This relieves utility power plants of even more stress.

In states like California where heat waves are becoming more frequent and utilities are struggling to keep up with electricity demand, it is crucial to reduce some of the strain on the electric infrastructure.

Is net metering available in all states and cities?

Technically, net metering is required in 38 states and Washington, D.C. Of the 50 states, 29 mandate full-retail net metering, and 17 provide an alternate net metering tariff or program of some form. Additionally, even though it is not required of them, certain significant utility companies in Idaho and Texas provide net metering to their home solar clients.

The only states without any kind of net metering or alternative net metering regulations are South Dakota and Tennessee. Though they might not remain isolated for long. Utility firms have been pushing to restrict net metering systems around the U.S. in order to minimize residential customers’ solar savings and boost their profit margins. In areas like Louisiana and South Carolina, utilities have been successful, and net metering reforms are even planned for California, the state that is most solar-friendly.

By choosing your state from the table below, which lists each state and the various forms of net metering as of January 2022, you can also learn more details about programs in your neighborhood:

StateFull-retail net meteringAvoided cost net meteringAlternative program
ArkansasYes NoNo
California Yes No No
Colorado Yes NoNo
Connecticut Yes NoNo
Delaware Yes NoNo
Florida Yes NoNo
Georgia No YesNo
HawaiiNo NoYes
IdahoYes*No No
Indiana Yes NoNo
Iowa Yes NoNo
Kansas Yes NoNo
MaineYes NoNo
Maryland Yes NoNo
Massachusetts Yes NoNo
Michigan NoNoYes
Minnesota Yes NoNo
Mississippi NoYesNo
Montana Yes NoNo
Nebraska NoYesNo
Nevada NoNoYes
New HampshireYesNoNo
New JerseyYesNoNo
New Mexico YesNoNo
New York YesNoNo
North CarolinaYesNoNo
North DakotaNoYesNo
Ohio YesNoNo
Rhode IslandNoYesNo
South CarolinaNoNoYes
South DakotaNoNoNo
West VirginiaYesNoNo

*Despite the fact that there is no statutory requirement requiring it, major investor-owned utilities in these states provide complete retail net metering.

As net metering laws are always evolving and can differ amongst utilities, we advise speaking with local solar installers for the most precise and recent information.

Go solar now while net metering is still available for the best savings

We’ll be out front about it: net metering has seen better days. Additionally, net metering’s future is bleak. Net metering is the driving force behind the solar sector, but avaricious electric utility companies are trying to undermine it in order to protect their profit margins.

Consider getting solar as soon as possible if you want to ensure that you’ll earn the best net metering savings. Waiting increases the likelihood that your utility will discontinue the program, which will reduce your overall savings.