Solar Resources

What Is Solar Net Metering & Why Is It Important?

solar net metering

Net metering is a billing arrangement that allows customers who generate electricity using solar power or other renewable energy systems to sell the excess electricity they produce to their utility. Customers’ utility bills are reduced by the amount of electricity they contribute back to the grid.

Why Should I Care About Net Metering?

Net metering is one of several policies required to make it easier for consumers to go solar. Only about 1% of the U.S. population has gone solar through rooftop panels, but that number could grow dramatically in the coming years if more people learn about net metering and other policies that help increase access to solar power.

How Does Net Metering Work?

When customers with solar systems generate more electricity than they use, net metering allows them to sell their excess electricity to the utility. For example, let’s say customer John Doe has a rooftop solar system on his house and he generates 50 kilowatt-hours (kWh) of electricity in his first hour of sunlight on this January day. The entire 50 kWh generated are used to power the house.

Since John’s home uses 50 kWh of electricity, but he produced 50 kWh of electricity, he wouldn’t pay anything for his electricity that hour.

Herein lies the benefit of net metering: any excess electricity generated by an onsite renewable energy system doesn’t go to waste; it’s sold to the utility. In our example, let’s say that by noon there is no more sun shining on John Doe’s rooftop panels and he has used 100 kWh of electricity from his utility. Because he generated 50 kWh of excess energy during his first hour of sunlight, he would be able to sell the entire 50 kWh of excess electricity back to the utility.

But, what about any kWh of electricity John Doe consumed afternoon? Since he would be getting his electricity from his utility instead of his rooftop panels, this is where net metering becomes handy: John’s 100 kWh worth of consumption (from noon and on) will be offset by the 50 kWh he “sold” to the utility earlier in the day.

If John were to have consumed an additional 150 kWh afternoon, he would be able to set up a payment arrangement with the utility so that his bill for this month would only reflect 50 kWh worth of electricity use-the other 100 kWh are still being offset by his solar production.

This arrangement allows customers who have solar panels on their home to still use electricity from the utility company when solar production is not at its peak (for example, at night) or if they need more energy than what their system is capable of producing.

Net metering policies are currently in place in 43 states, the District of Columbia, and three territories. According to data provided by the NC Clean Energy Technology Center, over 40% of all U.S. solar capacity is interconnected with a net-metering arrangement.

What if I produce more electricity than what I use in a day?

Net metering only works for excess renewable energy production, not total consumption. If you consume more than your onsite system is generating, you will need to draw energy from your utility. For example, if John Doe has a solar system capable of producing 1000 kWh per month and he only needs 700 kWh per month, he will be able to sell the extra 300 kWh back to the utility via net metering.

What’s more, this arrangement allows customers who buy electricity back from the utility company at night (when their solar panels aren’t generating electricity) can still send it back to the grid during peak hours when demand for electricity is high (and it could worth more). This way they are not forced to store all of their excess energy produced by their solar panels.

Can I have both a Net Metering Agreement and a Solar Power Purchase Agreement?

Yes! In fact, many utility companies offer both options. What is a Solar Power Purchase Agreement (PPA)?  With a PPA, the utility provides you with electricity but you buy the solar panels and other equipment necessary for generating electricity from offsite sources such as Sunrun or SolarCity when they are building new projects that produce excess energy.

With this type of agreement, you don’t have to pay for any of the upkeep and maintenance costs associated with owning and operating your own solar system and you will be able to lock in an electricity rate for 20 years or longer. If you move before the term expires, the company leasing your panels will remove them at no charge. This can be a major selling point for renters who want access to clean, renewable energy but can’t install rooftop solar panels.

What is a Net Metering Agreement?

With a net metering agreement, you own the equipment on your house needed to generate electricity from the sun -the solar panels and inverters-and you sell any excess back to your utility company. With this type of arrangement, if you move before the term expires, some states will allow you to take your solar system with you. This makes it possible for renters and others who don’t want to or can’t buy their own system to still benefit from installing one on their roof.

Common Questions About Solar Net Metering:

How long will my PPA last?

A typical agreement lasts 20 years but they can be as short as 2 years or if you’re willing to pay more, as long as 25-30 years.

What happens if I move before my agreement expires?

Your provider will remove your panels at no charge and you won’t be required to pay the remaining balance on the agreement.

How much money will I save with a PPA? How much can I save per month?

That depends on how many panels you have installed, where they are located (square footage of your roof), how much sunlight your region receives each day and what kind of incentives are available in your area. You can use this solar pricing calculator to give you an idea but something around $0.08 -$0.10 per kWh is reasonable given that most PPAs are 20 years in duration or longer and you don’t have to pay for any upkeep or maintenance.

Is there a fee if I move before my PPA expires?

According to the “Solar Power Purchase Agreement (PPA) Terms and Conditions Addendum” provided by Sunrun, they will charge $1,500 if you move but your last month’s electricity will be free. The reason for this is that electric meters need to be read at least twice per year and we can’t expect them to read the meter every time someone moves. If you want to avoid this fee and extend your agreement, it costs an extra $100/mo. Some companies like SunPower do not have a buyout fee so it all depends on who you choose as your provider.

In conclusion, a Solar Power Purchase Agreement is where you purchase your own solar panels from an offsite company and the utility company provides you with electricity, while a net metering agreement allows you to sell your excess energy back to the utility company. Either option can be a good choice for different people depending on their unique needs.