How Does Net Metering Work With Solar?

October 31, 2019

Are you thinking about going solar? Wondering how your home will be powered at night when there is no sun? Or maybe you are thinking, “How will I save money without buying an expensive battery to store all of this power?” Thanks to net metering, these obstacles are solved with no extra expense to you.

What exactly is Net Metering?

Net metering or Net Energy Metering (NEM) is a solar incentive and billing mechanism that allows owners of an energy system to receive credits for excess power produced. Customers are paid at the same rate as utilities would cost from the power company. When more energy is being generated than what is needed, the excess energy is transferred to the grid to power other homes in exchange for credits. When your panels are not producing enough like at night, you are then able to retrieve this energy from the grid by using the credits.

A system of the right size for your home will produce enough electricity to meet the total energy usage of your home for the year. Net metering allows customers to have control over their electricity bills through a two-directional path between their solar system and the grid. This way, the cost of electricity is neutralized by using credits received for excess production as well as saving when you use what you produce directly rather than drawing from the grid.

How net metering works

During the afternoon, solar systems tend to hit their peak performance. Often during this time, more electricity is being produced than what is being consumed. So, an electrical converter known as an inverter turns the direct current (DC) from your solar system into an alternating current (AC) and exports this electricity through the power line to the grid. This is when your electric meter runs backward as all of that excess power is collected by the grid. Then, at night, when your solar system is sitting idle, the credits that you receive for this excess energy are used to pull the power back from the grid. This excess energy also compensates for other times when your solar system is underproducing.

Net metering ensures that all energy produced by the system is used and needs during any shortages throughout the year will be compensated. When more power is generated than what is used in a month, credits will be supplemented to your utility bill.

This credit is based on “net” energy usage or the difference between the energy produced and the energy used. If the system generates unsubstantial energy to meet your usage for the month, you will need to purchase this power from your utility. In this case, your excess energy is subtracted from your usage, and you pay the difference.

As a result of net metering compensation, homeowners can save tens of thousands of dollars in electricity costs by being credited for excess energy at the retail rate. However, adding a larger than needed solar system to your home will not provide a source of supplemental income. Due to most utilities having a Net Surplus Compensation policy, customers are only compensated at the retail rate for energy consumed over the year. Beyond that, any further energy production is compensated at a much lower price.

We have put together a map, below, of Net Metering Policies by state: