Net Metering & Beyond


Inside this Article

Most modern kWh meters will record in both directions (energy export and import), but “net metering” is an agreement with the utility of the cost/credit value of those kWh.
The component simplicity and lower cost of a batteryless grid-tied PV system makes it the most common solution for distributing clean energy to the grid.
JLM Energy’s Energizr 200 energy storage system with Loadz appliance interface offers lithium iron phosphate battery storage and the ability to control household loads for energy management strategies.

For grid-tied PV system owners, net metering has been a popular way to credit homeowners for the surplus energy their systems produce. Net metering, together with monetary incentives and state PV energy target levels, makes it easy to connect PV systems to the grid and has resulted in the high growth of residential PV systems.

But this popular policy has recently been under attack and the resulting changes will have serious implications for the solar industry and future PV system owners. This article highlights what changes are occurring, their ramifications on the solar industry, and how to approach PV system design if these changes come to your area.

Net-Metering Basics

Under net metering, when a grid-tied PV system’s output is greater than the building’s electrical consumption, that excess energy flows through a kWh meter into the utility grid. The monetary value of the energy is counted and accumulates as credit, which can be used when the loads are higher and PV system output is lower or nil, such as at night or during cloudy weather. Most utilities allow credits to be carried over from month to month, which allows homeowners to draw on summer’s “banked” electricity during the winter months, when system production tends to be lower.

According to the Solar Energy Industries Association (SEIA), in a typical residential net-metered solar installation, only 20% to 40% of the energy produced by the PV system is exported to the grid—most of the energy produced is used directly in the home. Customers are only billed for their net energy use—that is, the electricity they use at home beyond their PV system’s production and beyond any accrued credits. Surplus PV electricity is usually consumed close by, reducing the load on the utility grid, reducing transmission and distribution losses, and reducing emissions and pollution from power plants.

Net metering offers a simple, low-cost way to accommodate and encourage the installation of grid-tied PV systems. Typically, a single kWh meter can be used, instead of requiring an additional kWh meter for the PV system. A key concept of net metering is that the customer buys electricity from the utility and sells back their PV-produced electricity at the current utility rate. Some utilities also combine net metering with time-of-use (TOU) rates—if the excess electricity is produced during peak rate periods, it is credited at this higher rate, therefore offsetting the cost of more kWh consumed during off-peak periods, which are priced at a lower rate.

Net metering has helped encourage the rapid growth in “distributed” PV systems, which provide other benefits. Distributed PV systems produce nonpolluting energy close to the points of consumption and the systems’ production often coincides with peak demand occurrences, such as air-conditioning on a hot, sunny summer day. This supply of peak power is much less expensive than buying it on the utility power exchanges or building new plants to meet this demand.


Comments (16)

Andrew Schacher's picture

As a Canadian reader, net metering does not work in Canada for existing grid connected houses.

This link states that all fees associated with micro generation sites still need to pay associated rate riders, admin, pool allocation, and admin fees for power used, or power put into the national system.

The only way net metering works is for NEW construction locations without power present. This means that the initial startup cost is subsidized by not installing the power lines or transformer. These costs are huge, and can be put into the costs of panels, BOS, batteries, etc...

Battery backup systems are even worse. To use batteries maybe once a year in Canada when the grid goes down....for a day or two means the system cost goes up considerably for batteries that rarely get used.

People need to focus on NEW construction efficiencies to begin with (DC lighting, DC fridge/freezer, insulation, infloor heating, triple pane windows, passive heating, etc..) and then look at power and heat requirements at that point. Retrofitting in Canada is much harder as older houses aren't power or heat efficient to begin with and it's much colder North of the 49th. For a province (Alberta) that has considerably more sunny days compared to's a joke that they have more solar power production. Oil/gas production sets the pace for sustainable development in Canada. Add in a carbon tax now, and it's even worse as that tax is not reimbursed for green energy production.

I agree....home storage is the way to go. Especially when you have a PV vehicle that you could possibly draw from or charge.

We all need to get off grid and stick it to the gouging service providers!

Edward-Dijeau's picture

Net Metering will go away and home storage will be next. You only produce power when the sun is out and above 30 degrees from your panels. If you could store that excess energy over the 4 to 9 hours you get sunlight, then you would not care what the utility does about your purchases from them when you need the utility power for back up. Utilities hate this prospect because they need so much money from every property they service to support the infrastructures already in place. Fees will go up for those with "on-Grid" Solar because you need to pay your share of the infrustructure plus pay to store your excess energy and "Bank It" buying it back off the old infrustructure. Using a system of UPS (Uninteruptable power supplies) and batteries, I can switch from utility to grid with the push of a button and with time clocks automaticly switch from solar to battery or utility as needed. I use 60% less grid power with renewable solar and do not have an on grid system. no fees, contracts or city imposed utility tax suplimental fees. I just use less utility power without one of those special meters that "RED FLAGS" your home as a "Taker" that pushes the responsability for maintaing the infrustructure onto my neighbors. Using less fossil fuel produced electiricity is no crime. This requires the expence of batteries and battery replacment every 8 years or so. The fees utilities will charge of up to $50.00 per month could buy you a $4,800.00 battery system or about 5,000 amp hours of 12 volt batteries and you would have "Black out" or "Brown out" protection. The problem is, most older systems use 300 volts inverters rather than 24 volt microinverters that could be swiched over to off grid 24 volt or even 12 volt systems. With re-wireing and MPPT charge controlers, even older solar panels could be changed over to off grid, battery back up but the "Tesla Power Wall" battery pack could be the answer on older systems.

Bob Hawley's picture

Excellent well-written article! An observation on being succinct: "...battery storage systems can provide 13 services to three stakeholder groups..." says the same thing with fewer words than: "...battery storage systems can provide 13 different services to three different stakeholder groups..."

johnd02's picture

It is not practical to build a system to produce more than you will use in a year. The systems do not pencil out when you are paying someone to sell and install your system and get less than full retail for the power you produce even with 30% tax subsidy. Even if you buy the parts and install it yourself and pay cash less than full retail does not pay for the added system costs.

Peter Gruendeman_2's picture

Anthony, JohnD02:
Alternate uses for one's surplus electricity are definitely of interest when excess production is credited at 2.5c/ kWh. Storage of electricity can be costly except perhaps when storing that energy in a storage water heater. This would heat or pre-heat the water before it enters your current water heater, regardless of what type it is. It's possible that your controller can divert excess power to a water heater before exporting to the grid. I am sure you would have to switch something manually if your goal was to reach net zero exports on a monthly or annual basis.

> The failure of governments and utilities to commit to
> breaking away from fossil fuels is outrageous.
Governments make a lot of money leasing land to energy companies, and then taxing the energy companies. That's a habit they won't be able to kick any time soon as all governments are addicted to money. OTOH, you, me and others are willingly NOT funding this environmental damage, whether or not it "pencils out." The way to keep that carbon in the ground is to stop paying corporations to pull it out, not by protesting in the streets, though this has its place. What I find to be outrageous is to march in the tar sands pipeline protest in St. Paul in June of 2015 with other protesters who later told me that they wanted to get solar but it was too expensive. Excuse me? You just marched in a protest and then came home to use energy provided by the company you just protested--because it is cheaper?
Pete Gruendeman

Paul Richards_5's picture

Pete, You are so right. Being the change you want to see is where it is at for me. The cost calculations on solar have never made sense to me because none of the environmental costs outside the bottom line of utility companies or governments are ever figured in. That kind of narrow focus on what an individual's costs are is fundamental to the mess we are now in. And for the record, I am retired living on a small pension and social security. It is a question of values, as in do we value the earth? Like how can we not?

Paul Richards_5's picture

John02 It''s not as important to me if it pencils out as it is to stop using fossil fuels and to take steps to pull away from companies who favor their use. If Pacific Gas & Electric manages to dis-incentive solar to recoup their grid costs, then off the grid I go. For me the question is what does it take to switch off the fossil fuels. That is what needs to be done and if sacrifices are needed, then I am ready to make them. After all we spend great amounts to buy cars which do not give a return on investment. Solar does in so many ways. So getting off the grid might be necessary until the public recaptured the utility companies that now own it.

Anthony Malovrh's picture

Installed a 3.4 kW system here in Prescott Valley AZ last June. Turns out I use much less electricity then I did back i Wisconsin. Ended up with a large surplus - only get 2.5 cents per kWh though. Still - I may get 6 months free electric bills. If APS(the local power company) should decide to pay nothing for the excess, I could see going to battery backup as the price has continued to drop.

johnd02's picture

Going to battery would not help much. APS is a cost efficient battery system. If you have that much surplus use more air conditioning, move more of your energy load to electric. Get a pluggable or all electric car, tankless electric water heater or inductive cooktop to use more of that almost free energy.

Paul Richards_5's picture

The obvious response for home owners with solar systems is to install battery back up and get off the grid. The profit calculations by profit oriented utility companies fly in the face of the mandate to encourage solar system adoption for the good of the planet. The failure of governments and utilities to commit to breaking away from fossil fuels is outrageous. Subsidies for solar adoption are rational and should be expanded, not reduced. Having just installed a new solar system, I made sure that my inverter will work as a grid tied system or with a battery back up. Articles like this will bring me to cost out battery installation sooner rather than later.

johnd02's picture

I have looked into adding batteries to my system and for me it is much better to use net metering as a 100% efficient long term battery for free. Batteries are expensive and require maintenance or replacement. You lose about 40% going in and out of the battery.

Where I am would need to more than double my system size to produce enough energy for the winter months, the battery would need to be large enough to run my house for most of a week and I do not think I would feel safe without a backup generator just in case. As it is with net metering I am moving more of my energy load to electricity becase in the summer I more than make up for the winter. The $19 I pay to the utility would not come close to covering the off grid system.

Peter Gruendeman_2's picture

The electric utilities are facing the end of their glory days and the beginning of a cold hard future where people are happy to make their own electricity-- or at least some of it. The authors mention "self-supply", where Hawaiian customers generate some of their electricity but export no excess to the grid. Nobody on net metering is required to generate enough electricity so that they have a surplus to send to the grid for a profit. I realize that there are a lot of fees associated with net metering so that cavebear42 would want to produce electricity for export, but it's not required.

Which scenario has a greater effect on the utilities and environment: One house in four making enough electricity to export some to the grid, or all four houses using PV for domestic hot water? The latter scenario has a much greater effect yet it costs less to do this for four houses than to make one house a net energy exporter. Why? Because the inverters and balance of system costs almost as much as the panels for the grid-tied home. The balance of system is extremely simple and cheap for PV-->DHW, and no grid connection is needed at all. No fees, no approvals needed. Some of the details are in the sidebar on page 52.

A modest contribution made by each of many homes has more effect than one spectacular grid-tied home. When electricity storage is cheap and efficient, more home owners will choose to generate their own electricity. Until then, heating water with PV is a good way to reduce energy use, and BTW, is cheaper than solar thermal because the installed cost of PV is so much lower. The joys of cheap Silicon!
Pete Gruendeman

cavebear42's picture

Net metering is a start but it is holding us back. I have a house in California with a big roof and plenty of sun. I also have made it very energy efficient. I could install a large PV system and, by my math, turn quite a profit on the year. The problem is that the system cost is mine and the profit would be for the energy company. At the current time, it's not worth a small system to offset our power but, if I could actually make money rather than "credit to my bill", I would install the largest system my roof could hold and a few more panels on the back awning.

johnd02's picture

Cavebear42 are you on a tiered billing system where you get some power at a low rate and if you go over that limit you are charged a higher rate? If so your most cost effective system is just large enough to keep you out of the top rate.
Time of use is an other billing structure (TOU). I am on TOU, in the summer I pay as much as 30 cents but my system earns 30 cents for the excess power.
There are other billing systems where you are not net metering. All the power you produce is credited at the wholesale rate.
Hear you are competing with other suppliers and it is quite competitive. I have heard of numbers like 8 cents

In my opinion without the federal tax incentive and net metering buying a PV is not a cost effective solution if you can buy power from a utility. Sales cost involved with selling PV system are almost as much as the tax incentive.

Net metering is in essence a free 100% efficient battery that can store energy for up to a year. At the end of the year you have to pay for any excess energy you have borrowed and not payed back. If you have a credit at the end of the year some places will pay cash or let you carry the credit others just zeror your account and lest you start over. If you find yourself with a credit at the end of your year it may be practical to switch more of your energy load to electric. Electric car, Tankless water heater, Inductive cooktop and electric dryer come to mind. I built my system and save more than my tax credit would have been if I would have had taken one of the bids. If you look at financing or leasing you should check consumer reports. My reading between the lines come out to do not lease but you could come out if you have a big down payment, the bigger the better. If you are financing all the system there are better investment. One advantage that is often overlooked is you do not have to pay taxes on the money you would have payed the bill with.

I do not see an economical advantage of adding batteries to a net metered system unless you need to cover outages. The last 40 years we have never had a 24 hour outage. Adding a battery to cover that does not seem cost effective to me.
With my TOU billing and if I had an electric car I could buy power at 6.5 cents and sell it back at 30 but that only works for weekdays for the summer. The other days I can sell at 15 cents. When you factor in the 30 to 40% energy loss going in and out of the batteries there is not much left to pay for the inconvenience and the battery system. If I could use the car batteries it may pay but the car would have to be home to finish discharging its battery into the grid before the TOU rate drops and the car would not be useable until the next morning. The ware and tare on the batteries cost could make that a losing proposition.

Michael Welch's picture
It's not much, but you can get paid $0.04 per kWh for that energy in CA. Do an internet search for "net surplus compensation.
Edward-Dijeau's picture

But, when the lowest electrical rate is 18 cents per kwhr and goes up to 40 cents per KWHr when you buy it back in tier 3, the only way to beat it is to be "off grid", store your energy and discharge to appliances at night from batteries. You keep and use the power you produce. If you still make too much, gived it by extention cord to your neighbors for free. Run their landscape and security lighting at night and stay safe.

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