What is Net Metering?

published on 05 October 2022
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“Conserving energy and thus saving money, reducing consumption of unnecessary products and packaging and shifting to a clean-energy economy would likely hurt the bottom line of polluting industries, but would undoubtedly have positive effects for most of us.”

David Suzuki

Net Metering is one of those trendy solar buzzwords, but just because it sounds like solar jargon, doesn’t mean you don’t need to know it. 

How Net Metering Works and What it Means to You

In simple terms, Net Metering is your home’s ability to be connected to the existing power grid and both credit and debit in energy, like a bank account. For example, after transitioning to solar your home, during daylight hours you will generate more electricity than you actually need. This surplus of energy is sent to the grid for others to use and the utility company provides you with a credit for the power you created. Then, during the evening hours when the sun has gone down and you are no longer generating power from your own personal rooftop power plant, you will then draw on the grid and get back the energy you created. Basically, you will always have as much energy as you need because you are on the grid, but there will be times you are simply building up the credits available to draw on before you need to pay for energy.

One great time to build up credits to draw on later is during a summer vacation. You might be away from your home for a week and not using any power. However, your personal power plant is still hard at work making you money. That week, you will have paid into the grid without making a withdrawal and most utility companies will allow that to carry over from one month to the next. Other times, the utility service may choose to mail you a check for the cost of energy that you created. The downside of a check is that this reimbursement would be at wholesale energy rates, while they pay credits at a retail rate. But let’s not kid ourselves. There’s never a downside to getting a check in the mail.

Not every utility provider has the same agreements in place so it’s important to find out how yours treats net metering before going solar.

Should I Stay on the Grid?

While many people imagine a more simplistic life of off grid living, I believe that the benefits of remaining tied to the grid far outweigh any negatives from it. Typically, to remain grid tied, you will need to pay a small monthly payment to the utility provider, but in return you get the protection of having access to unlimited energy should you need it. If something were to happen to your panels, you wouldn’t want to be without electricity for days while you schedule with a technician to repair the damage. This is especially important in this day and age where, even if a technician can visit you right away, it might take days or weeks for a needed part to arrive because of shipping logistics issues. While most panels will last for 30-40+ years, it’s always better to err on the side of caution rather than simply hoping for the best. After all, the best reason to get solar is to have more control over your life and finances and not less.

What is a Feed-In Tariff

Another perk that exists in some locals is what’s called a Feed-In Tariff. What that means is that you might only have to pay $0.15/kWh for electricity, but when you sell the excess power you generate, you might receive $0.27/kWh from the provider. While that sounds like you found a loophole in the system, it’s actually a local government program that exists in certain areas to encourage renewable energy adoption from residents. If you live in a place that offers Feed-In Tariffs, I recommend you build the largest system you can and bank the money it generates for as long as possible. Just think, you might go out to an extra fancy dinner during your summer vacation knowing that you are making a healthy profit by selling your energy back to the grid. Families that can benefit from Feed-In Tariffs typically also make the choice to conserve as much electric as they can, hoping to generate some additional income through their system. One way to do this is by looking at what appliances use the most energy and ensuring you have the most efficient ones.

What is Time-of-Use?

Another term you may or may not be familiar with depending on where you live in the country is Time-of-Use. Time-of-Use is becoming more and more common in the US and is basically what I consider an additional tax from the electric company. Under Time-of-Use your utility provider charges MORE for your electricity during peak demand periods. A peak demand period might be between 4:00pm - 9:00pm or 5:00pm - 10:00pm. So the times when you expect to come home, cook dinner, watch TV and crank up the AC, your electric company is taxing you for drawing from the grid during this time. To counter that, many solar home owners invest in a battery bank that will draw stored energy from your energy reserves during peak times rather than from the grid. This can save you the cost of paying higher fees during times of peak usage and better put your solar production to good use.

As more people transition away from paying the utilities for their energy and generate it themselves, I believe the energy companies will continue to find additional ways to generate income with new fees, taxes, and surcharges. While Time-of-Use is just one of the more common fees, there are many that you might not notice you are paying unless you pay close attention to the line items on your bill.

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Jon Nelsen | Solar Consultant



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