Net metering is a state level electricity policy for consumers who own "qualifying facilities," which are generally smaller, renewable energy sources such as a wind or solar power. "Net", in this context, is used in the sense of meaning "what remains after deductions" -- in this case, the deduction of any energy outflows from metered energy inflows. Under net metering, a system owner receives retail credit for at least a portion of the electricity they generate.
The ideal has your existing electricity meter spinning backwards, effectively banking excess electricity production for future credit. In reality, the rules vary significantly by country and possibly state/province if net metering is available, if and how long you can keep your banked credits, how much the credits are worth (retail/wholesale), etc. In North America, 40 U.S. states have some form of net metering in place, and some Canadian provinces have net metering programs.
Related: Distributed GenerationDid you know that Net Metering could save you money on your electric bill? Here are some answers to commonly asked questions about how net metering works and what it could mean for you.
What is Net Metering?
Net Metering measures the difference between the electricity you buy from your utility and the electricity you generate using your own solar or wind generating equipment. Your meter keeps track of this difference as you generate electricity and take electricity from the electricity transmission grid. When you generate more than you use, your electric meter spins backward!
return to topAm I Eligible?
You are eligible for Net Metering if you are a residential or small commercial electricity customer in California, and generate at least some of your electricity using solar or wind energy, or a combination of both, with a system capacity of one megawatt or less. Your electric generating system must be located on your premises and connected to the grid.
How does Net Metering work?
Net Metering is a special metering and billing agreement between you and your utility or electric service provider (ESP). Normally your electric meter spins forward as it measures how many kilowatt-hours of electricity you buy, and is read by your utility once a month.
A Net Metering agreement allows you to use the electricity you generate first, reducing what you would normally buy from your utility or ESP. If you generate more electricity than you use, the excess goes through your electric meter and into the grid, spinning your meter backward. Your meter shows the net amount, measured as the difference between the electricity you generate and the electricity you purchase from your utility or ESP.
What are the benefits of Net Metering?
Net Metering is a simple way to get the full value of the electricity you generate. For example, if you are a residential customer, you may not be home during the day when your system generates electricity. Net Metering allows you to "store" this excess electricity on the grid, reducing or offsetting the electricity you would otherwise have to purchase.
Another benefit of Net Metering is the "baseline" rate you are charged for the net electricity you consume. The baseline is a given amount of electricity for your home or business; you are charged a lower rate for each kilowatt-hour of electricity you consume below the baseline, and a higher rate above it. If your system is sized to offset most of your electricity needs, you are charged a lower rate for the minimal electricity you purchase from your utility if your annual net consumption falls at or below baseline.
Net Metering offers additional benefits, depending on the size of your generating system. If you purchase a smaller, less expensive system, you can still offset most or all of your electricity needs because of the higher value of your excess electricity. If you purchase a larger system, you can "bank" or store your excess electricity on the grid and offset all of the electricity you would otherwise purchase from your utility or ESP.
return to topHow will I be billed under Net Metering?
Your utility will continue to read your meter monthly. Under a Net Metering agreement, you will receive a monthly statement indicating the net amount of electricity you consumed or generated during that billing period.
On the anniversary of your agreement, you will be billed for the net electricity you consumed for the previous twelve months. You may request the option of monthly billing. Depending on the type of agreement you have, your meter might show a credit during some or all billing periods, even though the actual kilowatt-hours you generate and consume are equal.
Your utility is not required to pay you or credit your account for your excess generation each year, but it might do so. Contact your utility or ESP to discuss the option of negotiating rates for purchasing excess generation. If your current utility or ESP does not purchase excess electricity, you may contract with another company that will agree to purchase it.
What size should my generating system be?
To be eligible for a Net Metering agreement in California, generating systems cannot have a peak power output of more than one megawatt. Although a minimum size is not required, most residential systems range between two and four kilowatts. Your system size will depend on your needs and how much electricity you want to generate. You can also build your system by starting small and expanding over time. As long as your total system output is not greater than one megawatt, this modular approach is still allowable.
Can I use my current electric meter?
Most residential and small commercial customers have simple meters that are bi-directional, capable of turning in both directions. Some utilities or ESPs may want two meters for net metering, one to measure electricity going from the grid to your home or business, and one to measure the excess going from your system to the grid. If you enter into a time-of-use billing agreement, you will need to purchase a bi-directional time-of-use meter. Contact your utility for more information.
return to topHow do I sign up?
It's simple. Contact your utility or ESP and ask if they offer Net Metering. Your ESP and the company that distributes electricity to you may be the same or different companies. Your ESP handles the billing and accounting for Net Metering, while your local distribution company (LDC) handles how your generating system is connected to the grid. You and your LDC may also need to enter into an Interconnection Agreement, which will outline the requirements for safely connecting your generating system to the grid.
When connecting the system to your grid, your LDC cannot:
If my generating system produces more electricity than I need, is my utility or ESP required to buy it from me?
Utilities or ESPs may, but are not required to, purchase any excess electricity you produce at the end of each year of your net metering agreement. State law says that they do not have to buy your net generation. However, some ESPs, especially those specializing in selling "green" electricity, may be willing to buy your excess solar or wind electricity to re-sell to their other customers.
Will I have to pay for special meters, inspections or fees to get my system hooked up to the grid?
You are only responsible for having a simple, bi-directional meter, the type you probably already have, unless you decide to purchase a time-of-use meter. If your generating system meets national safety and performance standards, you cannot be charged for additional tests, certifications or fees.
Will the electricity I might still need to buy from a utility or ESP cost me more than before I became a Net Metered customer?
No, your utility or ESP cannot charge you more for electricity because you are a Net-Metered customer, and no charges can be imposed on the electricity you generate.
return to top
My electric service provider will pay me full retail rates for my excess electricity.
Wrong: If they are willing to buy this "net" annual generation, they do not have to pay you full retail prices for it. While the actual rate paid would be up to the ESP, it would likely be less than retail and closer to "wholesale" rates, which are much lower.
I will have to spend hundreds of dollars on special meters, inspections or fees to get my system hooked up to the electric grid.
Wrong: You are only responsible for having a simple, bi-directional meter, the type you probably already have. If your generating system meets national safety and performance standards, you cannot be charged for additional tests, certification or fees.
The kilowatt-hours of electricity I might still need to buy from an ESP will cost me more than before I became a net metered customer.
Wrong: Your ESP cannot charge you anything extra for being a net metered customer and no charges can be imposed on the electricity you generate.
return to topMost electricity customers are not aware that, as a result of the recent deregulation of utilities in California, their old electric utility no longer exists. It has now been replaced by two companies to bring them electricity, an "electric service provider" or "ESP" and a "local distribution company" or "LDC." This change is similar to the deregulation of telephone services twenty years ago. That deregulation meant that the company that sells you long distance telephone service may now be a different company from the company that maintains and owns the telephone wires into your home. This is now the same case for electricity, where the company that supplies the electricity that you purchase, your "ESP," may be a different company than the one that owns and maintains the power lines to your house, which is your "LDC." Your old utility company is most likely still your LDC and may also be your ESP, unless you have chosen to buy your electricity from one of the many new electric service providers that have been formed to market electricity. With net metering, the metering arrangement is with your ESP, while the details of how your generating system must be safely connected to the electrical grid is handled by your LDC.
