Net-Metering Fundamentals

The concept of net-metering is straightforward. The clean energy generated with solar panels, minus the electricity you use, equals a net amount of electricity. Most of us are connected to a network, so it’s fed into the network and your neighbors use that clean energy.

In the evening, you use electricity and it’s fed back to your home from the network. The way to measure is based on how much you create, how much you use, and how much you give to the network is with a meter that runs both backward and forward. The measuring process of that meter is called net metering. Below are the fundamentals of net-metering.

Net metering Arrangements

Net metering arrangements are mandated at a state level in 43 out of the 50 states. Even in states where they don’t mandate net-metering arrangements, most utilities have their systems in place. Most will install the special meters themselves for no charge. If you are going to feed energy back into the network, the people who handle the network will want to make sure it’s installed right.

Most utilities install the meter themselves, or they have authorized contractors to do the installation. In some cases, the utility uses the solar company’s licensed electrician to upgrade the meter. Every authorized installer walks the homeowner through this process and any costs associated.

As the net meter works, it measures both the kilowatt hours delivered to the home, as well as the kilowatt hours overproduced and fed back to the grid. This is where the net metering comes in. Net metering is not available in every state, but it is available in 38 of the 50 states.

During the day you might produce more power than you use, and then at night when the solar panels are dormant, you receive those power credits back as you use electricity from the grid. At the end of the month, if you harvest more clean power than you use, the excess power will carry over to the next month as a credit.

Annual true-up

At the end of each year, there is what is known as an annual true-up. This means if you have excess energy credits at the end of the year the utility can do one of three things, depending on the net metering rules in each state.

They can pay you out for them at the full retail rate (it’s rare, but it does happen). They can pay you out for them at an avoided cost rate of 3 to 4 cents per kWh (this is the case with California, Massachusetts, Utah, New York, New Jersey and most of the other leading solar states)

Basically, an avoided cost rate is a wholesale rate the utility would pay a normal fossil fuel burning power station for power. They can cancel the excess credits with no compensation to you. This is less common but you should know if your utility does this. If you’d like more information, click here. If you’d like further information, click here.

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