What Is Net Metering?
Solar only works when there is light out. However, it is possible to bank that solar power for use even when the sun isn’t shining; to do this, you’ll need to store the excess electricity produced by your solar system. Most homeowners who have enough solar to power their homes both day and night don’t store that power on-site in batteries. Typically, local utility companies will offer net metering or net energy buyback programs.
According to SEIA, net metering is a billing mechanism that credits solar energy system owners for the electricity they add to the grid. For example, if a residential customer has a PV system on their roof, it may generate more electricity than the home uses during daylight hours. If the home is net-metered, the electricity meter will run backwards to provide a credit against what electricity is consumed at night or other periods when the home's electricity use exceeds the system's output. Customers are only billed for their "net" energy use. On average, only 20-40% of a solar energy system’s output ever goes into the grid, and this exported solar electricity serves nearby customers’ loads.
Not all utility companies offer net metering; those that do have several different methodologies. Rather than going in-depth about every single utility company and their unique ways to net metering, we will discuss a few common practices and how these may apply to a homebuyer.
Net metering works because all day and nights worth of energy can be generated in an eight to ten-hour window. During that time on a net metered home, the solar will first power the needs of the home and then any excess energy will go back through the meter and to the utility company. The newer meters don’t spin like the old spin wheel meters; when the solar is overproducing, it is as if the metering is spinning backwards during overproduction and then forwards when it's under-producing for the needs of the home. In some places, net metering is not possible because the local utility company cannot handle excess electricity on the grid. Many parts of Hawaii are this way. In order to get a full solar offset of energy use, on-site batteries are required for these situations.
For those areas that do offer net metering, the electricity is purchased from the homeowner as it spins their meter backwards and then follows the path of least resistance; typically, just going out from their meter and into the nearest non-solar home. For this reason, utility companies typically like solar homes because they don't have to pay to put up a power plant and they don't have to pay to transport the power over any kind of distance. It simply stays in the neighborhood where it was produced to power the non-solar neighbors.
Net metering policies vary widely from state to state; many will either incentivize or penalize utility companies to provide this important aspect of solar generation.
The way the utility company offers net metering largely impacts the size of the solar system. The best case scenario for solar homes is when the utility company buys back the power at a rate of 1 kWh of energy sold to them, giving the solar customer 1 kWh of credit to use when they need it.
The next best option is a TOU back option where the customer is credited at an off-peak time rate when they will need the power from the utility company. For example, if during the peak rate time power costs .25/kWh, and off-peak time is .10/kWh, the utility company will buy back the excess at .10/kWh so the rate of usage is the same. This is not the best form of net metering but it's better than other utilities that buy back the power at a fraction of the rate they would sell it at. In that case, if the utility company is charging the same .20/kWh during peak time but .08-kWh during off-peak time, the utility only buys back the power at a rate of .025/kWh for overproduction. In this example, it would not make sense to use a net meter with this utility. In that case, solar would be good only if you are using power from the solar during the day and using power from a utility company at night. Or if batteries are cost-effective enough than to self-store your power and not involve the utility at all.
It's important to understand what kind of net metering plan, if any, the home you're buying is on and, historically, what the utility bills were for the previous homeowner. That way, you have the correct expectations going into solar homeownership for what kind of benefits you’ll receive.
