Net Metering—What It Is and Why It Matters
Learn How You Can Help Decentralize Power and Get Paid for It
by Kevin Wallace
5 min read - Published on 05/10/2022
Solar just makes sense.
Helps the environment? Check. Unlimited, reliable, decentralized power production from your roof? Check. Tax benefits? Currently, yes, check.
But there's more—it is also the gift that keeps on giving.
What happens to all that wonderful, sunlight-generated goodness when you're at work and the only device pulling any power is your still-beeping-from-this-morning alarm clock? Where does the extra power go?
Yes! Back to the grid. Bingo.
Now, there are a few caveats and requirements and we'll hit those one-by-one right here. Vamos!
What is Net Metering?
When your solar panels are producing more energy than your home is using, that extra power needs to go somewhere. What better place to send the energy than back to the power grid! Most utilities have a net metering program where you will be paid for that extra power—which 100% makes sense because chances are your neighbors will end up buying it from your utility at regular, marked-up rates.
So, you contribute your extra power back to the grid and you get credits back on your power bill to help offset at least a part of the cost of challenging your A/C to keep your room temperature at a brisk 58 degrees all night while you sleep.
Net Metering Bullet Points
- Net metering is a billing mechanism in which customers receive credits on their electricity bill from the energy they produce through solar that gets sent back to the power grid
- Policies and rates for net metering vary widely depending on what state and locality you live in, so let us help you navigate that mess
- Net metering is tracked using digital smart meters, which help improve customer control over their electricity production and consumption and provide real-time usage reporting
- The most direct and profound impact of net metering is that it effectively lowers the electric cost for those homes producing their own electricity through solar
- Net metering helps protect the grid and lowers costs related to transmission and distribution
What Is the Utility Company's Role in Net Metering?
Net metering requires a little cooperation between homeowners and utility companies. Rooftop solar power drastically reduces your dependence on utility-sourced electricity, but there are situations where you still need to rely on your local utility to keep the lights on.
At night or on cloudy days, a residential solar system may not be producing enough energy to power the entire home, and you will need to pull power back from the grid to keep electricity needs met. Net metering as an energy exchange and billing program allows for this seamless back and forth.
States and localities have varying regulations concerning net metering and what rates customers receive for their bill credits (what they consider the value of solar to be). Some states require that utilities pay the retail electricity rate back to the customer per unit of energy and other states allow for wholesale-priced credits.
Some utilities build in a flat fee if you benefit from net metering to make sure that you still contribute your fair share towards the construction and maintenance of electricity infrastructure.
States or Territories with Net Metering Mandates for Certain Utilities
If you live or work in one of these states or territories (or D.C.), you may be eligible to receive net metering credits for solar power generation. This list may have been updated, so please make sure to check with your local area, but this list will give you a good idea of where we currently stand:
Alaska, American Samoa, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Iowa, Kansas, Maine,Maryland, Massachusetts, Minnesota, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, U.S. Virgin Islands, Vermont, Virginia, Washington, Washington, D.C., West Virginia, Wisconsin, Wyoming
States That Are Transitioning to Different Forms of Compensation Besides Net Metering
Currently, Illinois, Indiana, Kentucky, Michigan, and New York all have state rules regarding net metering credits, and they are currently working to transition to different forms of compensation.
Illinois has basic net metering rules, but it will implement a new compensation process once predetermined targets are met.
Indiana began phasing out retail rate compensation in 2017, and state plans project that this phase-out will be complete by July 2022.
Kentucky plans to require its Public Service Commission to create crediting structures for utilities based on dollar value instead of kilowatt-hour net metering.
Michigan has begun phasing out net metering for another compensation structure related to "cost of service." It will allow utilities discretion to determine what they will pay to residences that generate electricity.
Instead of net metering, New York will institute a value of distributed energy resource (VDER) tariff to compensate non-utility energy providers.
States That Currently Mandate Compensation Alternatives to Net Metering
The following states (Arizona, Georgia, Hawaii, Louisiana, Mississippi, and Utah) do not mandate net metering but offer other compensation instead.
Arizona offers a form of net metering, which it calls "net billing." Credits are issued to customers at a specified (lower) rate rather than the retail market rate.
Georgia allows for net metering, but it does not require utilities to adopt it.
This state offers two tariffs in place of net metering. The first is called Customer Grid Supply Plus (CGS Plus); the other is the Smart Export Tariff. The CGS Plus Tariff offers credits until a utility meets its capacity limit.
The Smart Export Tariff regulates systems that have both solar and storage, and requires consumers to use excess electricity produced by solar to charge batteries during the day and to use their battery-stored power in the evening. If there is extra power left over to export to the grid at night, they receive a bill credit.
Louisiana requires utilities to compensate for net metering until they reach a predetermined cap.
Mississippi requires crediting for net metering, but it is at a rate that is less than the retail rate.
There is no aggregate capacity limit for utilities in the state. For their new net metering transition program, Utah has an individual system capacity limit of 25 kW for residential users and 2 MW for all other users.
States That Do Not Have Any Mandates Regarding Net Metering
Texas and Idaho are the only two states without any regulations concerning net metering. However, some individual utilities within these states do provide compensation structures for it.
Regions and Localities Matter
Look to your state's policies to get a general idea of what to expect if you hope to benefit from solar and net metering. Regulations and rates may also vary regionally or by locality. Give us a ring and we'll be happy to help you untangle this mess and get to the bottom of your future solar savings.