What is net metering and how does this solar incentive help reduce your energy bill? As a homeowner interested in installing solar, you might have heard of a net metering program provided by your public utility, but you’re unsure what it is and how it works. Let’s take a deep dive into net metering for solar and how this solar incentive can help reduce the cost of solar.
What is net metering?
Net metering allows you to bank excess energy with your utility, much like a squirrel caching food to be consumed in winter. During the summer, your solar panels will likely produce excess energy beyond what your home or building needs, generating credits with your electrical utility. Those credits can then be used during the winter when a solar energy system is not producing enough electricity to meet all of your energy needs.
With net metering, also referred to as net energy metering (NEM), utility companies compensate you with energy credits every time you send excess electricity back out to the grid. These credits can be used later when you need them. Think of it as a bank. You make a deposit when you have excess energy, and you make a withdrawal when you have a deficit of energy production.
It’s a simple and effective policy that makes Washington and Oregon great for solar. Couple that with long, cool summer days, and it’s no wonder that solar works great in the Northwest.
How net metering works?
Why net metering exists?
There are two primary reasons why net energy metering exists. The first is to encourage more widespread adoption of residential and small commercial solar throughout the country. The second is to provide an influx of low-to-no-cost energy onto the grid, which in turn helps utilities balance the cost of purchasing electricity from other resources.
Benefits of net metering for homeowners and businesses
More control of your energy bill
The savings on your energy bill are the greatest benefit of net metering. The cost of energy continues to go up in the U.S. In fact, consumers saw an average increase of 4.3% between 2020 and 2021 alone. With a solar system and net metering, homeowners and businesses achieve the peace of mind of being protected from rising energy costs. As a solar homeowner or business owner connected to the utility grid, you’re only billed for your “net” energy usage, or the amount your solar panels produced minus what you consumed from the utility, plus any fixed fees or subscription charges.
Net metering and off-grid: Is it possible?
As an electric utility billing tool, net metering only works when connected to the grid. If your system is off-grid, you won’t be able to receive net metering benefits. Think of the grid as a giant solar battery, storing excess energy you produce with your solar energy system. If you’re not connected to the grid, then you cannot send power back out to it or take advantage of utility incentives.
Your electricity bill and net metering
Your solar energy system will produce more electricity in the summer months and less in the winter, resulting in a larger share of utility-fed electricity in the winter. This production and consumption trend is fairly predictable, so your utility won’t send you a monthly check when you produce more than you need. Instead, as mentioned before, your utility will compensate you with energy credits proportionate to the excess energy you produced. These banked credits will go towards reducing your energy bills at night and in the winter when you need them. The credits you receive are based on the net number of kilowatt-hours you gave back to the grid. Simple.
A shorter payback period for solar panels
We calculate the impact of net metering when we give you a custom quote for your home or business. We take into consideration the total cost of your system, any incentives and tax credits, and how much you will save on electricity over the lifetime of your solar panels, which are usually warranted for 25 years.
For example, a solar system in a state with net metering might have a payback period of 8 to 10 years. Whereas a similar system in a state without net metering could take 15-20 years to pay off because they would not be receiving the full value of their self-produced clean energy.
In order to accurately determine how much you can save, it’s essential to evaluate the suitability of your site. This includes looking at the pitch and orientation of your roof, as well as gauging any potential shading from nearby obstructions like trees or taller buildings. Working with a solar design consultant can help you determine the optimal system for your home or building to take maximum advantage of net metering incentives.
Reduce pressure on the grid
Our utility grid is under a lot of stress to distribute enough energy to consumers. That’s why residential solar systems connected to the grid are so beneficial. If you’re producing your own electricity, then you’re helping utilities better manage their peak electricity demand from consumers; in effect, ensuring a more robust and reliable electricity grid for everyone. And by encouraging electricity generation near the point of consumption, as is the case with solar, net metering also reduces the strain on distribution systems while preventing losses in long-distance electricity transmission and distribution.
What’s more, because a solar energy system is sending excess electricity to the grid, that energy can be used by non-solar consumers, which further decreases grid stress. It’s a win-win for everyone!
Reduce greenhouse gas emissions
While every utility is different, the fact of the matter is that many still use fossil fuels to generate electricity. In Washington and Oregon, a significant portion of electricity is generated from hydropower: a renewable energy source that’s much better for the environment than fossil fuels, but still not without environmental consequences. On the other hand, much of the United States remains dependent on fossil fuels.
Because net metering encourages the wider adoption of solar energy systems, it has a not-so-insignificant influence on reducing greenhouse gas emissions.
Creating jobs & encouraging private investment
Net metering increases demand for solar energy systems, providing a boost to the economy by creating good-paying jobs for installers, electricians, and support staff who work in the solar supply chain. For reference, the solar industry today employs over 250,000 American workers. By making solar installation more affordable for homeowners and businesses, net metering has helped the solar industry thrive.
With a thriving solar industry comes investments in solar hardware and manufacturing as well. At the time of writing, President Biden has signaled that he intends to increase American investment in renewable energy. By invoking the Defense Production Act, the President hopes to accelerate American manufacturing of solar panels and complementary equipment. With manufacturing and production moving away from Asia, that means even more jobs for American workers.