Net Metering

by Nick Gromicko, CMI®

Net metering is an inexpensive, easily administered way to encourage homeowners to invest in renewable-energy technologies. In most Net metering with a solar arrayresidences and small businesses, standard kilowatt-hour meters are capable of automatically registering the flow of electricity in either direction, to or from the building. When the customer draws electricity from the utility, the meter spins forward, and when the customer allows excess energy to be drawn into the power grid, the meter spins backward. Essentially, the homeowner is billed only for the net energy consumed during the billing period.

Why is net metering important?
  • It increases the value of the electricity produced by renewable energy systems by allowing customers to "bank" their excess energy.
  • It reduces stress on the power grid. Solar arrays thrive on the very thing that makes the power grid vulnerable -- the sun. While customers demand a great deal of power to supply their air conditioners, solar arrays are at their most generous to the grid, reducing the likelihood of brownouts and rolling blackouts that can disrupt entire cities.
  • Batteries become unnecessary, as there is no need for on-site energy storage. Batteries required to store energy produced by solar arrays, wind turbines and other renewable-energy systems are expensive, and they must be disposed of carefully.
  • The installation cost is reduced by eliminating the need for a second energy meter, which is commonly required by renewable-energy systems located in regions that do not offer net metering (more on this later). 

The Origins of Net Metering:  "Double Metering"

In 1978, Congress passed the Public Utility Regulatory Policies Act, which requires electric utilities to offer to purchase power from electric power producers at an “avoided cost” or wholesale rate, which is the cost the electric utility would incur were it to generate electricity or purchase it from another source. This process, known as double metering, had a few major problems:

  • Avoided costs are very difficult to determine, and buy-back rates often seem to be discriminatory. In some areas, utilities offer less than 10% of the retail value for power purchased from customers.
  • Significant costs are incurred by the utility, as they are required to manually process a few special accounts. It may cost a utility $15 to read a second meter and send a check to the customer, even if the payment is only a few cents.Net metering laws differ by state. Source - the Interstate Renewable Energy Council
Regional Laws

Currently, nine states (Alaska, Alabama, Kansas, Nebraska, Mississippi, Missouri, South Carolina, South Dakota, and Tennessee) offer only double metering. Net metering, in various forms, is available to the rest of the country. In the 41 states where net metering is available, details of the practice vary considerably. All utilities must offer net metering in Vermont and Oregon, while only some utilities offer the service in Montana and Ohio, for instance. Still other states, such as Colorado and Connecticut, have investor-owned utilities which offer net metering, whereas utilities owned by public trusts and agencies may do as they wish.

State laws also restrict the wattage size of renewable-energy power systems that may take advantage of net metering. Of the states where the service is offered, Arizona and Georgia are among the most restrictive, permitting systems up to only 10 kW in power. Colorado and California allow considerably larger systems, at 2 mW and 1 mW, respectively. Ohio is currently the only state that places no restrictions on individual systems; however, the total customer-generated capacity cannot exceed 1% of a power provider’s peak demand.

Net metering has yet to take hold in England. Some Canadian provinces offer the service, and in some Australian provinces, notably Queensland and Victoria, utilities will pay customers several times the retail rate for excess energy.

In summary, net metering makes renewable energy sources more feasible.