Net Metering

Net metering is an inexpensive, easily administered way to encourage homeowners to invest in renewable-energy technologies. In most residences 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.

• 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.