Net Metering Guide: How the Utility Can Credit Your Solar System Power

When you go solar, you need a way to store energy generated by your solar panels and solar system. The easiest method to have energy storage is to hook into the utility grid to store energy and save it for later use.

Before you can achieve this, you will need to agree to the terms with the utility company and outline how you are credited and billed for power. These policies are often referred to as net metering or net energy metering agreements.

When the grid acts as energy storage for the solar homeowner it is under a net metering agreement. The utility creates a banking situation for the power that the solar homeowner generates so they can utilize it later. The utility then tracks your meter to record your net energy usage (energy consumed minus energy sent to the grid) so they can either bill or credit your account based on your overall usage and production.

Net metering benefits both the utility and the solar homeowner. The solar homeowner can store solar power for later use, and the utility receives an extra supply of electricity to provide to the overtaxed grid and smooth out the power demand curve preventing power outages.

Every utility has different terms and conditions, Intelligen Resources have been in professionals in the commercial and retail energy industry since 2008 and can help you navigate the connection process. We will cover some of the most common agreements in the industry so you know what to expect along your solar journey.

Types of Net Metering Agreements

What is Net Metering? Well in broad terms, net metering is an agreement with the utility that allows for you to get credit for the solar energy your solar system produces and sends to the grid. The utility gives you a credit for the solar electricity you generate, and you can utilize those credits at any time to draw power to and from the grid.

Net Metering allows for the utility to monitor how much energy you produce and use on your property. The more you produce and don’t use, the more the utility credits you for any extra production. This works inversely for if you withdraw more than you produce, you will have to pay for any extra usage.

Any excess production is credited to your utility account and rolled over into future months. That means if you produce more power than you use in a given month, that power will be “banked” for periods of low production, meaning what you produce in August can be utilized in December when the days are shorter and the weather is less fair for solar production.

Most net metering agreements allow for the utility to reimburse you for excess generation. This reimbursement can either be through a check or through energy credits toward your future bill. In some cases, the utility chooses to pay reimbursements at a wholesale rate (versus awarding credits at the retail rate), so most solar homeowners choose to take the credit.

What is a Feed-In Tariff?

Net metering agreements use one meter to track net energy consumption by the solar household (energy utilized minus energy generated from the solar homeowner) and bill everything at a uniform rate.

A Feed-In Tariff, the utility installs two meters: one for the power your home utilizes and one for the power you generate with your home solar system. Each meter has a different billed rate setting.

Feed-in tariffs are more frequently implemented by local governments to incentivize people to switch to renewable energy sources. The utility usually pays a premium rate to encourage solar adoption in their area and to reduce the load on the demand response for the grid. You might buy power at $0.15/kWh for example, but sell excess power to the utility at a rate of $0.25/kWh.

What is Net Purchase and Sale?

A Net Purchase and Sale is basically the opposite of the feed-in tariff structure. You will still get two meters in this scenario, but the utility will charge electricity at retail rates and buy energy produced from you at reduced wholesale rates.

The utility only pays their “avoided cost” under this billing structure for anything you generate and place on the grid. The avoided cost is the cost the utility would have to pay to generate that electricity from the grid.

This structure is not as beneficial for the consumer as the regulated feed-in tariffs, but it’s still effective because you can receive payment for surplus energy generation from your home solar system.

What is Aggregate Net Metering?

Aggregate net metering allows for multiple meters on a property to be offset by a single solar system.

For example, if you live on a ranch property with your home, a barn, and a workshop, each with separate meters. Under this agreement, all three meters are counted toward the total net energy use on the property.

This is the same as ‘standard’ net metering. The only difference is that it allows you to track all the meters on one property.

What is Virtual Net Metering / Community Solar?

While aggregate net metering allows a single customer to offset multiple meters on their property, Virtual Net Metering allows for multiple customers to participate in net metering with a shared solar energy system.

Under this policy, multiple customers in a community can connect to a central solar farm. Each customer is billed individually in proportion to their investment in the community solar farm. This also can work in shared residences like apartment complexes. Those who choose to buy into the community solar program receive an ownership stake in the shared system.

What are Time-of-Use Rates?

Lastly, your net metering policy may be affected by time-of-use (TOU) rates. Under a TOU policy, the utility charges more for electricity during peak demand periods, when people are home from school and work in the evening.

Where applicable, net metering calculations are affected by TOU rates. Solar generates energy during off-peak hours (when the sun is out during the day), so that production is credited at a lower rate. When you flip on lights in the evening, you are billed at a higher rate for usage during peak periods.

The result is that you can generate enough energy to cover your usage and still end up paying a bill because you pay a higher rate to use energy in the evenings than the rate you are credited for producing during the day.

To counteract this, you can invest in an energy storage system that allows for TOU offset. A small battery bank can store daytime production for use during peak periods. By drawing power from your battery bank (instead of the grid) in the evening, you avoid paying higher rates during peak usage periods and maximize the value of your solar production.

Net Metering Caps and Restrictions

Some utilities have restrictions and caps on their net metering policies. These restrictions are in place to level out supply and demand, and to prevent people from taking advantage of the policies purely for profit motive (since you can make money by selling off surplus energy).

These restrictions may include:

·         System size caps: either a concrete limit (systems up to 1 MW) or a percentage (125% of consumption)

·         Technology restrictions: outdated or inefficient technologies may not be eligible

·         Credit rollover limits: credits can expire and be surrendered to the utility if not used within a certain timeframe

·         Property type: residential, commercial, and industrial properties may have different policies

• Renewable energy source: Aside from solar, net metering policies may apply to the wind, hydro, fuel cells, biomass, geothermal, and other renewable energy sources.

Next Step: Understand Your Local Net Metering Policy

Thinking of going solar? Contact Intelligen Resources and your local utility and ask about their net metering policies. Many have their policies published online and we can help you make sure your solar system has a net metering agreement in place with your local utility.

They’ll explain how they credit you for solar energy produced, which is important to understand if you want to get the most out of your system.