What Is Net Energy Metering?

What Is Net Energy Metering

Updated January 20, 2022

Solar energy systems are growing in both the residential and commercial sectors. While there are many advantages to clean, renewable solar energy systems, one common reason to choose solar energy is the financial advantages. Net metering is yet another financially advantageous aspect of solar energy systems.

Net metering, also referred to as net energy metering (NEM), reduces your monthly electric bill.  It is a system designed to determine your home’s net power consumption. 

Net metering is an exciting addition to solar energy systems. It gives homeowners the full value of the solar energy their system produces. Without net metering, homeowners are not credited for excess, unused energy.

Net Energy

A special net meter is used to measure the net energy of your home. In simplest terms, net energy is the energy your home produces minus the energy you actually consume. 

Essentially, homeowners sell the unused solar energy produced by their homes to the utility company. The homeowner will then receive credits on their electric bill for the solar energy produced.

How Net Metering Works

Rooftop solar panels generate electricity from the sun. Your home uses the electricity generated from the panels to power your home. When excess electricity is produced, it is sent to the utility grid. 

There are instances when your solar energy system does not generate electricity, particularly at night. During these times, your electricity meter runs backward. The utility grid then powers your home, and you are only billed for your net energy usage.

Rolling Over Credits

Some months you may consume more energy than others. Likewise, in some months, you may produce more energy than others. Fortunately, most net metering programs have a solution for these scenarios. 

Homeowners can save unused net metering credits and use them later. For instance, you may accrue credits during the summer and use those credits in the winter. This can result in negative electric bills.

Where Is Net Metering Available?

Fortunately, net metering is available in most states. For example, 38 states and Washington D.C. have mandated net metering. Additionally, Texas and Idaho do not have mandated metering but do offer net metering. 

If net metering is not available in your state, you may still be eligible for other compensation. Other states either have other state-mandated compensation or are transitioning to other forms of compensation

The Size of Your System Matters

A correctly sized solar energy system will produce enough or close to enough electricity to match the home’s energy needs for an entire year. However, seasonal differences affect the amount of solar energy generated. Net metering ensures that the homeowner utilizes every unit of energy it produces. 

Benefits of Net Metering

The most obvious benefit of net metering is savings on your electricity, but benefits extend beyond these savings. For homeowners who purchased their solar energy systems, net metering helps recover the initial investment. The homeowner could pay back the loan faster if the system is financed.

Reduces Strain on the Electric Grid

The electric grid is under stress as energy demands increase. Yet, unbeknownst to many consumers, utility companies are straining to meet their growing needs. 

When a utility company cannot bear current energy demands, there are inconvenient consequences. Namely, customers will experience increased power outages and forced downtimes during peak periods.

However, solar energy systems reduce some of the strain on the grid. It helps reduce the strain in two ways. First, solar energy systems only draw power from the utility grid at night. Second, net metering feeds unused solar energy to the utility grid, and the excess is provided to non-solar customers.

Helps the Environment

Fossil fuels are a key component of the utility grid. Utility companies rely on gas, coal, or foreign oils to supply electricity—homeowners who use solar energy use less electricity from the grid, which benefits their neighbors.

Neighborhoods with solar energy system homes benefit from cleaner air and water. In addition, it reduces toxic emissions and pollutants that come from burning fossil fuels.

Save Money With Net Energy Metering 

Net metering is a billing tool developed and employed to credit solar energy system users for any excess, unneeded solar energy produced by their system that feeds back to the utility grid. 

This leads to an annual negative electric bill for many solar energy system owners. However, net metering advantages extend beyond the homeowner and on to their neighbors, community, and the utility company.