41 states plus D.C. have mandatory rules regarding it. Yet if you’re one of the millions of American homeowners who are just learning more about solar power, you likely have no idea what net metering is, let alone how it can benefit you. And since net metering can help increase the value of a solar energy system (as well as your potential savings) it’s important to gain at least a basic understanding of how these solar-focused state programs work.
What Is Net Metering?
To put it simply, net metering is a utility billing mechanism that credits solar energy system owners for the electricity they add to the grid.
Homes with solar panels on their roof often generate more electricity than is used during daylight hours. That surplus energy has to go somewhere. So unless the home also has solar storage capacity on-site (like a battery) – chances are it will flow back to the utility grid to serve nearby customers’ energy needs. On average, only 20-40% of a solar energy system’s output ever goes into the grid. But when it does, the home has effectively become an independent power plant, feeding excess energy back to the utility grid.
In an effort to compensate the solar system owner for that free energy, a net-metered home’s electricity meter will actually run backwards, providing a credit that can be used at night or other periods where the home’s electricity use exceeds the system’s output. In this way, homes with solar production in net metered areas only get billed for their “net” energy use, i.e. the energy drawn from the grid less any credits for surplus energy generated from solar.
Throwing Shade At Solar Power
Sounds great, right? After all — who wouldn’t want to help out their neighbors by putting surplus power to good use? Unfortunately, differences in local net metering policies can mean that benefits vary widely for solar customers in different areas of the country. And changes in net metering policies during the 20+ years a solar system is active can cast an unexpected shadow on the value provided by the system over its lifetime.
In Nevada for example, a solar debacle unfolded at the end of 2015. Under pressure from the local utility, this former national leader in solar energy rolled back its state net metering incentives – in effect raising rates on solar energy. Increased monthly utility charges for solar homes along with a lower net metering credit temporarily jacked up energy bills for solar system owners, and dealt a serious blow to the then-booming residential solar industry. The move also put Nevadans out of work and chased some good companies away as solar providers shuttered their training facilities and operations in the sunshine-plentiful state.
The good news is that the public outcry was so loud – and this from a state with just over 30,000 home solar systems – that a compromise was quickly reached. Over 20,000 eligible homeowners were automatically grandfathered into the more generous net metering rules for 20 years. The remaining 8,000 Nevada homeowners with solar systems in progress can opt-in before a date to be named soon. The Nevada legislature is also looking holistically at state energy policies over the next two years as part of a ballot measure that received overwhelming public support in November 2016.
Similarly in Massachusetts, the state’s net metering cap was lowered and then lifted in 2016. Solar companies wanted the cap lifted immediately so that projects underway in the state would not stall. Utilities said the subsidies being paid for solar energy were raising electricity costs for non-solar customers, and they wanted to see the reimbursement rates lowered before the cap was lifted. A compromise bill ensured that small residential solar projects (i.e. homes) would still get the full retail rate. However, both solar advocates and Massachusetts lawmakers have warned that the issue must be revisited soon, since the cap is likely to be hit again in 2017.
Will Net Metering Affect YOU?
So if net metering policies differ by location and can change — what’s a pro-solar homeowner to do? Once again, it all comes back to choosing the right solar company. A knowledgeable provider can explain exactly how net metering works (or doesn’t) in your area. The right solar partner will also keep you updated on how policy shifts may affect you as part of their commitment to a long and positive relationship over the next 20 years. And last but certainly not least, remember that any solar proposal you receive simply cannot accurately reflect future market changes – good or bad. A solar company that is transparent about their lack of a crystal ball and committed to working with you long-term should definitely get your confidence and business.