What Is Net Metering?
Net metering, or net energy metering (NEM) is a way of storing your excess energy in the electric grid. When your solar panels produce more energy than you need, it is sent to the electric grid in exchange for utility credits. When your panels are producing less electricity than what you need, your home will pull from the grid and use these credits to offset your bill.
A solar panel system that produces 100% offset will produce exactly enough electricity to match your home’s energy usage over the entire year. However, the amount of electricity your panels will produce will vary throughout the year. Net metering accounts for these invariable changes by crediting you for the extra energy you produce, so you can use it later.
Net metering isn’t the only way for utility companies to calculate your usage after going solar, but it is by far the most common. At least 41 states and Washington D.C. have mandatory net metering policies, and two more have utilities that permit the practice.
Generally speaking, solar homes will produce excess electricity during the summer and will use more electricity from the grid during the winter. Since these variations are predictable, your utility company isn’t going to send you a check for months when you produce more electricity than you use. Instead, you will build up credits during the summer that you can draw from at night and during the winter. A perfectly designed system will match your total electricity usage for a year.
How It Works
Solar panel systems typically hit peak production rates in the mid-afternoon when most people aren’t home to use the electricity. On the other hand, electricity use is generally higher in the morning and evening. Net metering accounts for these daily ups and downs in solar production.
When your system is producing more electricity than you need, your meter actually runs in reverse. When your solar panels aren’t producing enough electricity to power your home, you can draw from the grid, just as you did before going solar. This “back-and-forth” system ensures that your excess electricity will still be used, and your shortages will be met.
When your system generates more electricity than you use over the course of a month, you will receive a credit based on the net number of kilowatt-hours (KwH) you gave back to the grid. If you produce less than you use in a given month, you will have to buy the electricity from the utility company. In these situations, you would pay for the total electricity you used for the month, minus the credits your panels generated.
Thanks to net metering, solar homes are credited for the energy that their panels generate at the same rate they would pay to the utility company. As a result, you can save tens of thousands of dollars on electricity costs over the life of their system.