What is net metering?
Net metering is a simple policy that has a big impact on the value of your photovoltaic system. We give you the state-by-state update for 2019.
Net metering is a policy where you are billed according to your net electricity usage. This means that if you generate 100% of your power from solar within a billing cycle, the electricity usage portion of your bill will be zero. If you generate only 90%, you pay for the remaining 10% at the normal retail rate.
In the United States, net metering is a policy that is enacted at the state level, and is one of the key factors that will determine whether having photovoltaics on your house will pay for itself in a reasonable period of time.
With net metering, you get a full credit for excess electricity that you send into the grid. “Full credit” means that for each kilowatt hour of excess electricity that you put into the grid, you get a credit equal to the retail rate of electricity. In other words, if you pay 12 cents for one kilowatt hour of grid electricity, the utility will credit you 12 cents when you put one kilowatt hour of solar electricity back into the grid.
To better understand why this is important, imagine an extreme scenario: you have a utility that not only does not have net metering, but pays zero compensation for electricity that you send into the grid. Also, you happen to be a vampire who sleeps during daylight hours and uses no electricity during the day. You’re only awake and doing your vampire activities after the sun has set.
While you are sleeping during the day the solar panels on your vampire home may generate dozens of kilowatt hours of electricity, but because your utility doesn’t compensate you for that, your extra solar electricity doesn’t reduce your monthly bill at all. Then when it’s dark out, you wake up and turn on your electric stove to cook yourself a nice meal of blood sausage. Because it’s night, your panels aren’t generating any power, so your house pulls electricity from the grid. Your electric meter records this, and you get a bill at the end of the month.
If this is your situation, having solar panels on your home still benefits society because you are contributing renewable energy to the grid, but you don’t get any financial compensation. You don’t get paid for the solar electricity you put into the grid, but pay for the electricity you use at night. Strictly as a financial investment, solar would be a bad deal for you.
People aren’t vampires, so the extreme case here would never actually happen (also because vampires aren’t real, you know) but it does illustrate how, in the absence of net metering, time-of-use suddenly becomes important.
Even if a utility doesn’t participate in net metering, if they allow you to interconnect your photovoltaic system with the grid, they will still compensate you for the electricity that you send into the grid, although it will be at a rate less than the retail rate of electricity. This system is called net billing.
How does net billing work?
Under a net billing model, when you generate more electricity than you are using at any point in time, the excess power is sent into the grid for your neighbors to use, and your utility meter tracks the amount. At the end of your billing cycle, you pay for any electricity that you draw from the grid at the normal residential rate, and any credits you’ve earned for power sent into the grid are paid to you at a lower rate - often, it the same rate that the utility company pays on the wholesale market for electricity. The net billing rate varies greatly from utility to utility, but it’s often about half the residential rate.
Getting a half credit for your solar electricity is better than nothing, but you can see how being under net billing changes how you calculate the financial benefits of home solar. If you’re a little bit like a vampire and a majority of your electric usage is at night, then your financial payback period for having solar is going to be longer.
Some strategies for living with net billing
If net billing is your option, you might be able to shift your power usage to during the day when your solar panels are generating lots of electrons.
While at first it might seem that changing your electricity time-of-use to coincide with the sunshine is a big inconvenience, with modern appliances and internet-connected devices it can actually be pretty simple. For example, dishwashers, clothes washers and dryers often have programmable time delay settings. With this feature, you could set the dishwasher on your way out the door in the morning, and have it begin working a few hours later when the sun is blazing overhead.
Or if you have an air conditioner, set it to make the house a few degrees colder than normal during the day while you’re out of the house at work. Then later when you return home in the evening, your air conditioner can rest and the house can “coast” on the cold air generated when the sun was shining earlier.
Still, while it’s certainly possible to have a good financial payback under net billing, net metering is a much more favorable policy for the homeowner. If you’re fortunate enough to have net metering, you don’t have to worry about time-of-use at all (unless you choose variable pricing that rewards you with lower prices at off-peak times, but that’s separate from solar policy). You can continue wash your clothes and play your PlayStation whenever you feel like it and not be concerned about whether your electrons are solar or not.
Net metering by state in 2019
The table below summarizes the current state of net metering across the United States in 2019. The Policy column describes whether a state mandates net metering, net billing or has no mandate that residents be allowed to connect a photovoltaic system to the grid at all. Note that this table only describes state-level policy, and it’s always possible that a utility may offer a better deal than the state requires.
There are some other details involved as well, such as the size of system that you are allowed to connect to the grid, how excess monthly credits are paid or rolled over, how much you are paid for electricity if you generate more than 100% of your usage, and how those excess credits are handled within the billing cycle. To find out more, check with your local utility or solar installer.
|Alabama||none||State actually levies a charge of $5 per kw for interconnected solar customers.|
|Arizona||net billing||Previous net metering policy was changed to net billing in 2016. Solar customers prior to the policy change are grandfathered for 20 years.|
|Connecticut||net metering||Senate Bill 9 ends net metering in Connecticut in 2019. Existing customers will be grandfathered until December 2039.|
|Hawaii||none||Net billing programs are available, but with limited availability. See https://www.hawaiianelectric.com/products-and-services/customer-renewable-programs for more info|
|Idaho||none||Even though there is no state mandated net metering in Idaho, Avista Utilities, Idaho Power and Rocky Mountain Power all offer net metering. Check with individual utilities for details.|
|Illinois||net metering||Senate Bill 309 ends net metering by July 1, 2022 or when net billing capacity for a utility reaches 1.5% of peak summer load, whichever comes first.|
|Iowa||net metering||New rules in 2017 place a significant restriction on the size of the system eligibile for net metering. https://bit.ly/2HFdgYr|
|Maine||net metering||Maine is slowly phasing out net metering, and will be replaced by net billing by 2026. As of 2019, only 80% of a customer’s electricity production is eligible for net metering credits.|
|Massachusetts||net metering||Only state-owned utilities in MA are required to provide net metering. Municipal utilities may offer net metering, but are not required to do so.|
|Michigan||net metering||The Michigan Public Service Commission has ordered that the state’s net metering policy be put under review, with new rules in place by 2020. https://bit.ly/2ueZxQ9|
|Nevada||net metering||Net metering in Nevada pays only 95% of the retail rate, and will drop over time according to this schedule: http://puc.nv.gov/Renewable_Energy/Net_Metering/|
|New Hampshire||net metering|
|New Jersey||net metering|
|New Mexico||net metering|
|New York||net metering|
|North Carolina||net metering|
|North Dakota||net metering||Net metering is available to customers of investor-owned electric utilities (Montana-Dakota Utilities, Xcel, and Otter Tail), but not municipal utilities or electric cooperatives.|
|Ohio||net metering||Offering net metering is required for investor-owned electric utilities, but optional for cooperatives and municipal utilities.|
|Rhode Island||net metering|
|South Carolina||net metering||Net metering must be offered by utilities with more than 100,00 customers. Excludes cooperatives.|
|Texas||none||No state policy, but some utilities offer net metering.|
|West Virginia||net metering|
Now that you’ve got a handle on net metering, the net important consideration is to find out what incentives are available to you. That’s covered in the next article.