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.
The critical detail to know is that with net metering, it doesn’t matter what time of day you generate electricity from your solar panels or your home consumes power. This article will explain why.
What is net metering?
If you have net metering from your utility, 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. For example, 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 home may generate dozens of kilowatt hours of electricity, but because your utility doesn’t credit 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, solar panels will never pay for themselves because of the lack of credits for your excess electricity. You don’t get paid for the solar electricity you put into the grid, but do pay for the power you use at night. Your community still benefits because you are sending renewable energy to the grid, but strictly as a financial investment, solar would be a bad deal for you.
People aren’t vampires, so this extreme case would never actually happen (and also vampires aren’t real) but it does illustrate how, in the absence of net metering, time-of-use 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. Your utility meter tracks this, and at the end of your billing cycle you pay for any electricity that you draw from the grid at the normal residential rate. Credits you’ve earned for power sent into the grid is paid to you at a lower rate - often, it the same rate that the utility company pays on the wholesale market for electricity. This is often referred to as the avoided cost rate.
The avoided cost rate or 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 net billing changes how you calculate the financial benefits of home solar. If you’re part vampire and much of your electric usage is at night, it will take longer for solar panels to pay for themselves under net billing.
Some strategies to make net billing work for you
If net billing is your only option, solar could still be a good investment if you are able to make some adjustments to how you use electricity - specifically, shifting your power usage to during the day when your solar panels are generating lots of electrons. The goal is to use electricity while the sun is shining and to use less when its dark.
At first it might seem that changing your electricity time-of-use to coincide with the sunshine is a big inconvenience, but the biggest electricity consumer for homes with solar panels is often air conditioning. If you can shift your air conditioning use, that can go a long way toward making net billing work for you.
Precool your house with a programmable thermostat
If you have a central air conditioner, get a programmable or smart thermostat and then set it to make the house a little colder than you normally would during noon or early afternoon.
Then in the late afternoon as the sun is going down and your power generation starts to taper off, your house will be precooled and your air conditioner won’t have to work as hard in the evening. If you have a typical 9 to 5 job and aren’t home during this time, this doesn’t impact your comfort in any way.
Use the time delay feature of your appliances
Although they use less electricity than a central air conditioner, many appliances have a programmable time delay feature built-in, allowing you to wash your dishes and clothes while the sun is shining. 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.
Net metering by state in 2021
In the United States, net metering is a policy that is enacted at the state level.
The table below summarizes the current state of net metering across the United States in 2021. 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.
However, the rules can get quite a bit more complicated than that. For example, states may have caps on the amount of net metering customers allowed by the state or individual utilities. The rules can also differ for investor-owned utilities. (Invested-owned utilities refer to those that are privately owned rather than public utilities.)
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 (SRP customers)|| Previous net metering policy was changed to net billing in 2016. Solar customers prior to the policy change are grandfathered for 20 years. |
Customers of the Salt River Project (SRP) get full net metering, but the plan requires customers to have a time-of-use plan. Excess electricity is credited at the rate for that time of day.
|Connecticut|| net metering|
CL&P and UI customers are eligible for net metering, but municipal utilites are not required to offer it.
|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.|
|Indiana||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. Senate Bill 430 has been proposed to reverse SB 309, but has not been put up for a vote.|
|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|
|Louisiana||net billing||Entergy New Orleans offers full net metering to its customeres.|
|Maine||net metering||Maine is slowly phasing out net metering, and will be replaced by net billing by 2026. As of 2019, only 60% 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.|
|Nevada||net billing||Net metering in Nevada pays only 75% 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 next important consideration is to find out what incentives are available to you. That’s covered in the next article.