Net metering
Net metering is a policy that allows consumers who generate their own electricity from renewable sources, such as solar or wind, to receive credits for any excess power they feed back into the electric grid. This system typically involves a bidirectional meter that tracks both the energy consumed from the grid and the surplus energy contributed. The consumer is billed for the net difference—total consumption minus total generation—each month. The primary aim of net metering is to promote the adoption of small-scale renewable energy systems, contributing to broader environmental goals, such as reducing reliance on fossil fuels and lowering greenhouse gas emissions.
Net metering rules can differ significantly based on jurisdiction, applying various eligibility criteria, credit values, and rollover options for excess energy. While many programs primarily support technologies like solar and wind, some have expanded to include other renewable sources like geothermal and biomass. However, net metering does present challenges, including the need for advanced grid technology to manage inflows from diverse energy sources and the complexities consumers face when interacting with larger utility companies. As of 2023, net metering is implemented in numerous countries and states, with ongoing developments to address emerging issues and improve program efficiency.
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Net metering
Summary: Net metering is a government policy in which electricity generators use a renewable energy source to provide their own electricity and are paid for any surplus electricity fed back into the grid. The objective is to encourage deployment of small-scale renewable electricity.
Net metering is one of a variety of energy policies used by jurisdictions that seek to increase the deployment of renewable energy sources. Overarching policy objectives may include decreasing dependence on traditional fossil fuels, reducing greenhouse gas (GHG) emissions, and improving the quality of the atmosphere.
Net metering is a policy whereby a grid-tied consumer enters into an agreement with its local utility to generate some of its own electricity and use a single, bidirectional meter to measure both electricity drawn from the grid and any excess electricity fed back into the grid. The meter moves forward when drawing electricity and reverses its direction when excess energy is provided to the grid. A consumer is billed for its positive “net consumption,” which is defined as total consumption minus total generation during a given billing period. If a consumer generates more electricity than it consumes over a given billing period, it will be paid the difference or receive a credit toward a subsequent billing cycle.
Net-metering rules vary by country, state or province, and even utility. Programs address eligibility (consumer class, location, system size, and system ownership), whether and how long a consumer can keep banked credits, and how much the credits are worth (on the retail or wholesale market). Most programs incorporate a monthly rollover of electricity credits, a small monthly connection fee, monthly payment of deficits (that is, the normal utility bill), and annual settlement of any credit due. Some utilities allow a consumer to carry over a balance of any net extra electricity generated by the consumer’s system from month to month, which is advantageous if the resource generating the electricity is seasonal.
Consumer-Based Incentive
Net metering is typically a consumer-based incentive and commonly is applied to small, renewable energy-generating facilities, such as wind and solar photovoltaic (PV) systems. However, some utilities have expanded their range of permitted technologies to include microhydropower, geothermal power, tidal energy, wave and biomass energy, cogeneration of heat and power, energy from landfill gas and municipal solid waste, fuel cells, and efficiency improvements at existing facilities. Some US jurisdictions also allow net metering for generators up to 2 megawatts.
Despite being a relatively simpler approach than programs such as feed-in tariffs, net metering does raise a number of implementation issues. First, any jurisdiction that relies solely on a net-metering program to incentivize the deployment of renewable energy generation places the burden of pioneering renewable energy primarily on fragmented consumer population. In addition, it can be challenging for individuals to negotiate with large institutions to recover their net-metering credits or rebates.
Second, net metering requires technology development at two levels. From a transmission and distribution perspective, the grid must have the ability to accept electricity inflows from alternative as well as from traditional energy sources, such as large hydroelectric and nuclear power. Smart-grid systems must also incorporate bidirectional capability to integrate and to direct both traditional and alternative energy flows into and out of the grid and over transmission lines.
From a communications perspective, many net-metering programs rely on Internet communication between participating consumers and utilities. This consists of reporting on energy usage and consumption, and ultimately on electronic billings, which weigh household or business energy contributions against consumption in order to produce a final bill. Implementing such a system requires serious thought, given to the capability of utility companies’ existing billing and communications infrastructure and the privacy rights of consumers.
By 2023, net-metering laws existed in at least 14 countries and 34 US states. A growing number of developing countries—for instance, Tanzania and Thailand—have adopted net metering as a policy option. Net-metering programs continue to evolve, as new provisions address issues such as net excess generation, renewable energy credit ownership, and community-owned systems.
Bibliography
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Forsyth, T. L., M. Pedden, and T. Gagliano. The Effects of Net Metering on the Use of Small-Scale Wind Systems in the United States. NREL/TP-500-32471. Washington, DC: National Renewable Energy Laboratory, 2010.
Mack, Eric and A.J. Dellinger. "Net Metering: How You Can Save Even More Money with Solar." CNET, 5 July 2024, www.cnet.com/home/energy-and-utilities/net-metering-how-you-can-get-paid-for-solar-power-you-generate/. Accessed 2 Aug. 2024. Starrs, T. Net Metering: New Opportunities for Home Power. Washington, DC: Renewable Energy Policy Project, 1996.
Stoutenborough, James W., and Matthew Beverlin. “Encouraging Pollution-Free Energy: The Diffusion of State Net Metering Policies.” Social Science Quarterly 89, no. 5 (December 2008).