Solar energy not only benefits the environment but also has long-term savings and investment perks. But do you know about one of the other main advantages of solar energy — net metering. Net metering is a billing mechanism that we will learn more about in this blog. But first, let’s see how net metering came into existence.
Steven Strong, the pioneer of net metering, started off as an engineer and worked on the Trans-Alaska Oil Pipeline. Due to a scandal related to the project, he resigned and returned to Boston to become an architect and founded his solar design company – Solar Design Associates. One of his first projects in the early 70s was solar hot water for a housing complex. He incorporated solar photovoltaics (besides satellites, solar power wasn’t popular) for electricity. But the question of how to connect the building-mounted PV system to the grid and what to do with the excess electricity production arose. Steven designed a system to feed excess electricity back to the grid. Thus, net metering was born.
What is net metering and how does it work?
Net metering is the solar industry’s foundational policy. It is a billing mechanism that allows homeowners and commercial customers to store excess energy produced by their solar panel system. Through net metering, the utility grid will give energy to the home on a cloudy or rainy day when the solar panels aren’t producing enough energy. This will count as the energy that homeowners have stored over time. Owners will be billed for the ‘net’ energy usage, known as net energy metering (NEM).
According to the Solar Energy Industries Association (SEIA), only 20-40% of solar energy systems’ output goes into the grid. Net metering gives homeowners the opportunity to generate their own electricity efficiently. This is achieved when they export the excess power generated back into the grid and consequently reduce their future electricity bills.
Types of net metering
- Virtual Net Metering (VNM)
VNM is a system that distributes energy cells to those who have subscribed¹ to a community solar project, like a solar farm. This allows consumers to access the benefits of solar without going through the process of installing it. By subscribing to a community solar they qualify for energy credits through virtual net metering. The credits they receive are based on the number of solar panels shared on the community solar installation.
- Aggregate Net Metering (ANM)
ANM allows for a single generating system to offset electricity use to multiple meters without a physical connection between the systems and those meters.
- Remote Net Metering (RNM)
RNM is a system used by non-residential customers and farms. Those with solar, wind, and other electric generating equipment in one location use the excess electricity generated to get credit and reduce their electricity bill. This allows customers with excess net metering credits to balance their other accounts.
Benefits of net metering
Increased job opportunities
Net metering provides economic benefits when it comes to income, investment, and jobs. Since net metering can reduce electricity bills and store excess electricity it increases the demand for solar panels. This increased demand opens various job opportunities for electricians, installers, and solar manufacturers. According to SEIA, as of 2021, solar energy is the fastest-growing sector, providing over 4.3 million jobs worldwide.
Fewer network upgrades
Solar power not only helps conserve energy but also powers the grid. The excess electricity from solar panels is fed back to the grid which reduces the need for utility companies to spend more finances on infrastructure updates. This also decreases rolling blackouts and other power outages for repairs and upgrades.
Easier installations
The electricity grid serves as a backup generator which means there is no need for a physical backup generator or battery storage. This reduces the overall cost of installation of solar panels due to the absence of the requirement of these components.
Obstacles homeowners may face with net metering
Fluctuation in voltage
Since the energy produced by the photovoltaic (PV) system is dependent on the sunlight available, the power generator can vary drastically. This can cause rapid voltage fluctuations which can affect the transmission network and sometimes overheat the power lines. To avoid this, the voltage fluctuations should stay within specified limits. Beyond these limits, the system should automatically disconnect from the grid.
Transmission of unwanted current
The current supplied for end use is alternating current (AC) and one generated by the solar power system is direct current (DC). There is a chance the PV inverter may pass some unwanted DC into the AC-driven network of the grid. This can lead to overheating of the distribution of power transformers and power losses. Since cables are insulated and routed through underground conduits, they need cooling systems. Cables can use copper instead of aluminum which will lower the resistive heating and help you avoid any transmission of unwanted current.
Reverse power flow
The voltage in long and weak networks rises when the consumption at the customer’s end is low and the power fed is high. The increase in voltage may cause the electricity to switch direction and the flow through the transformer to the higher voltage which causes the transformer and transmission lines to heat up. To avoid this, use an export limiter² that will limit the power generation of the grid.
Countries where net metering is currently in use
In 2018, Renewable Energy Policy Network for the 21st Century (REN21) published a list of countries that implemented net metering.
| High-Income Countries | Upper Middle-Income Countries | Lower Middle-Income Countries |
| Australia | Albania | Armenia |
| Bahrein | Argentina | Bolivia |
| Barbados | Brazil | Cape Verde |
| Belgium | Costa Rica | Egypt |
| Canada | Republic Dominican | Ghana |
| Chile | Gabon | Guatemala |
| Cyprus | Grenada | Honduras |
| Denmark | Jamaica | India |
| Greece | Lebanon | Jordan |
| Israel | Mauritius | Kenya |
| Italy | Mexico | Lesotho |
| Korea | Panama | Micronesia |
| Latvia | Peru | Moldova |
| Lithuania | St Lucia | Morocco |
| Malta | St Vincent and the Grenadines | Pakistan |
| Netherlands | Suriname | Palestine |
| New Zealand | Philippines | |
| Saudi Arabia | Sri Lanka | |
| Singapore | Syria | |
| Slovenia | Ukraine | |
| United Arab Emirates | Vietnam | |
| USA | ||
| Uruguay |
California net metering
The California Public Utilities Commission (CPUC) collectively voted to cut the average export rate from $0.30 per kWh to $0.08 kWh, effective on April 15, 2023. This decreases the payments for excess solar production sent to the grid by 75%. In a market that represents roughly 50% of the nation’s residential solar market, this is the largest cut of the export rates in U.S. history.
Final words
As solar becomes more common and net metering is applicable in various countries it can be used by other types of generation systems such as wind turbines. It’s important that customers do their research because countries with the best net metering policies offer a good opportunity to regain the cost of solar installation.
Learn more about solar design and how the placement and design can help you get the maximum use of it.
¹Subscribers invest in community solar system projects that produce and distribute renewable energy. The investments in these projects (for a share of the produced energy) help subscribers lower their electricity bills.
²Export limiter also known as zero export device is a programmable controller with set points that can detect reverse power flow and control the power generation.