Net metering

Net metering is an electricity policy for consumers who own (generally small) renewable energy facilities (such as wind, solar power or home fuel cells) or V2G electric vehicles. "Net", in this context, is used in the sense of meaning "what remains after deductions" — in this case, the deduction of any energy outflows from metered energy inflows. Under net metering, a system owner receives retail credit for at least a portion of the electricity they generate.

Most electricity meters accurately record in both directions, allowing a no-cost method of effectively banking excess electricity production for future credit. However, the rules vary significantly by country and possibly state/province: if net metering is available, if and how long you can keep your banked credits, and how much the credits are worth (retail/wholesale). Most net metering laws involve monthly roll over of kWh credits, a small monthly connection fee, require monthly payment of deficits (i.e. normal electric bill), and annual settlement of any residual credit. Unlike a feed-in tariff (FIT) or time of use metering (TOU), net metering can be implemented solely as an accounting procedure, and requires no special metering, or even any prior arrangement or notification.

Net metering is generally a consumer-based renewable energy incentive. While it is important to have Net Metering available for any consumer that interconnects their renewable generator to the grid, this form of renewable incentive places the burdens of pioneering renewable energy primarily upon fragmented consumers. Often over-burdened energy agencies are not providing incentives on a consistent basis and it is difficult for individuals to negotiate with large institutions to recover their Net Metering credits and/or rebates for using renewable energy.

In the United States, as part of the Energy Policy Act of 2005, all public electric utilities are now required to make available upon request net metering to their customers.

In Canada, some provinces have net metering programs.

The United Kingdom government is reluctant to introduce the net metering principle because of complications in paying and refunding the value added tax that is payable on electricity, but pilot projects are underway in some areas.

History

Net metering originated in the United States, where small wind turbines and solar panels were connected to the electrical grid, and consumers wanted to be able to use the electricity generated at a different time or date than when it was generated. Minnesota is commonly cited as passing the first net metering law, in 1983, and allowed anyone generating less than 40 kW to either roll over any kilowatt credit to the next month, or be paid for the excess. In 2000 this was amended to compensation "at the average retail utility energy rate". This is the simplest and most general interpretation of net metering, and in addition allows small producers to sell electricity at the retail rate. Utilities in Idaho adopted net metering in 1980, and in Arizona in 1981. Massachusetts adopted net metering in 1982. By 1998, 22 states or utilities therein had adopted net metering. Two California utilities initially adopted a monthly "net metering" charge, which included a "standby charge", until the PUC banned such charges. In 2005, all U.S. utilities were required to offer net metering "upon request". Excess generation is not addressed. As of 2024 43 U.S. states have adopted net metering, as well as utilities in 3 of the remaining states, leaving only 4 states without any established procedures for implementing net metering.

Net billing, or net metering, is the cornerstone of state energy

policies encouraging private investment in renewable energy

sources.

— Steven Ferrey 2004

Net metering was slow to be adopted in Europe, especially in the United Kingdom, because of confusion over how to address the value added tax (VAT). Only one utility in Great Britain offers net metering.

Comparison

Net metering, unlike a feed-in tariff, requires only one meter, but it must be bi-directional.

There is considerable confusion between the terms "net metering" and "feed-in tariff". In general there are three types of compensation for local, distributed generation:

• Feed-in Tariff (FIT) which is generally above retail, and reduces to retail as the percentage of adopters increases.
• Net metering - which is always at retail, and which is not technically compensation, although it becomes compensation if there is excess generation.
• Power purchase agreement - compensation which is generally below retail, also known as a "Standard Offer Program", and can be above retail, particularly in the case of solar, which tends to be generated close to peak demand.

Net metering only requires one meter. A feed-in tariff requires two.

Time of use metering

Further information: Smart meter

Time of use (TOU) net metering employs a specialized reversible smart (electric) meter that is programmed to determine electricity usage any time during the day. Time-of-use allows utility rates and charges to be assessed based on when the electricity was used (i.e., day/night and seasonal rates). Typically the production cost of electricity is highest during the daytime peak usage period, and low during the night, when usage is low. Time of use metering is a significant issue for renewable-energy sources, since, for example, solar power systems tend to produce energy during the daytime peak-price period, and produce little or no power during the night period, when price is low. When this is the case, the effective output of a solar panel is increased, as more electricity can be consumed than is produced. Italy has installed so much photovoltaics that peak prices no longer are during the day, but are instead in the evening. TOU net metering affects the apparent cost of net metering to a utility.

Market rate net metering

Further information: Vehicle-to-grid

In market rate net metering systems the user's energy use is priced dynamically according to some function of wholesale electric prices. The users' meters are programmed remotely to calculate the value and are read remotely. Net metering applies such variable pricing to excess power produced by a qualifying systems.

Market rate metering systems were implemented in California starting in 2006, and under the terms of California's net metering rules will be applicable to qualifying photovoltaic and wind systems. Under California law the payback for surplus electricity sent to the grid must be equal to the (variable, in this case) price charged at that time.

Net metering enables small systems to result in zero annual net cost to the consumer provided that the consumer is able to shift demand loads to a lower price time, such as by chilling water at a low cost time for later use in air conditioning, or by charging a battery electric vehicle during off-peak times, while the electricity generated at peak demand time can be sent to the grid rather than used locally (see Vehicle-to-grid). No credit is given for annual surplus production.

Excess generation

Excess generation is a separate issue than net metering, but it is normally dealt with in the same rules, because it can arise. If local generation offsets a portion of the demand, net metering is not used. If local generation exceeds demand some of the time, for example during the day, net metering is used. If local generation exceeds demand for the billing cycle, best practices calls for a perpetual roll over of the kilowatt credits, although some regions have considered having any kilowatt credits expire after 36 months. The normal definition of excess generation is annually, although the term is equally applicable monthly. The treatment of annual excess generation (and monthly) ranges from lost, to compensation at avoided cost, to compensation at retail rate. Left over kilowatt credits upon termination of service would ideally be paid at retail rate, from the consumer standpoint, and lost, from the utility standpoint, with avoided cost a minimum compromise. Some regions allow optional payment for excess annual generation, which allows perpetual roll over or payment, at the customers choice. Both wind and solar are inherently seasonal, and it is highly likely to use up a surplus later, unless more solar panels or a larger wind turbine have been installed than needed.

Australia

Main article: Feed-in tariffs in Australia

In some Australian states, the "feed-in tariff" is actually net metering, except that it pays monthly for net generation at a higher rate than retail, with Environment Victoria Campaigns Director Mark Wakeham calling it a "fake feed-in tariff". A feed-in tariff requires a separate meter, and pays for all local generation at a preferential rate, while net metering requires only one meter. The financial differences are very substantial.

In Victoria, from 2009, householders will be paid 60 cents for every excess kilowatt hour of energy fed back into the state electricity grid. This is around three times the current retail price for electricity.

In Queensland starting in 2008, the Solar Bonus Scheme pays 44 cents for every excess kilowatt hour of energy fed back into the state electricity grid. This is around three times the current retail price for electricity.

Canada

Ontario allows net metering for up to 500 kW, however credits can only be carried for 12 consecutive months. Should a consumer establish a credit where they generate more than they consume for 8 months and use up the credits in the 10th month then the 12 month period begins again from the date that the next credit is shown on an invoice. Any unused credits remaining at the end of 12 consecutive months of a consumer being in a credit situation are cleared at the end of that billing.

Areas of British Columbia serviced by BC Hydro are allowed net metering for up to 50 kW. At each annual anniversary the customer was paid 8.16 cents per KWh, if there is a net export of power after each 12 month period, which was increased to 9.99 cents/kWh, effective June 1, 2012. Systems over 50 kW are covered under the Standing Offer Program. FortisBC which serves an area in South Central BC also allows net-metering for up to 50 kW. Customers are paid their existing retail rate for any net energy they produce. The City of New Westminster, which has its own electrical utility does not currently allow net-metering.

New Brunswick allows net metering for installations up to 100 kW. Credits from excess generated power can be carried over until March at which time any excess credits are lost.

SaskPower allows net metering for installations up to 100 kW. Credits from excess generated power can be carried over until the customer's annual anniversary date, at which time any excess credits are lost.

European Union

Denmark established net-metering for privately owned PV systems in mid 1998 for a pilot-period of four years. In 2002 the net-metering scheme was extended another four years up to end of 2006. Net-metering has proved to be a cheap, easy to administer and effective way of stimulating the deployment of PV in Denmark; however the relative short time window of the arrangement has so far prevented it from reaching its full potential. During the political negotiations in the fall of 2005 the net-metering for privately owned PV systems was made permanent.

Italy offers a very attractive support scheme, mixing net-metering and a well segmented premium FiT.

In Spain, net metering has been proposed by ASIF to promote renewable electricity, without requiring additional economic support.

Some form of net metering is now proposed by Électricité de France. According to their website, energy produced by home-owners is bought at a higher price than what is charged as consumers. Hence, some recommend to sell all energy produced, and buy back all energy needed at a lower price. The price has been fixed for 20 years by the government.

United States

Growth of net metering in the United States

Net metering was pioneered in the United States as a way to allow solar and wind to provide electricity whenever available and allow use of that electricity whenever it was needed, beginning with utilities in Idaho in 1980, and in Arizona in 1981. Most states have net metering programs, and a 2005 Federal law requires all public utilities to offer net metering upon request.

Several bills have been proposed to institute a federal requirement to set standard limits on net metering. They range from H.R. 729 which allows up to 2% net metering to H.R. 1945 which has no limit, but does limit residential users to 10 kW, a low limit compared to many states, such as New Mexico, with an 80,000 kW limit, or states such as Arizona, Colorado, New Jersey, and Ohio which limit as a percentage of load. Best practices recommends limiting only to the customer's service entrance capacity. Current law requires all utilities to offer net metering upon request, which implies no limits, and is in conflict with state laws which do set a limit. Current as of June 2011, only three states do address net metering, and twenty one have no limit on the number of subscribers using net metering. Only three, Arizona, New Jersey, and Ohio, have no specific wattage limit on the power limit for each subscriber (see table). Arizona, California, Colorado, Connecticut, Delaware, Maryland, Massachusetts, New Jersey, New York, Ohio, Oregon, Pennsylvania, Utah, Vermont, and West Virginia are considered the most favorable states for net metering, as they are the only states to receive an "A" rating from the Network for New Energy Choices in 2012.

State	Subscriber limit (% of peak)	Power limit Res/Com(kW)	Monthly rollover	Annual compensation
Alabama	no limit	100	yes, can be indefinitely	varies
Alaska	1.5	25	yes, indefinitely	retail rate
Arizona	no limit	125% of load	yes, avoided-cost at end of billing year	avoided cost
Arkansas	no limit	25/300	yes, until end of billing year	retail rate
California	5	1,000	yes, can be indefinitely	varies
Colorado	no limit	120% of load or 10/25*	yes, indefinitely	varies*
Connecticut	no limit	2,000	yes, avoided-cost at end of billing year	retail rate
Delaware	5	25/500 or 2,000*	yes, indefinitely	retail rate
District of Columbia	no limit	1,000	yes, indefinitely	retail rate
Florida	no limit	2,000	yes, avoided-cost at end of billing year	retail rate
Georgia	0.2	10/100	no	determined rate
Hawaii	1 or 3*	50 or 100*	yes, until end of billing year	none
Idaho	0.1	25 or 25/100*	no	retail rate or avoided-cost*
Illinois	1	40	yes, until end of billing year	retail rate
Indiana	1	1000	yes, indefinitely	retail rate
Iowa	no limit	500	yes, indefinitely	retail rate
Kansas	1	25/200	yes, until end of billing year	retail rate
Kentucky	1	30	yes, indefinitely	retail rate
Louisiana	no limit	25/300	yes, indefinitely	avoided cost
Maine	no limit	100 or 660*	yes, until end of billing year	retail rate
Maryland	1500 MW	2,000	yes, until end of billing year	retail rate
Massachusetts**	no limit <10 kW 3	60, 1,000 or 2,000	varies	varies
Michigan	0.75	150	yes, indefinitely	partial retail rate
Minnesota	no limit	40	no	retail rate
Mississippi	—	—	—	—
Missouri	5	100	yes, until end of billing year	avoided-cost
Montana	no limit	50	yes, until end of billing year	retail rate
Nebraska	1	25	yes, until end of billing year	avoided-cost
Nevada	1	1,000	yes, indefinitely	retail rate
New Hampshire	1	100	yes, indefinitely	retail rate
New Jersey	no limit	previous years consumption	yes, avoided-cost at end of billing year	retail rate
New Mexico	no limit	80,000	if under $50	avoided-cost
New York	1 or 0.3 (wind)	10 to 2,000 or peak load	varies	avoided-cost or retail rate
North Carolina	no limit	1000	yes, until summer billing season	retail rate
North Dakota	no limit	100	no	avoided-cost
Ohio	no limit	no explicit limit	yes, until end of billing year	generation rate
Oklahoma	no limit	100 or 25,000/year	no	avoided-cost, but utility not required to purchase
Oregon	0.5 or no limit*	10/25 or 25/2,000*	yes, until end of billing year*	varies
Pennsylvania	no limit	50/3,000 or 5,000	yes, "price-to-compare" at end of billing year	retail rate
Rhode Island	2	1,650 for most, 2250 or 3500*	optional	slightly less than retail rate
South Carolina	0.2	20/100	yes, until summer billing season	time-of-rate use or less
South Dakota	—	—	—	—
Tennessee	—	—	—	—
Texas***	no limit	20 or 25	no	varies
Utah	varies*	25/2,000 or 10*	varies*	avoided-cost or retail rate*
Vermont	2	250	yes, until end of billing year	retail rate
Virginia	1	10/500	yes, avoided-cost option at end of billing year	retail rate
Washington	0.25	100	yes, until end of billing year	retail rate
West Virginia	0.1	25	yes, up to twelve months	retail rate
Wisconsin	no limit	20	no	retail rate for renewables, avoided-cost for non-renewables
Wyoming	no limit	25	yes, avoided-cost at end of billing year	retail rate

Note: Some additional minor variations not listed in this table may apply. N/A = Not available. Lost = Excess electricity credit or credit not claimed is granted to utility. Retail rate = Final sale price of electricity. Avoided-cost = "Wholesale" price of electricity (cost to the utility). * = Depending on utility. ** = Massachusetts distinguishes policies for different "classes" of systems. *** = Only available to customers of Austin Energy, CPS Energy, or Green Mountain Energy (Green Mountain Energy is not a utility but a retail electric provider; according to www.powertochoose.com, Green Mountain prices are twice the average retail price).

Net purchase and sale

Net purchase and sale is a different method of providing power to the electricity grid that does not offer the price symmetry of net metering, making this system a lot less profitable for home users of small renewable electricity systems.

Under this arrangement, two uni-directional meters are installed—one records electricity drawn from the grid, and the other records excess electricity generated and fed back into the grid. The user pays retail rate for the electricity they use, and the power provider purchases their excess generation at its avoided cost (wholesale rate). There may be a significant difference between the retail rate the user pays and the power provider's avoided cost.

Germany, Spain, Ontario (Canada), some states in the USA, and other countries, on the other hand, have adopted a price schedule, or feed-in tariff (FIT), whereby customers get paid for any electricity they generate from renewable energy on their premises. The actual electricity being generated is counted on a separate meter, not just the surplus they feed back to the grid. In Germany, for the solar power generated, a feed-in tariff is being paid in order to boost solar power (figure from 2009). Germany once paid several times the retail rate for solar but has successfully reduced the rates drastically while actual installation of solar has grown exponentially at the same time due to installed cost reductions. Wind energy, in contrast, only receives around a half of the domestic retail rate, because the German system pays what each source costs (including a reasonable profit margin).

Related technology

Sources that produce direct current, such as solar panels must be coupled with an electrical inverter to convert the output to alternating current, for use with conventional appliances. The phase of the outgoing power must be synchronized with the grid, and a mechanism must be included to disconnect the feed in the event of grid failure. This is for safety - for example, workers repairing downed power lines must be protected from "downstream" sources, in addition to being disconnected from the main "upstream" distribution grid. Note: A small generator simply lacks the power to energize a loaded line. This can only happen if the line is isolated from other loads, and is extremely unlikely. Solar inverters are designed for safety - while one inverter could not energize a line, a thousand might. In addition though, all electrical workers treat every line as though it was live, even when they know it should be safe.

Solar Guerrilla

Solar Guerrilla (or the guerrilla solar movement) is a term originated by Home Power Magazine and is applied to someone who uses an alternative energy source to illegally supply electricity back to a public utility grid.

See also

• Automatic meter reading
• Demand response
• Distributed generation
• Electricity meter
• Feed-in Tariff
• Interstate Renewable Energy Council
• Power Purchase Agreement
• Power system automation
• Public Utility Regulatory Policies Act of 1978
• Smart Grid
• Smart meter
• Utility submeter
• Variable pricing
• Virtual power plant

External links

• U.S. Department of Energy - Net Metering Policies
• EERE:
  • Consumer's Guide: Net Metering and Rate.
  • Solar and Net metering
• The Database of State Incentives for Renewable Energy (DSIRE)
• Connecting to the Grid: published monthly, focusing on the latest news on interconnection and net metering in the U.S.
• Canada 2003
• Renewable Energy in Grid-Connected Electricity Generation (by REN21)
• Indiana Net Metering Rules Now In Effect

News articles

• Utilities in N.Y. told to make switch to time-of-day pricing, Ithaca Journal, 18 Dec 2007
• Time-of-Day Pricing, PBS Jim Lehrer, 22 Jun 2001
• Time of Day Pricing for Electricity, Tom Evslin's Blog, 19 Feb 2007
• Net Metering, Technorati (tagged social media)