Net metering is in my view the most important solar incentive that supports the investment case for American households buying solar energy systems. I know this is a big call given the 30% federal solar tax credit is a massive incentive but the net metering law is what guarantees that you save the full retail value of every kilowatt hour of solar that your solar panels generate, even if you are not using power when the solar is generating.
The critical importance of the net metering law is that it allows owners to get around the timing mismatch between when they use energy and when their solar system generates energy. Without this law a solar system would be much less economic and would require batteries to store this power for use at a later time. Despite the noise made by Tesla last year about batteries, they are still expensive and so to be able to get the economic benefit of economically storing power rather than having to physically store it with batteries is a great benefit.
What is net metering?
Net metering is where the amount of energy you buy in from the grid and the amount of excess solar energy you export to the grid are recorded separately and you are only billed for the net of these two numbers. So if you buy in 1000 kWh of electricity over a month at times when your solar is either not generating (nighttime), or not generating enough energy to cover all of your needs (say a cloudy day) but you export 500 kWh of energy to the grid in the same month at other times when your solar is producing more energy than your house is using, then you would be billed for only 500 kWh.
How do I calculate my savings from net metering?
Calculating the value of the net metering incentive with respect to a specific solar system is difficult because it is hard to tell how much of a solar systems total output will be generated at times when the electrical loads in the house are less than this output and by how much the system output will exceed the electrical needs of the house. As such most people don't really bother to calculate how much better off they are financially because of this one incentive they simply look at the overall savings from a system which is easy to calculate when you know the kWh output of the system annually and you know you will get full retail value for each of these kWh.
It is much harder to estimate financial returns and payback periods from solar panels in states that do not offer net metering.
What is the difference between net metering and a solar feed-in tariff?
A solar feed-in tariff is when a different rate of financial payment is offered for your excess solar that you export to the grid than what is charged by your utility for the power they sell you.
So in the example above, with an feed-in tariff then the utility would still bill you for 1000 kWh at the retail rate but it would pay you a different amount for the 500 kWh that you export to the grid.
A feed-in tariff could be set at either above or below the retail cost of power but in most states where a feed-in tariff scheme is used rather than net metering the amount of payment is usually lower than.
Fortunately most states offer full net metering rather than lower feed-in tariffs.
What happens when my net metering contract ends?
In the states that have net metering legislation the legislation requires utility companies to offer these net metering contract to their clients.
However, these contracts may not last for the full life of your system. Most net metering contracts are for 20 years but you should check with your utility as to the length of contract they offer.
It is unclear what will happen to your excess generation once these contracts expire but I guess in 20 years your solar system would most likely have paid itself of many times over.
Why would I consider batteries when I have the benefit of the net metering law?
The short answer is that I don't think anyone who lives in a state that has a net metering law and is connected to the public utility grid should consider battery storage for their excess solar power.
However, in states that do not offer full retail net metering there may be merit in considering the viability of battery storage to allow you to use your excess solar at night rather than sell it to the utility at a low rate.
How does net metering work with TOU (time of use billing)?
net metering works awesomely well when you have time of use billing because they only bill you for net usage in each time period, peak and off peak. Because your solar system generates most of its power during peak periods, and peak periods typically have higher charges per kWh you are effectively getting the highest rate for your power exported to the grid.
What is the net metering law in my state?
To see if net metering applies in your state click on the state solar panels guide for your state from the list below