FutureStructure

Net Metering: What Is It and Why Does It Matter?

The practice is controversial, widely used and very important to the future of solar power.

by / August 25, 2016

The old stereotype of rooftop solar owners was that they were tie-dye-wearing Californians driving hybrid cars. Today there's no longer a stereotype — anybody with a roof and a power bill is at least interested in the idea.

The conversation surrounding solar power is increasingly focused on costs and the ability of home-generated energy to save money over the long term. And that’s exactly why net metering is such a controversial issue: It exists at the center of the solar movement.

In simple terms, net energy metering is a system where a utility agrees to use excess energy from a solar array and credit the panels’ owner for the power at the rate that person would normally pay to buy power. So if a rooftop solar owner leaves for work and their array is generating more power than their home is using while they’re away, the utility will use that energy and lower the customer’s power bill accordingly.

It’s a solution to the problem of timing — solar panels produce the most energy in the middle of the day, when homeowners are often at work and not using as much power. If a panel system were only connected to the house it sat on, much of that power might go to waste.

It’s a popular solution too. According to the National Conference of State Legislatures, 44 states and the District of Columbia have net energy metering policies in place.

But utilities and some others in the energy industry have become more and more agitated with the system. The foremost argument is usually that net energy metering means utilities aren’t able to recover money from solar-owning customers that they rely on for fixed costs such as maintenance and infrastructure. Because that revenue is gone, they argue, they have to shift costs to non-solar customers.

The line of reasoning is not without its critics, but nonetheless, net energy metering is not the only way to make rooftop solar worth it for homeowners. One alternative, albeit one that usually still involves connecting to the grid, is home batteries. By storing mid-day energy, homeowners can make the most of the energy coming off their roofs before deciding what to do with any excess. That solution is set to become more available to customers as multiple car companies have announced home battery products in recent years — most notably Tesla, which is building an enormous factory just east of Reno, Nev., that’s meant to roughly double worldwide production capacity of lithium-ion batteries.

Plus, batteries can provide auxiliary services to the grid.

Another solution utilities have been turning to is simply charging solar customers a fee to cover those fixed costs. The solution has drawn the ire of the solar industry and its customers in Arizona — a prime solar market because of its population and sunniness — where the dueling interests are headed toward a ballot initiative fight in November.

When it comes to the public sector, local government entities have found ways to benefit from owning solar with and without net energy metering. The Yolo County, Calif., government, for example, has taken advantage of net metering to produce more energy than it uses. The result is that it saves money on power bills and generates a stream of revenue that didn’t exist before by selling electricity to its utility company.

The government of Phoenix, meanwhile, has adopted an approach more focused on lowering but not zeroing out the power bills for individual buildings. By signing power purchase agreements, the municipality can lock in competitive prices even as utility rates rise over time.

As time passes, the issue will become more and more prevalent. Not just because the federal government and many state governments are pushing for fast adoption of renewable energy, but because consumers are already clamoring for it. According to the U.S. Energy Information Administration — which many solar advocates have argued lowballs its estimates for rooftop solar generation — distributed solar power generation in the first half of 2016 was about 72 percent higher than it was in the first half of 2014.