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Net Metering & Energy Credits

Net metering is an electricity policy for consumers who own (generally small) renewable energy facilities, such as wind, solar power or home fuel cells. "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. The ideal has your existing electricity meter spinning backwards, effectively banking excess electricity production for future credit. In reality, 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, how much the credits are worth (retail/wholesale), etc.

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 U.S.A., as part of the Energy Policy Act of 2005, under Sec. 1251, all public electric utilities are now required to make available upon request net metering to their customers.

‘‘(11) NET METERING.—Each electric utility shall make available upon request net metering service to any electric consumer that the electric utility serves. For purposes of this paragraph, the term ‘net metering service’ means service to an electric consumer under which electric energy generated by that electric consumer from an eligible on-site generating facility and delivered to the local distribution facilities may be used to offset electric energy provided by the electric utility to the electric consumer during the applicable billing period.

New Jersey/and Colorado are widely considered to have the best net-metering policies in the United States as both have no limit on enrollment (less than 2MW each), roll over month to month and pay annually for excess generation at avoided-cost rate (New Jersey) or incremental cost (Colorado).

In Canada, some Canadian 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.

Time of use metering

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 (ie, 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.

United States

Several bills are pending that require utilities to provide 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 relatively low limit compared to New Jersey and Colorado's 2 MW limit, the two states with laws most favorable to consumers. A comparison of the 38 states plus Washington D.C., which have net metering, gives 5 an "A" (New Jersey, Colorado, Pennsylvania, Maryland and California) and 5 an "F" (Utah, District of Columbia, Georgia, North Carolina, and Wisconsin).

A home owner watching her electric meter run backwards as her solar array puts energy into the electric grid.

Net metering creates electrical power during the day. The power needed by the building for operation is used directly from the electricity being produced. All other electricity that is surplus and that does not get consumed by the building is pushed into the grid. The power grid acts mush like a battery system would. It stores electrical power that was produced by the home renewable energy system until it is needed again. At night, when the solar array is not collecting electrical energy from the sun it draws the electrical power out of the grid that was stored in it during the day.


Consumer Net Metering is available in California and is presumed to be highly favorable to smaller systems that displace the highest cost electricity, and systems wherein the user's demand load may be managed so that there is a net production of electricity during high cost periods. This can be done, for example, by chilling water during off-peak times for air conditioning use during high demand periods, or by pre-cooling the thermal mass of the building during low cost period s.

Ahiccup has occurred in California legislation (SB1 - 2006), in that new (after Jan. 1, 2007) residential solar systems are singled out to be billed on TOU schedules, and at least one utility (Southern California Edison (SCE)) has rate structures which are punitive to the solar customer, particularly for smaller systems that cannot keep up with peak demands. This faulty legislation created a disincentive to new solar installations, and/or windfall profits to SCE. This has since been remedied through legislation.


No limit on enrollment, system size is limited to 2 MW, excess is credited to customer's next bill; utility pays customer at end of calendar year for excess kWh credits at the average hourly incremental cost for that year.


Passed by Florida Public Service Commission 4 March 2008, system size is limited to 2 MW, with compensation up to the account's electrical consumption as trued up at end of calendar year. Excess production is not compensated.


Kansas does not have a consumer Net Metering incentive, but does have a renewable metering incentive on the wholesale level that provides the wholesale commerce of renewable energy at 150% of the avoided cost. Thus, the incentive one receives in this case is dependent not upon the price of retail electricity per kWh, but upon the price of wholesale electricity.

The Kansas Solar Electric Co~operatives [K-SEC] was founded January 2005 by Eileen M. Smith, M.Arch. VITAE as a non-profit and non-competitive renewable electricity cooperative. K-SEC Phase I Demonstration is structured around Kansas House Bill 2018 passed in 2003 by Kansas Representative Tom Sloan. See Kansas Statutes Annotated Chapter 17-4661 and 17-4655

The K-SEC program has the goal of installing 1,000 MWp building-integrated photo voltaic [BI-PV] solar electricity by 2018.

This translates to approximately 100,000,000 sq ft (9,300,000 m2) of BI-PV solar roofing or one million sqft BI-PV roofing in 100 of the 105 counties of Kansas. This will require 70,000 to 100,000 sq ft (9,300 m2) BI-PV per county per year for ten years. K-SEC will not sell the solar systems, but they are going to lease consumer rooftops in exchange for a high-tech battery back-up system for fifty years. K-SEC will manufacture, install, monitor, maintain and sell the electricity wholesale. K-SEC will provide numerous job opportunities to rural and urban Kansas communities from manufacturing to solar system design, installation, maintenance, monitoring and electricity sells.

The foundational structure for the K-SEC Program is the Kansas Solar Electric Buildings Registry and GIS Database. A list is being compiled of Kansas homes and buildings that have unshaded roofing surface that could accommodate 100 sq ft (9.3 m2) to 50,000 sq ft (4,600 m2) of BI-PV solar materials. The rooftops must have south to southwest facing or flat rooftops.

The K-SEC Program is important for Kansas where 72.5% of the electricity Kansas presently consumes is generated by coal-fired power plants. In 2004 and 2005 projects totaling a 55% increase in coal-fired power plants were proposed in Kansas.

New Jersey

No limit on enrollment, system size is limited to 2 MW, excess is credited to customer's next bill at retail rate; purchased by utility at avoided-cost rate at end of 12-month billing cycle.

North Carolina

In North Carolina initial net metering rules were put in place in 2005 to prohibit systems that include backup battery power, but due to consumer feedback the restriction was lifted in July 2006.


In Texas the limit on system size are 100 kW for qualifying facilities; 50 kW for renewables. The treatment of net excess is purchased by utility for a given billing period at avoided-cost rate. It applies only to all integrated IOUs that have not unbundled in accordance with Public Utility Regulatory Act § 39.05; does not apply to municipal utilities, river authorities and electric cooperatives.

Market rate net metering

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 will be 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. It can never be negative, meaning you cannot make money from selling the electricity back. If you generate more electricity than you use then over a period of a month you will be billed zero and not make any money, in effect you give away your extra energy if you do not use it.

Net metering enables relatively 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. No credit is given for annual surplus production.

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 energy 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 and Spain, 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 of more than 3 times the retail rate per kWh for residential customers is being paid in order to boost solar power (figure 2006). Wind energy, in contrast, only receives around a third of the retail rate because the German system pays what each source costs.

Basic net metered configuration.

A net metered house.

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