What Is Net Metering in Solar Power?

Residential solar power is accessible to more people than ever.

Increasingly generous government incentives, rapidly improving technology, rising demand, and falling prices have created an extremely favorable environment for switching at least part of your household electricity production to solar.

Billing arrangements like net metering with utility companies can make investing in a solar panel array even more appealing to homeowners. 

Virtual net metering makes it possible for renters and communities to collectively share in the benefits of a solar power system even when their home is unsuitable for PV panel installation or the upfront investment is too high.

So, what exactly is net metering?

Read on to find out. 

What Is Net Metering?

Net metering empowers consumers and businesses with solar panels or other renewable energy systems — like wind turbines — to send electricity they produce in excess of their immediate consumption back to the utility grid.

Typically, any electricity sent back to the grid from your solar power system is credited to your current or future utility bills to offset the cost of the on-grid power you consume. 

In cases where your net solar electricity generation exceeds your on-grid consumption during a billing period, the credit balance will be rolled over to reduce future bills. 

Depending on the specifics of your net metering billing arrangement, you may be able to receive a cash payout for the electricity you send back to the grid.

Net metering billing arrangements vary widely by location and utility provider. Overall, net metering is designed to incentivize businesses and consumers to switch to renewable solar power systems to reduce reliance on the electricity grid.

(Source: US Energy Information Agency)

Currently, “about 60%” of US on-grid electricity generation is produced by burning “fossil fuels — coal, natural gas, petroleum, and other gases.”

By encouraging consumers and businesses to switch to solar, net metering is helping the US achieve its net-zero carbon emission and geopolitical goals.   

(Source: Vermont.gov)

How Does Net Metering Actually Work?

If you’re a homeowner, the basic principles behind net metering are simple. Let’s examine the process step-by-step.

1. Ensure your utility provider offers solar net metering: Not every on-grid electricity provider offers solar net metering. An increasing number of states require utility companies to provide some form of individual or community solar net metering program, but many do not. Even if you live in a state that doesn’t have net metering legislation, your utility company may offer a program regardless.
   
   If you live somewhere that doesn’t currently offer net metering, it’s worth checking if there’s any pending legislation that mandates net metering that could become law in the near future.
   
   Even if your location doesn’t offer solar net metering, you can still enjoy the many benefits of solar. Consider investing in an off-grid whole home generator solution. By purchasing a system with substantial solar battery capacity, you can store the electricity your solar panels generate in excess of your consumption for later use. For example, at night, when solar panels don’t work.
   
   Without net metering and/or solar battery storage capacity, any excess electricity your solar panels generate will go to waste. Additionally, adding a solar battery to your grid-tied photovoltaic (PV) panel system helps provide energy security in a blackout.
   
2. Purchase solar panels and a balance of system compatible with the grid

Thanks to rapidly improving PV technology and increasing demand, there are more high-quality residential solar power systems on the market than ever before. Thanks to economies of scale and generous government incentives, purchasing solar panels and a balance of system has never been more affordable. 

At a bare minimum, residential grid-tied solar power systems require the following components.

• Photovoltaic modules (usually solar panels or solar shingles) for capturing and converting sunlight into DC electricity
• Mounting Hardware and Cabling: Depending on the size of your solar array and where you want to install it, you’ll need the appropriate cabling to connect the panels and hardware to mount them. For example, if you’re using rigid solar panels for a rooftop installation, the proper cabling and hardware are typically available from the manufacturer. If you’re using a professional installer, they’ll take care of this step for you.  
• A grid-tied inverter for converting and conditioning DC current gathered by PV modules into household (AC) electricity.
• Transfer switch for integrating with your home’s electrical circuit board and wiring. 
• Net metering compatible electricity meter for measuring how much electricity your solar panels generate vs. how much electricity you consume. Normally, a bidirectional, dual, or smart meter measures and facilitates the flow of electricity to and from your home to the grid. Usually, your utility company will provide one to replace your old meter or supply one for new builds.       

In addition to making sure that your solar power system is compatible with your utility’s net metering program before making a purchase, it’s essential to ensure compliance with all the relevant regulatory requirements and permitting.

Both net metering compatibility and regulatory compliance vary widely based on your location and other factors. Avoid costly mistakes by thoroughly researching your purchase. Consider working with an experienced, reputable installer who can help you navigate potential hurdles.   

3. Install Your Solar Panels and Balance of System

Once you’ve made your informed purchase of a grid-tied residential solar power system, you’ll need to install it. For large residential PV panel arrays, most people choose to work with a professional installer. Choose wisely. Residential solar power is booming. Many unproven companies and inexperienced installers are looking to cash in.

4. Integrating Your Solar Power System With Your Home Wiring and the Utility Grid

Unless you’re a licensed electrician, this is a step you cannot DIY. Connecting your grid-tied solar system to your home circuit board, circuit breakers, and wiring must be carried out by a professional. Even with an off-grid solar generator, integrating your PV system with your home wiring through a transfer switch or EcoFlow Smart Home Panel must be done by an electrician. Even if you’re an experienced handyperson, working with high-voltage electricity is dangerous at best — and potentially fatal at worst. With a grid-tied solar system, there’s added the complexity of connecting your PV system to your home wiring but also to the grid. Improper installation could endanger not only your safety but also the integrity of the grid. Your utility provider will require an inspection before you can connect a grid-tied power system to a bi-directional meter and send excess electricity back to the grid.

5. Inspection and Permitting: Regulations vary widely based on your location and utility company, but some form of inspection will be required before your grid-tied solar panel system is cleared to be operational, eligible for net metering, and connected to the grid.  

Types of Net Metering

When it comes down to specifics, there are many different types of net metering programs available for individuals, communities, and businesses.

For the purposes of this overview, let’s focus on the two primary ways that homeowners and renters can benefit from solar net metering: individually or as part of a community. 

Individual Net Metering

If you’re a homeowner looking to invest in renewables, a grid-tied solar panel system — in a location that offers net metering — can be a viable option for you. 

On-grid solar is best suited for locations that receive a significant amount of peak sunlight, utility infrastructure is reliable, and power outages are rare. By opting for a grid-tied system, you can be less concerned about solar power’s intermittency.

Intermittency is one of the biggest challenges facing adopters of renewable energy like wind and solar. If the wind doesn’t blow or the sun doesn’t shine, your electricity production will be diminished or nonexistent. For example, solar panels don’t work at night. 

At times when your solar panels produce less than their rated power — or not enough to meet your household consumption needs — your grid-tied system will automatically switch to electricity provided by the grid. When your PV panel array produces more power than you need, you’ll reduce your electricity bill by selling it to your utility.

By reducing — or eliminating — your electricity bills, you can achieve solar payback and start making money by saving on utility bills.  Additionally, homeowners can increase their property’s value significantly by installing on-grid or off-grid solar power systems.

(Source: CNET)

Depending on where your residence is located, you may be eligible for tax exemptions for purchasing a solar system in addition to the Federal Solar Tax Credit of 30%. 

(Source: NREL/Research Gate)

As mentioned previously, many states have legislation mandating individual net metering programs. Even in states that don’t, you may still have options through your municipality or utility provider.

On-grid solar has its advantages — especially in locations that offer net metering. The initial cost of purchasing solar panels and a balance of the system may be lower than investing in an off-grid solar generator. 

It’s crucial to remember, however, that without an optional solar battery, your grid-tied system won’t work in a blackout. Thanks mainly to the increase in extreme weather events and aging infrastructure, power outages are happening more frequently — and the lights are staying out longer.

Purchasing a PV system with solar battery backup can dramatically improve your energy security.

(Source: Energy.gov)

Community Solar or Virtual Net Metering

Community solar projects make it possible for renters and apartment dwellers to benefit from solar power and net metering. Individuals and businesses — anyone who pays for electricity — collectively share the costs and the savings of a portion of the electricity generated by a community solar project. 

Typically, members pay a monthly subscription fee and receive a credit for the power produced by the community solar project against their electricity bills. 

The National Renewable Energy Laboratory (NREL) estimates that almost 50% of homes are unable to support rooftop solar installations. Some of the primary reasons for this are:

• Significant upfront investment in solar panels and balance of system components
• You rent, not own, your home 
• No suitable area for PV panel installation 

Government incentives like the Residential Clean Energy Credit have made solar power more accessible to homeowners than ever before. Community solar net metering programs put the benefits of generating clean energy within even more people’s reach. 

(Source: Energy.gov)

As of December 2022, there are community solar projects in 43 states, plus Washington, D.C. You can learn more about State Community Solar Policies here. 

In some cases, community solar can be eligible for the 30% Federal Solar Tax Credit and other government incentives. Do your research and see if community solar is an option for you and your neighbors.

(Source: NMAH)

How Is Net Metering Measured?

The process of measuring how much electricity you consume and how much you provide back to the grid will vary based on your utility provider. But at its heart, the process is relatively straightforward.

Your standard electricity meter will be replaced with one that measures production in addition to consumption. Depending on the details of your specific net metering arrangement, you will typically receive a credit on your electricity bill for the energy you send back to the grid. 

Some meters used to measure your electricity production vs. consumption actually run backward when you’re generating more energy than you’re using, resulting in a real-time credit against your bill. 

The most common types of meters used to measure net metering are:

• Bidirectional meters
• Dual meters
• Smart meters

Does Net Metering Save Money?

As long as you produce more electricity than you consume for at least part of the day, net metering will lower your electricity bill. 

It should be noted that it’s almost unheard of to actually receive a check for the electricity you produce from net metering. A 2020 study found that the average savings on monthly electricity bills from solar power systems is $181 in summer and $104 in winter, for an annual average of $143 per month in savings.

Another commonly quoted estimate is that net metering will save you 20% to 40% on your electricity bills.

So, don’t count on any checks in the mail. Even if you do exceed your consumption with solar, the credit will typically roll over to the following months. Many programs have an annual limit on how long you can carry over credits. So, if you regularly produce more electricity than you consume from the grid, your net metering credits may eventually go to waste.

However, that doesn’t mean the savings provided by net metering — or switching to off-grid solar power — can’t be significant over time. Solar panels last for decades and typically pay for themselves in five to 10 years. 

With generous government incentives, improving technology, and lower prices, the mid to long-term return on investment in residential solar power has never been better. 

With or without net metering, recent estimates show that you’ll save $1,500 a year on average with a residential solar system and $25,500 to $33,000 over the life of the system. With electricity prices predicted to keep increasing, your savings could be substantially higher.

Money saved is money earned. 

What Are the Benefits of Net Metering?

• Reduced electricity bills
• Most newly purchased and installed grid-tied PV panel systems will be eligible for the 30% Residential Clean Energy Credit and other incentives 
• Solar batteries and other balance of system components like a charge controller and battery management system are optional
• Widely available across the US
• Accelerated solar payback period
• Reduced carbon footprint
• Community solar makes renewable energy accessible to more people — including renters and people living in low-income neighborhoods
• Less pressure on America’s aging power infrastructure

What Are the Limitations of Net Metering

• Grid dependence: Without optional solar battery storage, your grid-tied system won’t work in a power outage
• Not available in all locations
• Most net metering programs set a limit on how long you can retain credits to apply against your electricity bills. If you regularly produce more electricity than you consume — and you don’t have solar battery storage — that power could go to waste.
• Subjectivity to volatile (and frequently rising) electricity costs
• Net metering programs are subject to change — including cancellation
• Contrary to popular belief, it’s extremely rare to receive a check from your utility company for the electricity you produce in excess of your consumption
• Not suitable for locations with unreliable on-grid power or prone to frequent extreme weather events

(Source: South Carolina PSC)

Is Net Metering Available in My Location?

A majority of states have some form of legislation mandating individual net metering and community solar programs. Even in states that don’t, many utility providers will still offer some kind of billing arrangement that incentivizes you to send excess electricity generated by renewable energy sources — primarily solar — back to the grid.

Net metering legislation is in a constant state of flux, as are other government incentives for adopting residential renewable electricity production. Consult a reputable local installer or your utility provider to get a definitive answer as to whether net metering is currently an option for you.

Frequently Asked Questions

Final Thoughts

Embracing clean, renewable solar energy to generate your household electricity is a solid investment — both financially and for the future of our planet.

If you’re a homeowner, net metering programs are just one of the ways installing a residential solar power system can save you money.

If you rent or your residence is unsuitable for a solar panel installation, virtual net metering or community solar is another way to benefit from the clean energy revolution. 

No matter whether you opt for grid-tied or off-grid solar power, Ecoflow’s rigid, portable, and flexible solar panels offer industry-leading efficiency, durability, and performance.

Check out our selection today!