Net metering, also called net energy metering (NEM), is a system used to measure and bill electricity for homes or businesses that produce some or all of their own electricity. This system lets users use the electricity they generate at any time, not just when it is made. This is especially helpful for renewable energy sources like wind and solar, which do not always produce electricity when needed. Monthly net metering allows users to use solar power made during the day at night, or wind power from a windy day later in the month. Annual net metering lets extra electricity credits from one month be used in another month, such as using solar power made in July for December or wind power made in March for August.

Net metering rules can differ by country, state, or province. These rules include whether net metering is available, how long extra electricity credits can be saved, and how much those credits are worth (either the price the consumer pays or the price the utility company pays). Most net metering laws require monthly credits to roll over, a small monthly fee for connecting to the grid, a monthly payment for any electricity used beyond what was generated, and an annual settlement for any leftover credits. Net metering uses one meter that measures electricity flowing in both directions. It can be managed as a simple accounting process and does not always require special equipment or prior arrangements.

Net metering is a policy that helps support private investment in renewable energy sources.

History

Net metering began in the United States when people used small wind turbines and solar panels to create electricity and wanted to use it at different times or dates than when it was made. The first two projects to use net metering were an apartment complex and a solar test house in Massachusetts in 1979. Minnesota was the first state to pass a net metering law in 1983, allowing people who produced less than 40 kW of electricity to carry over unused credits to the next month or receive payment for extra electricity. In 2000, this rule changed to allow payment at the average price customers pay for electricity. This is the basic idea of net metering, which lets small electricity producers sell their power at the same price customers pay.

Utilities in Idaho started using net metering in 1980, and Arizona in 1981. Massachusetts adopted net metering in 1982. By 1998, 22 states or their utilities had adopted net metering. In California, two utilities first charged a monthly "net metering" fee that included a "standby charge," but the Public Utilities Commission later stopped these fees. In 2005, the Energy Policy Act required all U.S. utilities to consider offering net metering if customers requested it. This law did not address how to handle extra electricity. As of 2013, 43 U.S. states had adopted net metering, and utilities in three other states had started programs, leaving only four states without rules for net metering. However, a 2017 study found that only 3% of U.S. utilities paid customers the full price for electricity, while most offered less than the retail price, let credits expire yearly, or allowed credits to carry over indefinitely.

Net metering was slow to spread in Europe, especially in the United Kingdom, because of confusion about how to handle value-added tax (VAT). Only one utility company in Great Britain offers net metering. The UK government is hesitant to use net metering because of challenges in paying and refunding VAT on electricity, though some pilot projects are testing the idea.

In Canada, some provinces have net metering programs. In the Philippines, the Net Metering scheme is governed by Republic Act 9513 (Renewable Energy Act of 2008) and its rules. The Energy Regulatory Commission (ERC) works with the National Renewable Energy Board (NREB) to manage the program. However, this is not a true net metering system but a "net billing" system. According to the Department of Energy’s guidelines, net metering allows customers to install renewable energy systems up to 100 kW in size. Extra electricity not used is sent to the utility, and the utility gives a credit based on the cost to generate electricity, not the full retail price. Philippine customers who sell extra electricity to the utility are paid the "generation cost," which is often less than half the price customers pay for electricity.

Controversy

Net metering is a topic of debate because it affects different groups connected to the electric grid. A report by Peter Kind from Energy Infrastructure Advocates for the Edison Electric Institute said that systems like rooftop solar create challenges for electric utilities. Utilities in the United States have tried, but failed, to stop net metering.

Renewable energy supporters say that while solar systems and energy efficiency efforts challenge the way utilities operate, the benefits of these systems are greater than the costs. These benefits help all electricity customers. For example, solar systems reduce the need for large power plants and ease pressure on the electric grid. Supporters also note that net metering, a key rule that helps rooftop solar grow, brings many benefits to society, such as better public health, more jobs, lower energy prices, stronger grid security, and water savings. These benefits are often not included in reports by utilities.

A report by the consulting firm Crossborder Energy found that California’s net metering program provides more benefits than costs to electricity customers. These benefits will total more than $92 million each year when the program is fully completed.

A 2012 report by the California Public Utilities Commission (CPUC) showed that customers without solar systems will pay an extra $287 each year by 2020 to use and maintain the grid. By 2020, the total cost to these customers will reach $1.1 billion. The same report found that solar customers pay about 103% of the cost to serve them, on average, across three major utilities in 2011.

Electric utilities say that solar owners do not pay all the costs of using the grid. Instead, these costs are passed on to customers who do not have solar systems. Many solar owners still depend on the grid for electricity at night or during times when their systems cannot produce enough power.

A 2014 report by the Institute for Electric Innovation (which supports electricity companies) claimed that net metering in California gives too much financial help to typical residential solar systems. These subsidies are paid by other customers, many of whom have lower incomes than solar owners. The report also said that most of these subsidies go to solar leasing companies, which installed about 75% of solar systems in 2013. The report suggested changes in California, such as using pricing plans that better reflect costs and replacing net metering with a system where solar customers buy all their electricity at current rates and sell their extra power to the utility at a set price.

Post-net metering successor tariffs

Energy officials across the country have discussed new programs to replace net metering for many years. By 2018, some models that can be used in other places had been developed. Utility companies have always argued that customers with solar panels receive too much credit on their bills under net metering, which increases the costs for other customers who do not use solar energy. According to Utility Dive, this policy has caused intense discussions at the state level since 2003 about whether and how to create a new policy to replace it. The main challenge in designing new pricing and rebate plans after net metering is to fairly reward customers with rooftop solar systems without raising costs for non-solar customers. Experts say a good new policy, called a "successor tariff," should support the growth of solar energy systems in a way that benefits both customers and the power grid.

Thirteen states replaced their net metering programs with new pricing plans in 2017. In 2018, three more states made similar changes. For example, in Nevada, solar customers will receive less compensation over time, but currently, they are paid the standard rate (meaning, they are paid the same amount for electricity they send to the grid as they pay for electricity they use). In Arizona, the new solar rate is 10% lower than the standard rate.

The two most common new pricing plans are called "net billing" and "buy-all-sell-all" (BASA). Net billing pays the standard rate for electricity customers use, but a lower rate for electricity they send back to the grid. With BASA, the utility company charges a lower rate for electricity used and pays a lower rate for electricity sent back to the grid.

Comparison

There is a lot of confusion between the terms "net metering" and "feed-in tariff" (FIT). In general, there are three ways to compensate for electricity generated locally:

• Net metering: This method uses the same rate as electricity sold to customers. It is not a direct payment, but it can act as one if there is extra electricity produced and the utility company allows payments.
• Feed-in tariff: This method usually pays more than the customer rate. The payment rate decreases as more people adopt this method.
• Power purchase agreement: This method typically pays less than the customer rate. It is also called a "Standard Offer Program." In some cases, like with solar energy, it may pay more than the customer rate because solar electricity is often produced when demand is highest.

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

Time of use metering

Time of use (TOU) net metering uses a smart electric meter that tracks electricity use at any time of day. This system sets different rates for electricity based on when it is used, such as during the day, night, or certain seasons. Usually, the cost to make electricity is highest during the day when many people use power, especially around sunset, and lowest in the middle of the night. TOU metering is an important challenge for renewable energy sources, like solar power, because solar panels often produce the most electricity at noon but generate little energy during the daytime hours when prices are highest. They also produce no electricity at night, when prices are lowest. In places like California, Italy, and Australia, many solar panels have been installed, so the highest electricity prices now happen in the evening instead of during the day. TOU net metering changes how much the utility company seems to pay for electricity from homes with solar power.

Market rate net metering

In market rate net metering systems, the cost of electricity a user pays changes based on wholesale electric prices. The user's meters are controlled from a distance to calculate the value of electricity used and are read remotely. Net metering uses this changing pricing for extra electricity produced by an approved system, such as solar or wind power.

Market rate metering systems were introduced in California in 2006. Under California's rules, these systems apply to approved solar and wind systems. California law requires that users are paid the same changing price for extra electricity sent to the grid as the price charged for electricity used at the same time.

Net metering allows small systems to cost the consumer nothing over a year if they use electricity during times when prices are lower, such as by cooling water when electricity is cheaper for later use in air conditioning or by charging an electric car with a battery during off-peak times. Electricity produced during high-demand times can be sent to the grid instead of being used locally (see Vehicle-to-grid). Extra electricity produced in a year does not earn any additional payment.

Excess generation

Excess generation is a different topic from net metering, but both are often covered by the same rules because they can happen together. When local energy production meets part of the energy needed, net metering is not used. When local energy production is more than needed at certain times, like during the day, net metering is used. If local energy production is more than needed for the entire billing period, best practices suggest carrying over kilowatt-hour credits indefinitely. However, some areas have considered letting these credits expire after 36 months. The usual definition of excess generation is based on annual totals, though the term can also apply monthly. How excess generation is handled varies by region. Options include losing the credits, receiving payment based on avoided costs, or receiving payment at the retail rate. If unused kilowatt-hour credits remain when service ends, it is best for the customer to receive payment at the retail rate, while utilities may prefer to lose the credits. Avoided cost is a middle-ground solution. Some areas allow customers to choose between carrying over credits indefinitely or receiving payment for excess annual generation. Both wind and solar energy are naturally seasonal, so it is likely that extra energy will be used later unless more panels or a larger turbine are installed than needed.

Energy storage

Net metering systems can include energy storage to save some power locally, such as from renewable energy sources connected to the system, instead of sending all energy to the main power grid. The batteries used are often industrial deep cycle batteries, which can last 10 to 20 years. Lead-acid batteries are also sometimes used, but they typically last about 5 years. Lithium-ion batteries are occasionally used, but they also have a shorter lifespan. Nickel-iron batteries last the longest, with a lifespan of up to 40 years. A 2017 study on solar panels with battery storage showed that using batteries added 8 to 14 percent more electricity use during charging and discharging.

Adoption by country

In some Australian states, the "feed-in tariff" is actually net metering, but it pays monthly for net generation at a higher rate than retail. Mark Wakeham from Environment Victoria calls this a "fake feed-in tariff." A true feed-in tariff requires a separate meter and pays for all local generation at a preferential rate. Net metering uses only one meter. The financial differences between these systems are large.

In Victoria, from 2009, households were paid 60 cents for each extra kilowatt hour of energy sent to the state electricity grid. This was about three times the retail price for electricity at that time. However, later governments reduced the rate several times. By 2016, the rate was as low as 5 cents per kilowatt hour.

In Queensland, starting in 2008, the Solar Bonus Scheme paid 44 cents for each extra kilowatt hour of energy sent to the grid. This was about three times the current retail price. However, from 2012, the rate was reduced to 6–10 cents per kilowatt hour, depending on the electricity retailer.

Steve Hoy, an Australian smart grid technologist, created the idea of "True Zero" to describe how net metering allows consumers to trace electricity back to its source, making clean energy more accessible.

Ontario allows net metering for systems up to 500 kW. Credits for excess energy can be used for up to 12 months. If a customer generates more energy than they use for 8 months and uses the credits in the 10th month, the 12-month period restarts from the date the next credit appears on an invoice. Any unused credits after 12 months are removed.

In British Columbia, areas served by BC Hydro allow net metering for up to 100 kW. Customers are paid the market price, calculated as the average mid-Columbia price from the previous year, on March 1 each year. FortisBC, which serves parts of South Central BC, 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 electricity utility, also allows net metering.

New Brunswick allows net metering for systems up to 100 kW. Credits for excess energy can be carried over until March, after which any unused credits are lost.

SaskPower allows net metering for systems up to 100 kW. Credits for excess energy can be carried over until the customer’s annual anniversary date, after which any unused credits are lost.

In Nova Scotia, 43 homes and businesses started using solar panels in 2015. By 2017, this number grew to 133. These customers use net metering, and Nova Scotia Power buys excess energy from them at the same rate it sells electricity to customers. In 2022, Nova Scotia increased the net metering cap for small businesses to 200 kW and for large businesses to 1000 kW. By 2024, 7000 Nova Scotians had installed solar. At the end of 2024, there were 45 active commercial net metering generators totaling 4.1 MW and 11,102 legacy net metering customers (including 58 with wind, 1 with hydro, and 6 with other systems) with a total capacity of 97.7 MW. This was more than double the 2020 projection of 39 MW for 2025.

Denmark introduced net metering for private solar systems in 1998 for a four-year pilot. The program was extended for another four years until 2006. Net metering helped increase solar use in Denmark but was limited by the short time frame. In 2005, the policy was made permanent.

The Netherlands has had net metering since 2004. Initially, there was a limit of 3000 kWh per year, which was later increased to 5000 kWh. The limit was removed entirely in 2014.

Italy uses a mix of net metering and a premium feed-in tariff to support solar energy.

Slovenia allows net metering for up to 11 kVA annually. Up to 10 MVA can be installed nationwide in a calendar year.

Spain proposed net metering in 2010 to promote renewable energy. It was officially introduced in 2019 through Royal Decree 244/2019.

Électricité de France plans to use net metering, where homeowners sell energy at a higher price than what they pay as consumers. The government has set this price for 20 years.

Ireland is planning to use net metering under the "Micro-generation Support Scheme." Under this plan, micro-generators can sell 30% of their excess energy to the grid. The selling price is still being decided.

Poland introduced net metering for private and commercial systems up to 50 kW in 2015. Energy sent to the grid must be used within one year, or it is lost. For systems up to 10 kW, 20% of exported energy is subtracted, and for systems up to 50 kW, 30% is subtracted. This policy will remain in place for at least 15 years. Government subsidies also helped increase solar installations in Poland.

Portugal has a limited form of net metering. Only energy injected into the grid that matches consumption within 15-minute periods is credited. Excess energy is not compensated. Old analog meters are replaced when solar panels are installed, preventing true net metering.

Almost every state in India has implemented net metering, allowing consumers to sell surplus energy to the grid and receive compensation. However, policies vary by state. To use net metering, consumers must apply to their local electricity company with their solar project plan and fees. The company reviews the application and approves or rejects it. If approved, a registration application is submitted, an agreement is signed, and a net meter is installed.

In India, the states of Karnataka and Andhra Pradesh have started implementing net metering, as announced by their respective governments.

Net purchase and sale

Net purchase and sale is a method of connecting to the electricity grid that does not provide the same balance of prices as net metering, which makes it less beneficial for people using small renewable energy systems at home.

In this system, two one-way meters are used. One meter measures the electricity a user takes from the grid, and the other measures the extra electricity produced and sent back to the grid. The user pays the full retail price for the electricity they use, while the power company buys the extra electricity they produce at a lower wholesale price. This can create a big difference between what the user pays and what the company pays for the electricity.

In some countries, like Germany, Spain, Ontario (Canada), and certain U.S. states, a system called feed-in tariff (FIT) is used. Under FIT, customers are paid for all the electricity they generate from renewable sources at their home. A separate meter tracks the total electricity produced, not just the extra electricity sent to the grid. In Germany, solar energy was once paid many times the retail price, but the rates have dropped significantly. At the same time, the number of solar installations has increased greatly because solar technology has become less expensive. Wind energy, however, receives only about half the retail price in Germany because the system pays based on the actual cost of each energy source, including a fair profit.

Virtual net metering

Another way to provide electricity to the power grid is through virtual net metering, which is also known as peer-to-peer (P2P) energy trading, wheeling, or local energy trading. Peer-to-peer energy trading is a new way of managing electricity systems. People who produce their own energy at homes, offices, and factories can share it with others nearby. Some companies that offer virtual net metering use a technology called blockchain.

Related technology

Sources that produce direct current, like solar panels, need to be connected to an electrical inverter to change the power to alternating current for use with regular household devices. The power produced must match the phase of the electricity grid, and a system must be included to stop the power supply if the grid stops working. This is important for safety—workers fixing broken power lines must be protected from electricity coming from sources behind them, in addition to being separated from the main power grid. While a small generator cannot usually supply power to a line that is already carrying electricity, this can happen if the line is not connected to other devices. Solar inverters are designed to be safe—although one inverter cannot supply power to a line, many inverters together might. Also, electrical workers are trained to treat every power line as if it is still carrying electricity, even if they know it should be safe.

Solar guerrilla

The term "solar guerrilla" or "guerrilla solar movement" was first used by Home Power Magazine. It refers to people who install solar panels without asking for permission or telling others. They also use a system called net metering each month without following the rules.