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A Beginner's Guide to How Net Metering Actually Works

Joe KnowsThe world has shrinking energy resources, which is why there has been a shift towards developing renewable sources of energy. For instance, solar panels and wind turbines generate power from sources that will always exist — the sun and the wind. You can do your part in the renewable energy movement by installing solar panels on your farm and participating in a net metering program. Take a look at how net metering really works and how you can get started.

What Is Net Metering 

Solar Panels

Image via Flickr by Powerhouse Museum

Net metering is a system that compensates people for the energy they contribute to a power grid from renewable sources like solar panels. This encourages consumers to invest in solar and wind power. Basically, with a net meting system you can run the power meter backwards and get money back for the excess power that you generate.

How Do Solar Panels Work?

Before you can participate in net metering, you have to install solar panels. Solar panels trap DC (direct current) electricity and then convert it to AC (alternating current) electricity to power appliances. At night, your solar panels go idle and you have to get power from your utility company or a battery to charge up any free cell phones you may have on hand.

When you install solar panels, you have two options for storing your excess power. You can either get connected to your power grid and sell it back to the utility company or get a battery to store the extra power for you. If you create more electricity than you need from your solar panels and participate in net metering, that extra power goes back into your local power grid.

It's expensive to install solar panels, but you typically recoup your expenses after a couple years because of net metering. And, depending on your power usage, you might not have to pay a utility bill each month. Another option for generating power for your farm is a residential wind energy system. However, people typically choose solar panels over wind systems because the sun is more reliable than wind.

How Is Net Metering Tracked?

When you have an excess of power from solar panel usage, the utility meter on your house actually spins backwards instead of forwards. This allows the utility company to monitor the amount of power you use and the amount of power you contribute back to the grid. People who have a lot of solar panels often use less power than they generate, so they get a credit back from the utility company.

Depending on the net metering program in your area, you can roll over your power usage to the next month or get a payout. Some net metering programs do this monthly and others do it yearly. Of course, some utility companies will not pay you back because they only pay a wholesale rate instead of a retail rate, but having solar panels will still save you money on your overall power bill. Plus, you can give away your extra energy to help the environment.

Who Can Participate in Net Metering?

Unfortunately, many utility companies oppose net metering because it means shrinking profits for them. This has made it difficult for many state legislatures to develop programs that make it more appealing for consumers to install solar panel systems. So, you may want to find out information about the area you live to see if there are net metering programs available.

There is a federal law called Public Utility Regulatory Policies Act (PURPA) that states homes must be allowed to generate their own power and connect to the energy grid. However, that does not mean that net metering is available everywhere. There are 42 states that currently allow it, with California having the most participants. Other states with top-rated net metering programs include Utah, Arizona, Illinois, Massachusetts, Florida, Oregon, and Vermont. Many of these states offer additional incentives to install solar panel systems besides net metering.

Check out this map of net metering sites to see if it is available where you live.

What Are the Benefits of Net Metering?

Both the consumer and the utility company benefit from net metering. This is because you reduce your monthly utility bill and the utility company has access to cheaper power for their grid.

Here are some other benefits of net metering:

  • You don't have to purchase an expensive battery storage system to work with your solar panels because the utility company takes care of it for you.

  • The money savings over the life of the solar panel system is more than the initial cost of installing it.

  • You can potentially generate enough power to supply energy to two or three homes in your neighborhood.

  • You're helping to preserve natural energy resources around the world.

  • You're more conscious of your power usage, which has additional benefits to the environment.

How Much Money Can You Get Back from Net Metering?

The amount of money you get from net metering varies depending on where you live and your power consumption. For instance, a family of six will get less money back than a family of two because of the difference in power usage. Additionally, you'll get more money back from the power company if you carefully watch your usage. For instance, you should turn off lights when they're not in use and avoid leaving electronic items, such as TVs and computers, on when they're not in use.

Solar panels can save you up to $100 a month on power costs. And according to the American Wind Energy Association, a 10-kilowatt residential wind energy system can cut your utility bill by $10 to $40 per month. So, as you can see, there are quite a few variables that affect how much money you can get back from net metering.

If you live in an area where there are net metering programs, installing a solar panel system is a great way to save you money and do your part for the environment. Have you participated in net metering? What has your experience been?