Net Metering Background
Net metering allows homeowners to receive the full value for the electricity that their solar energy system produces. The term, net metering, refers to the method of accounting for the electricity production of a photovoltaic or wind energy system. Net metering allows homeowners with such systems to use any excess electricity they produce to offset their electric bill. As the homeowner’s system produces electricity, the kilowatts are first used for any electric appliances in the home. If more electricity is produced from the system than is needed by the homeowner, the extra kilowatts are fed into the utility grid.
Under Federal law, utilities must allow independent power producers to interconnect with the utility grid and purchase any excess electricity they generate. Many states have gone beyond the minimum requirements of the Federal law by allowing net metering for customers with PV or wind energy systems. Under net metering, the electric meter of the customer will run backwards when their solar electric system is producing more energy than they need to operate their home at that time. The excess electricity produced is fed into the utility grid and sold to the utility at the retail rate.
At the end of the month, if the customer has generated more electricity than that used, the utility credits the net kilowatt-hours produced at the wholesale power rate. If the customer uses more electricity than they generate, they pay the difference. The billing period for net metering may be either monthly or annually.
Net metering allows homeowners who are not home when their systems are producing electricity to still receive the full value of that electricity without having to install a battery storage system. The power grid acts as the customer’s battery backup, which saves the customer the added expense of purchasing and maintaining a battery system.
Generally, the preferred method of accounting for the electricity under net metering is with a single, reversible meter. An alternative is dual metering, in which customers or their utility purchase and install two non-reversing meters that measure electrical flow in each direction. This adds significant expense to installing a PV system. The current trend around the country is toward a single, reversible meter.
Some utilities are opposed to net metering because they believe it may have negative financial impacts on them. However, a number of studies have shown that net metering can benefit utilities. The benefits include reduced meter hardware and interconnection costs, as well as reduced meter reading and billing costs. Grid-connected PV systems can also help them to avoid the need for additional power generation, may increase the reliability and quality of electricity in the grid, and produce power at peak, when utility generation costs are higher and they often need the extra power.
Renewable Northwest Project has published a Net Metering Q&A with specific information about Montana and answers to commonly asked questions about how net metering works and how it can help you save money on your electricity bill.
Net metering policies are determined by states, which have set policies varying on a number of key dimensions. The Energy Policy Act of 2005 required state electricity regulators to “consider” (but not necessarily implement) rules that mandate public electric utilities make available upon request net metering to their customers. Several legislative bills have been proposed to institute a federal standard limit on net metering. They range from H.R. 729, which sets a net metering cap at 2% of forecasted aggregate customer peak demand, to H.R. 1945 which has no aggregate cap, but does limit residential users to 10 kW, a low limit compared to many states, such as New Mexico, with an 80,000 kW limit, or states such as Arizona, Colorado, New Jersey, and Ohio which limit as a percentage of load.
Arizona, California, Colorado, Connecticut, Delaware, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Ohio, Oregon, Pennsylvania, Utah, Vermont, and West Virginia are considered the most favorable states for net metering, as they are the only states to receive an “A” rating from Freeing the Grid in 2015.
(% of peak)
|Alabama||no limit||100||yes, can be indefinitely||varies|
|Alaska||1.5||25||yes, indefinitely||retail rate|
|Arizona||no limit||125% of load||yes, avoided-cost at end of billing year||avoided cost|
|Arkansas||no limit||25/300||yes, until end of billing year||retail rate|
|California||5||1,000||yes, can be indefinitely||varies|
|Colorado||no limit||120% of load or 10/25*||yes, indefinitely||varies*|
|Connecticut||no limit||2,000||yes, avoided-cost at end of billing year||retail rate|
|Delaware||5||25/500 or 2,000*||yes, indefinitely||retail rate|
|District of Columbia||no limit||1,000||yes, indefinitely||retail rate|
|Florida||no limit||2,000||yes, avoided-cost at end of billing year||retail rate|
|Hawaii||none ||50 or 100*||yes, until end of billing year||none|
|Idaho||0.1||25 or 25/100*||no||retail rate or avoided-cost*|
|Illinois||1||40||yes, until end of billing year||retail rate|
|Indiana||1||1000||yes, indefinitely||retail rate|
|Iowa||no limit||500||yes, indefinitely||retail rate|
|Kansas||1||25/200||yes, until end of billing year||retail rate|
|Kentucky||1||30||yes, indefinitely||retail rate|
|Louisiana||no limit||25/300||yes, indefinitely||avoided cost|
|Maine||no limit||100 or 660*||yes, until end of billing year||retail rate|
|Maryland||1500 MW||2,000||yes, until end of billing year||retail rate|
|Massachusetts**||6 peak demand
4 private 5 public
|60, 1,000 or 2,000||varies||varies|
|Michigan||0.75||150||yes, indefinitely||partial retail rate|
|Minnesota||no limit||40||no||retail rate|
|Missouri||5||100||yes, until end of billing year||avoided-cost|
|Montana||no limit||50||yes, until end of billing year||retail rate|
|Nebraska||1||25||yes, until end of billing year||avoided-cost|
|Nevada||3||1,000||yes, indefinitely||retail rate|
|New Hampshire||1||100||yes, indefinitely||avoided-cost|
|New Jersey||no limit||previous years consumption||yes, avoided-cost at end of billing year||retail rate|
|New Mexico||no limit||80,000||if under US$50||avoided-cost|
|New York||1 or 0.3 (wind)||10 to 2,000 or peak load||varies||avoided-cost or retail rate|
|North Carolina||no limit||1000||yes, until summer billing season||retail rate|
|North Dakota||no limit||100||no||avoided-cost|
|Ohio||no limit||no explicit limit||yes, until end of billing year||generation rate|
|Oklahoma||no limit||100 or 25,000/year||no||avoided-cost, but utility not required to purchase|
|Oregon||0.5 or no limit*||10/25 or 25/2,000*||yes, until end of billing year*||varies|
|Pennsylvania||no limit||50/3,000 or 5,000||yes, until end of billing year.||“price-to-compare” (generation and transmission cost)|
|Rhode Island||2||1,650 for most, 2250 or 3500*||optional||slightly less than retail rate|
|South Carolina||0.2||20/100||yes, until summer billing season||time-of-rate use or less|
|Texas***||no limit||20 or 25||no||varies|
|Utah||varies*||25/2,000 or 10*||varies – credits expire annually with the March billing*||avoided-cost or retail rate*|
|Vermont||15||250||yes, accumulated up to 12 months, rolling||retail rate|
|Virginia||1||10/500||yes, avoided-cost option at end of billing year||retail rate|
|Washington||0.5||100||yes, until end of billing year||retail rate|
|West Virginia||0.1||25||yes, up to twelve months||retail rate|
|Wisconsin||no limit||20||no||retail rate for renewables, avoided-cost for non-renewables|
|Wyoming||no limit||25||yes, avoided-cost at end of billing year||retail rate|
Note: Some additional minor variations not listed in this table may apply. N/A = Not available. Lost = Excess electricity credit or credit not claimed is granted to utility. Retail rate = Final sale price of electricity. Avoided-cost = “Wholesale” price of electricity (cost to the utility).
* = Depending on utility.
** = Massachusetts distinguishes policies for different “classes” of systems.
*** = Only available to customers of Austin Energy, CPS Energy, or Green Mountain Energy (Green Mountain Energy is not a utility but a retail electric provider; according to www.powertochoose.com).
The state of Nevada implemented net metering in 1997. Up until 2016, utility companies in Nevada paid the retail electricity rate to net metering consumers. Nevada’s utilities pay net metering customers an average of $623 per year in southern Nevada and $471 per year in northern Nevada. (The major utility company in Nevada is NV Energy.)
The Nevada legislature passed legislation in 2015 that required the Nevada Public Utilities Commission to study the electric rate structure and come up with ways to shift costs. In December 2015, the commission updated the regulations so that utility companies would pay the wholesale rate to net metering consumers.
The group Greenpeace and Senator Harry Reid, the Democratic leader in the U.S. Senate, expressed opposition to the commission’s ruling. On February 8, 2016, during a commission hearing, three individuals with guns attempted to enter the hearing. Security guards turned them back. The individuals said they would return to the next commission hearing and would be armed.
In Maine, solar companies and major utility companies came to a legislative agreement in 2016 over net metering issues. The two sides said that their deal might increase solar power in Maine “tenfold in five years.” In response, several national solar companies paid for lobbyists to travel to Maine and attempt to persuade state legislators to stop the deal. The legislation would replace net metering with a concept referred to as “next metering.” Under next metering, regulators would set the rates that utilities pay residential solar customers for the customers’ excess energy. (Under normal net metering, utilities would pay the wholesale rate). The legislation includes a grandfather clause for existing solar customers.
In the spring of 2016, the city of Mt. Vernon, Missouri created a local net metering program. The local board of aldermen passed a measure on May 16, 2016 that allows for residents and businesses to apply to “generate their own electricity while staying connected to the Mt. Vernon power grid.” The board took up the issue after city residents asked about regulations regarding hooking up their own solar panels. The town’s program would allow net metering, but consumers must pay for their own equipment including a bi-directional meter. Participants would pay for power from the city at the regular rate that any other city consumer would pay. Participants who create excess power would receive a credit on their utility bill, equal to what the city pays for the electricity at a wholesale rate from the distributor Empire.