Net Metering

Net metering is a process in which a homeowner or small business (let's call them the customer) who both uses electricity and generates electricity (whether by solar, wind, tidal, or other means) has a special meter that runs both ways. When the customer is consuming more power than he or she is producing, the meter runs forward. When the customer is producing more than is being consumed, the meter runs backward. The excess power the customer produces goes to the electrical grid, where the customer's neighbors use it. See what we mean about low transmission cost?

In a typical net metering structure, the customer pays for the excess power that he or she uses each month. The utility "settles up" with the customer once a year and offsets the net credit from any months against the amount the customer paid for the year. If there's a net surplus (that is, if the customer produced more during the year than he or she used), either the surplus is forfeited or the utility pays the customer for it at wholesale rates.

From the standpoint of the customer, net metering makes it economically feasible to invest in sustainable energy at the household level. If the customer doesn't know that he or she will get credit for excess production capacity, the customer will want to install only the capacity that will always be used. Once the customer knows he or she can get credit for extra capacity, the customer can be more generous and install more production capacity. That's good for the customer, the utility, and the durability of the grid.

In the past, utility companies resisted net metering, arguing that it increased their costs and provided little or no benefit. Now, however, progressive utilities who understand the challenges ahead are coming to see net metering as a blessing, for these reasons:

• It lessens transmission costs by providing for the generation of electricity close to its consumers.
• It makes for a more stable and durable grid by decentralizing the production function.
• It offers generation without capital investment. Unlike large nuclear, coal-fired, and natural gas generators, the capital for net metered electrical production is provided by the customers.
• The energy produced is almost always "green," which the utility can claim as it publishes its percentage of renewable energy.
• Certainly in the case of solar energy, and often with other energy sources as well, the production from the customer tends to correspond with the peak in demand for electricity across the grid. That is, the power provided by net metering customers replaces the most expensive sources the utility typically reserves for peak demand.

Here's the statement in favor of Net Metering we submitted to the Alabama Public Service Commission in November of 2007.

Here are some model Net Metering Standards suggested by the Environmental Law & Policy Center.