Net metering

Net metering is a service to an electric consumer under which electric energy generated by that electric consumer from an eligible on-site generating facility and delivered to the local distribution facilities may be used to offset electric energy provided by the electric utility to the electric consumer during the applicable billing period.

Net metering policies can vary significantly by country and by state or province: if net metering is available, if and how long you can keep your banked credits, and how much the credits are worth (retail/wholesale). Most net metering laws involve monthly roll over of kWh credits, a small monthly connection fee, require monthly payment of deficits (i.e. normal electric bill), and annual settlement of any residual credit. Unlike a feed-in tariff (FIT) or time of use metering (TOU), net metering can be implemented solely as an accounting procedure, and requires no special metering, or even any prior arrangement or notification.

<p>Net metering is a policy designed to foster private investment in renewable energy. In the United States, as part of the Energy Policy Act of 2005, all public electric utilities are required to make available upon request net metering to their customers.


Net metering originated in the United States, where small wind turbines and solar panels were connected to the electrical grid, and consumers wanted to be able to use the electricity generated at a different time or date than when it was generated. Minnesota is commonly cited as passing the first net metering law, in 1983, and allowed anyone generating less than 40 kW to either roll over any kilowatt credit to the next month, or be paid for the excess. In 2000 this was amended to compensation "at the average retail utility energy rate". This is the simplest and most general interpretation of net metering, and in addition allows small producers to sell electricity at the retail rate.

Utilities in Idaho adopted net metering in 1980, and in Arizona in 1981. Massachusetts adopted net metering in 1982. By 1998, 22 states or utilities therein had adopted net metering. Two California utilities initially adopted a monthly "net metering" charge, which included a "standby charge", until the PUC banned such charges. In 2005, all U.S. utilities were required to offer net metering "upon request". Excess generation is not addressed. As of 2015 43 U.S. states have adopted net metering, as well as utilities in 3 of the remaining states, leaving only 4 states without any established procedures for implementing net metering.

Net metering was slow to be adopted in Europe, especially in the United Kingdom, because of confusion over how to address the value added tax (VAT). Only one utility company in Great Britain offers net metering.

The United Kingdom government is reluctant to introduce the net metering principle because of complications in paying and refunding the value added tax that is payable on electricity, but pilot projects are underway in some areas.

In Canada, some provinces have net metering programs.

In the Philippines, Net Metering scheme is governed by Republic Act 9513 (Renewable Energy Act of 2008) and it's implementing rules and regulation (IRR). The implementing body is the Energy Regulatory Commission (ERC) in consultation with the National Renewable Energy Board (NREB). Unfortunately, the scheme is not a true net metering scheme but in reality a net billing scheme. As the Dept of Energy's Net Metering guidelines say, "

“Net-metering allows customers of Distribution Utilities (DUs) to install an on-site Renewable Energy (RE) facility not exceeding 100 kilowatts (kW) in capacity so they can generate electricity for their own use. Any electricity generated that is not consumed by the customer is automatically exported to the DU’s distribution system. The DU then gives a peso credit for the excess electricity received equivalent to the DU’s blended generation cost, excluding other generation adjustments, and deducts the credits earned to the customer’s electric bill.” (

Thus Philippine consumers who generate their own electricity and sell their surplus to the utility are paid what is called the "generation cost" which is often less than 50% of the retail price of electricity.


Utility companies and trade organizations are seeking to update state net metering policies to make them more transparent and prevent shifting the cost of electric generation, transmission, and distribution systems from net metering customers to customers who cannot afford or are unable to have renewable energy sources. A report prepared by Peter Kind of Energy Infrastructure Advocates for the trade association Edison Electric Institute stated that distributed generation systems, like rooftop solar, present unique challenges to the future of electric utilities.

Many electric utilities state that owners of generation systems do not pay the full cost of service to use the grid, thus shifting their share of the cost on to customers without distributed generation systems. Most owners of rooftop solar or other types of distributed generation systems still rely on the grid to receive electricity from utilities at night or when their systems cannot generate sufficient power.

Renewable advocates point out that while distributed solar and other energy efficiency measures do pose a challenge to electric utilities' existing business model, the benefits of distributed generation outweigh the costs, and those benefits are shared by all ratepayers. Grid benefits of private distributed solar investment include reduced need for centralizing power plants and reduced strain on the utility grid.They also point out that, as a cornerstone policy enabling the growth of rooftop solar, net metering creates a host of societal benefits for all ratepayers that are generally not accounted for by the utility analysis, including: public health benefits, employment and downstream economic effects, market price impacts, grid security benefits, and water savings.

A 2012 report on the cost of net metering in the State of California, commissioned by the California Public Utilities Commission (CPUC), showed that those customers without distributed generation systems will pay $287 in additional costs to use and maintain the grid every year by 2020. The report also showed the net cost will amount to US$1.1 billion by 2020. Notably, the same report found that solar customers do pay more on their power bills than what it costs the utility to serve them (Table 5, page 10: average 103% of their cost of service across the three major utilities in 2011).

A 2014 report funded by the Institute for Electric Innovation reveals that net metering in California produces excessively large subsidies for typical residential rooftop solar PV facilities. These subsidies must then be paid for by other residential customers, most of whom are less affluent than the rooftop solar PV customers. In addition, the report points out that most of these large subsidies go to the solar leasing companies, which accounted for about 75 percent of the solar PV facilities installed in 2013. The report concludes that changes are needed in California, ranging from the adoption of retail tariffs that are more cost-reflective to replacing net metering with a separate "Buy All - Sell All" arrangement that requires all rooftop solar PV customers to buy all of their consumed energy under the existing retail tariffs and separately sell all of their onsite generation to their distribution utilities at the utilities' respective avoided costs.

Illustrating the alternative view, an independent report conducted by the consulting firm Crossborder Energy found that the benefits of California's net metering program outweigh the costs to ratepayers. Those net benefits will amount to more than $92 million annually upon the completion of the current net metering program.


There is considerable confusion between the terms "net metering" and "feed-in tariff". In general there are three types of compensation for local, distributed generation:

  • Feed-in tariff (FIT) which is generally above retail, and reduces to retail as the percentage of adopters increases.
  • Net metering - which is always at retail, and which is not technically compensation, although it may become compensation if there is excess generation and payments are allowed by the utility.
  • Power purchase agreement - compensation which is generally below retail, also known as a "Standard Offer Program", and can be above retail, particularly in the case of solar, which tends to be generated close to peak demand.

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

Time of use metering

Time of use (TOU) net metering employs a specialized reversible smart (electric) meter that is programmed to determine electricity usage any time during the day. Time-of-use allows utility rates and charges to be assessed based on when the electricity was used (i.e., day/night and seasonal rates). Typically the generation cost of electricity is highest during the daytime peak usage period, and low during the night, when usage is low. Time of use metering is a significant issue for renewable-energy sources, since, for example, solar power systems tend to produce energy during the daytime peak-price period, and produce little or no power during the night period, when price is low. Italy has installed so many photovoltaic cells that peak prices no longer are during the day, but are instead in the evening. TOU net metering affects the apparent cost of net metering to a utility. Smart meter technology can also be used to design residential electricity delivery tariffs on the basis of coincident peak demand rather than usage. This tariff model, while complex, may allow for a more accurate valuation of the economic benefit of distributed generation.

Market rate net metering

In market rate net metering systems the user's energy use is priced dynamically according to some function of wholesale electric prices. The users' meters are programmed remotely to calculate the value and are read remotely. Net metering applies such variable pricing to excess power produced by a qualifying system.

Market rate metering systems were implemented in California starting in 2006, and under the terms of California's net metering rules will be applicable to qualifying photovoltaic and wind systems. Under California law the payback for surplus electricity sent to the grid must be equal to the (variable, in this case) price charged at that time.

Net metering enables small systems to result in zero annual net cost to the consumer provided that the consumer is able to shift demand loads to a lower price time, such as by chilling water at a low cost time for later use in air conditioning, or by charging a battery electric vehicle during off-peak times, while the electricity generated at peak demand time can be sent to the grid rather than used locally (see Vehicle-to-grid). No credit is given for annual surplus production.

Excess generation

Excess generation is a separate issue than net metering, but it is normally dealt with in the same rules, because it can arise. If local generation offsets a portion of the demand, net metering is not used. If local generation exceeds demand some of the time, for example during the day, net metering is used. If local generation exceeds demand for the billing cycle, best practices calls for a perpetual roll over of the kilowatt credits, although some regions have considered having any kilowatt credits expire after 36 months. The normal definition of excess generation is annually, although the term is equally applicable monthly. The treatment of annual excess generation (and monthly) ranges from lost, to compensation at avoided cost, to compensation at retail rate. Left over kilowatt credits upon termination of service would ideally be paid at retail rate, from the consumer standpoint, and lost, from the utility standpoint, with avoided cost a minimum compromise. Some regions allow optional payment for excess annual generation, which allows perpetual roll over or payment, at the customers choice. Both wind and solar are inherently seasonal, and it is highly likely to use up a surplus later, unless more solar panels or a larger wind turbine have been installed than needed.


In some Australian states, the "feed-in tariff" is actually net metering, except that it pays monthly for net generation at a higher rate than retail, with Environment Victoria Campaigns Director Mark Wakeham calling it a "fake feed-in tariff". A feed-in tariff requires a separate meter, and pays for all local generation at a preferential rate, while net metering requires only one meter. The financial differences are very substantial.

In Victoria, from 2009, householders will be paid 60 cents for every excess kilowatt hour of energy fed back into the state electricity grid. This is around three times the current retail price for electricity.

In Queensland starting in 2008, the Solar Bonus Scheme pays 44 cents for every excess kilowatt hour of energy fed back into the state electricity grid. This is around three times the current retail price for electricity.


Ontario allows net metering for up to 500 kW, however credits can only be carried for 12 consecutive months. Should a consumer establish a credit where they generate more than they consume for 8 months and use up the credits in the 10th month, then the 12-month period begins again from the date that the next credit is shown on an invoice. Any unused credits remaining at the end of 12 consecutive months of a consumer being in a credit situation are cleared at the end of that billing.

Areas of British Columbia serviced by BC Hydro are allowed net metering for up to 50 kW. At each annual anniversary the customer was paid 8.16 cents per KWh, if there is a net export of power after each 12-month period, which was increased to 9.99 cents/kWh, effective June 1, 2012. Systems over 50 kW are covered under the Standing Offer Program. FortisBC which serves an area in South Central BC also 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 electrical utility, does not currently allow net metering.

New Brunswick allows net metering for installations up to 100 kW. Credits from excess generated power can be carried over until March at which time any excess credits are lost.

SaskPower allows net metering for installations up to 100 kW. Credits from excess generated power can be carried over until the customer's annual anniversary date, at which time any excess credits are lost.

European Union

Denmark established net-metering for privately owned PV systems in mid-1998 for a pilot-period of four years. In 2002 the net-metering scheme was extended another four years up to end of 2006. Net-metering has proved to be a cheap, easy to administer and effective way of stimulating the deployment of PV in Denmark; however the relative short time window of the arrangement has so far prevented it from reaching its full potential. During the political negotiations in the fall of 2005 the net-metering for privately owned PV systems was made permanent.

Italy offers a very attractive support scheme, mixing net-metering and a well segmented premium FiT.

In Spain, net metering has been proposed by the Asociación de la Industria Fotovoltaica (ASIF) to promote renewable electricity, without requiring additional economic support.

Some form of net metering is now proposed by Électricité de France. According to their website, energy produced by home-owners is bought at a higher price than what is charged as consumers. Hence, some recommend to sell all energy produced, and buy back all energy needed at a lower price. The price has been fixed for 20 years by the government.

United States

Net metering was pioneered in the United States as a way to allow solar and wind to provide electricity whenever available and allow use of that electricity whenever it was needed, beginning with utilities in Idaho in 1980, and in Arizona in 1981. Most states have net metering programs, and a 2005 Federal law requires all public utilities to offer net metering upon request.

Several bills have been proposed to institute a federal requirement to set standard limits on net metering. They range from H.R. 729 which allows up to 2% net metering to H.R. 1945 which has no limit, 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. Best practices recommends limiting only to the customer's service entrance capacity. Current law requires all utilities to offer net metering upon request, which implies no limits, and is in conflict with state laws which do set a limit. Current as of June 2011, only three states do address net metering, and twenty one have no limit on the number of subscribers using net metering. Only three, Arizona, New Jersey, and Ohio, have no specific wattage limit on the power limit for each subscriber (see table). Arizona, California, Colorado, Connecticut, Delaware, Maryland, Massachusetts, 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 the Network for New Energy Choices in 2012.

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


Indian states of Tamil Nadu, Karnataka, and Andhra Pradesh have started implementation of net metering, and the policy has been announced by the respective state electricity boards in 2014. Feasibility study will be done by the electricity boards, and after inspection the meters will be replaced by bidirectional ones and will be installed. Applications are taken up for up to 30% of the distribution transformer capacity on a first-come-first-serve basis and technical feasibility.

Net purchase and sale

Net purchase and sale is a different method of providing power to the electricity grid that does not offer the price symmetry of net metering, making this system a lot less profitable for home users of small renewable electricity systems.

Under this arrangement, two uni-directional meters are installedâ€"one records electricity drawn from the grid, and the other records excess electricity generated and fed back into the grid. The user pays retail rate for the electricity they use, and the power provider purchases their excess generation at its avoided cost (wholesale rate). There may be a significant difference between the retail rate the user pays and the power provider's avoided cost.

Germany, Spain, Ontario (Canada), some states in the USA, and other countries, on the other hand, have adopted a price schedule, or feed-in tariff (FIT), whereby customers get paid for any electricity they generate from renewable energy on their premises. The actual electricity being generated is counted on a separate meter, not just the surplus they feed back to the grid. In Germany, for the solar power generated, a feed-in tariff is being paid in order to boost solar power (figure from 2009). Germany once paid several times the retail rate for solar but has successfully reduced the rates drastically while actual installation of solar has grown exponentially at the same time due to installed cost reductions. Wind energy, in contrast, only receives around a half of the domestic retail rate, because the German system pays what each source costs (including a reasonable profit margin).

Related technology

Sources that produce direct current, such as solar panels must be coupled with an electrical inverter to convert the output to alternating current, for use with conventional appliances. The phase of the outgoing power must be synchronized with the grid, and a mechanism must be included to disconnect the feed in the event of grid failure. This is for safety â€" for example, workers repairing downed power lines must be protected from "downstream" sources, in addition to being disconnected from the main "upstream" distribution grid. Note: A small generator simply lacks the power to energize a loaded line. This can only happen if the line is isolated from other loads, and is extremely unlikely. Solar inverters are designed for safety â€" while one inverter could not energize a line, a thousand might. In addition, all electrical workers should treat every line as though it was live, even when they know it should be safe.

Solar Guerrilla

Solar Guerrilla (or the guerrilla solar movement) is a term originated by Home Power Magazine and is applied to someone who uses an alternative energy source to illegally supply electricity back to a public utility grid.

See also

  • Automatic meter reading
  • Demand response
  • Distributed generation
  • Electricity meter
  • Feed-in tariff
  • Interstate Renewable Energy Council
  • Power purchase agreement
  • Power system automation
  • Public Utility Regulatory Policies Act of 1978
  • Smart Grid
  • Smart meter
  • Utility submeter
  • Variable pricing
  • Virtual power plant


External links

  • U.S. Department of Energy - Net Metering Policies
  • EERE:
    • Consumer's Guide: Net Metering and Rate.
    • Solar and Net metering
  • The Database of State Incentives for Renewable Energy (DSIRE)
  • Connecting to the Grid: published monthly, focusing on the latest news on interconnection and net metering in the U.S.
  • Canada 2003
  • Renewable Energy in Grid-Connected Electricity Generation (by REN21)
  • Indiana Net Metering Rules Now In Effect

News articles

  • Utilities in N.Y. told to make switch to time-of-day pricing, Ithaca Journal, 18 Dec 2007
  • Time-of-Day Pricing, PBS Jim Lehrer, 22 Jun 2001
  • Time of Day Pricing for Electricity, Tom Evslin's Blog, 19 Feb 2007
  • Net Metering, Technorati (tagged social media)

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