What Is Net Metering?
What is net metering?
Net metering uses the excess electricity produced by a wind turbines and solar electric
systems to spin the existing home or business electricity meter backwards; effectively
banking the electricity until it is needed by the customer. This provides the customer with
full retail value for all the electricity produced.
Under existing federal law (PURPA, Section 210) utility customers can use the electricity
they generate with a wind turbine to supply their own lights and appliances, offsetting
electricity they would otherwise have to purchase from the utility at the retail price. But if
the customer produces any excess electricity (beyond what is needed to meet the
customer’s own needs) and net metering is not allowed, the utility purchases that
excess electricity at the wholesale or ‘avoided cost’ price, which is much lower than the
retail price.
The excess energy is metered using an additional meter that must be installed at the
customer’s expense. Net metering simplifies this arrangement by allowing the customer
to use any excess electricity to offset electricity used at other times during the billing
period. In other words, the customer is billed only for the net energy consumed during
the billing period.
Why is net metering important?
There are three reasons net metering is important. First, because wind energy is an
intermittent resource, customers may not be using power as it is being generated, and
net metering allows them to receive full value for the electricity they produce without
installing expensive battery storage systems. This is important because it directly affects
the economics and pay-back period for the investment. Second, net-metering reduces
the installation costs for the customer by eliminating the need for a second energy
meter. Third, net metering provides a simple, inexpensive, and easily-administered
mechanism for encouraging the use of small-scale wind energy systems, which provide
important local, national, and global benefits to the environment and the economy.
What are the benefits and costs of net metering?
Net metering provides a variety of benefits for both utilities and consumers. Utilities
benefit by avoiding the administrative and accounting costs of metering and purchasing
the small amounts of excess electricity produced by small-scale wind energy facilities.
Consumers benefit by getting greater value for some of the electricity they generate and
by being able to interconnect with the utility using their existing meter.
The only cost associated with net metering is indirect: the customer is buying less
electricity from the utility, which means the utility is collecting less revenue from the
customer. That’s because any excess electricity that would have been sold to the utility
at the wholesale or ‘avoided cost’ price is instead being used to offset electricity the
customer would have purchased at the retail price. In most cases, the revenue loss is
comparable to having the customer reducing electricity use by investing in energy
efficiency measures, such as compact fluorescent lighting, efficient heating and cooling
equipment, or other highly-efficient appliances.
The bill savings for the customer (and corresponding revenue loss to the utility) will
depend on a variety of factors, particularly the amount of excess electricity produced. In
most circumstances, however, the difference will be between $10-40 a month for a 10
kilowatt residential wind energy system.
Moreover, any utility revenue losses associated with net metering are at least partially
offset by administrative and accounting savings, which are not included in the above
figures. These savings can exceed $25 a month because, absent net metering, utilities
have to separately process the accounts of customers with wind turbines and issue the
monthly checks. In practice, these checks can be for as little as 5 cents.
Can I really use my existing meter to take advantage of net metering?
The standard kilowatt-hour meter used for most residential and small commercial
customers accurately registers the flow of electricity in either direction. This means the
‘netting’ process associated with net metering happens automatically — the meter spins
forward (in the normal direction) when the customer needs more electricity than is being
produced, and spins backward when the customer is producing more electricity than is
needed in the home or building. The meter registers the net amount of energy produced
or consumed during the billing period.
What is the current status of net metering?
Currently, 30 states require at least some utilities to offer net metering for small wind
systems, although the requirements vary from state to state. Most state net metering
rules were enacted by state utility regulators, and these rules apply only to utilities
whose rates and services are regulated at the state level. In recent years many states
have enacted net metering laws legislatively, including California, Connecticut, Delaware,
Massachusetts, Montana, Nevada, New Hampshire, New Jersey, Ohio, Oregon, Vermont,
Virginia, and Washington. In most of the states with net metering statutes, all utilities
are required to offer net metering for some wind systems, although many states limit
eligibility to small systems.
Net metering uses the excess electricity produced by a wind turbines and solar electric
systems to spin the existing home or business electricity meter backwards; effectively
banking the electricity until it is needed by the customer. This provides the customer with
full retail value for all the electricity produced.
Under existing federal law (PURPA, Section 210) utility customers can use the electricity
they generate with a wind turbine to supply their own lights and appliances, offsetting
electricity they would otherwise have to purchase from the utility at the retail price. But if
the customer produces any excess electricity (beyond what is needed to meet the
customer’s own needs) and net metering is not allowed, the utility purchases that
excess electricity at the wholesale or ‘avoided cost’ price, which is much lower than the
retail price.
The excess energy is metered using an additional meter that must be installed at the
customer’s expense. Net metering simplifies this arrangement by allowing the customer
to use any excess electricity to offset electricity used at other times during the billing
period. In other words, the customer is billed only for the net energy consumed during
the billing period.
Why is net metering important?
There are three reasons net metering is important. First, because wind energy is an
intermittent resource, customers may not be using power as it is being generated, and
net metering allows them to receive full value for the electricity they produce without
installing expensive battery storage systems. This is important because it directly affects
the economics and pay-back period for the investment. Second, net-metering reduces
the installation costs for the customer by eliminating the need for a second energy
meter. Third, net metering provides a simple, inexpensive, and easily-administered
mechanism for encouraging the use of small-scale wind energy systems, which provide
important local, national, and global benefits to the environment and the economy.
What are the benefits and costs of net metering?
Net metering provides a variety of benefits for both utilities and consumers. Utilities
benefit by avoiding the administrative and accounting costs of metering and purchasing
the small amounts of excess electricity produced by small-scale wind energy facilities.
Consumers benefit by getting greater value for some of the electricity they generate and
by being able to interconnect with the utility using their existing meter.
The only cost associated with net metering is indirect: the customer is buying less
electricity from the utility, which means the utility is collecting less revenue from the
customer. That’s because any excess electricity that would have been sold to the utility
at the wholesale or ‘avoided cost’ price is instead being used to offset electricity the
customer would have purchased at the retail price. In most cases, the revenue loss is
comparable to having the customer reducing electricity use by investing in energy
efficiency measures, such as compact fluorescent lighting, efficient heating and cooling
equipment, or other highly-efficient appliances.
The bill savings for the customer (and corresponding revenue loss to the utility) will
depend on a variety of factors, particularly the amount of excess electricity produced. In
most circumstances, however, the difference will be between $10-40 a month for a 10
kilowatt residential wind energy system.
Moreover, any utility revenue losses associated with net metering are at least partially
offset by administrative and accounting savings, which are not included in the above
figures. These savings can exceed $25 a month because, absent net metering, utilities
have to separately process the accounts of customers with wind turbines and issue the
monthly checks. In practice, these checks can be for as little as 5 cents.
Can I really use my existing meter to take advantage of net metering?
The standard kilowatt-hour meter used for most residential and small commercial
customers accurately registers the flow of electricity in either direction. This means the
‘netting’ process associated with net metering happens automatically — the meter spins
forward (in the normal direction) when the customer needs more electricity than is being
produced, and spins backward when the customer is producing more electricity than is
needed in the home or building. The meter registers the net amount of energy produced
or consumed during the billing period.
What is the current status of net metering?
Currently, 30 states require at least some utilities to offer net metering for small wind
systems, although the requirements vary from state to state. Most state net metering
rules were enacted by state utility regulators, and these rules apply only to utilities
whose rates and services are regulated at the state level. In recent years many states
have enacted net metering laws legislatively, including California, Connecticut, Delaware,
Massachusetts, Montana, Nevada, New Hampshire, New Jersey, Ohio, Oregon, Vermont,
Virginia, and Washington. In most of the states with net metering statutes, all utilities
are required to offer net metering for some wind systems, although many states limit
eligibility to small systems.
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