“Net metering” is the practice of running a meter for energy use in reverse when a user feeds energy into the system rather than drawing it out, and billing the user for the “net” amount of energy drawn. It’s used in home energy systems that are “on the grid,” which means that the home is still connected to the energy utility’s system and draws upon commercial energy production for convenience.

A net metering system feeds power from the home production system into the grid, which the utility can sell to other customers. During times when the home is producing energy (usually from a solar or wind power system), and more energy is being fed into the grid than
taken from it, the utility’s accounting system “pays” the customer for this energy in the form of a credit that can be used to buy energy from the utility.

During times when more energy is being drawn from the grid than added to it, the credit is reduced to pay for the energy consumed. At the end of the month, if more energy has been consumed than produced by the customer, the utility charges the customer for the difference. If more energy has been produced than consumed, the utility pays the customer for the difference –– usually at a much lower rate.

Advantages

The great advantage of net metering is convenience. A home energy system with net metering does not have to produce 100% of the power that the home needs. Also, with net metering it’s unnecessary to have much of the auxiliary equipment that is used with an off-grid system. The homeowner does not need storage batteries, for example. The energy being used by appliances is drawn from the commercial grid just as if no home energy system existed.

This is especially useful because a home energy system typically doesn’t produce its energy at convenient times. A solar system, for example, has maximum production capacity during the daylight hours, but most energy use happens at night. That’s when artificial lighting is needed. It’s also when people are usually at home. In the winter months, it’s the time of the greatest energy cost for heating
the home. With an on-grid system using net metering, the system can “sell” energy to the utility during the times of high production and low use, for a credit that can be used to “buy” energy back from the utility during the times of low production and high use.

Net metering, despite the name, does not require any special equipment. Electric meters are generally configured to be able to run in either direction. To implement net metering, an electric utility would need only to make use of accounting procedures and appropriate policies.

Disadvantages

Net metering has some disadvantages for the individual as well. One of these is that you are tied to the grid and to some extent still dependent on the utility. If the utility changes its net-metering policy, you could find yourself owing money to the utility even though you produced enough electricity to meet all of your needs. The utility could even decide to stop allowing net metering and leave your home energy system all but useless. Except as regulated by law, with net metering you are at the mercy of the energy utility, even if your electric bill is greatly reduced or even eliminated. (In the United States, a federal law does require electric utilities to offer net metering on request; however, the law does not set standards for the practice, which vary from state to state and sometimes from company to company.)

Theoretically, another disadvantage could arise if too many customers install home energy systems and make use of net metering. Currently, net metering is feasible because most energy customers don’t have home energy systems. The bulk of the utility’s electricity is produced at commercial facilities, not by home systems. This gives the utility plenty of power to provide for net-metering customers during their times of peak use. If all or most of the utilities customers had home energy systems using net metering, however, the utility could find itself swamped with energy during high production times and unable to meet demand during high use times, except by wastefully producing commercial energy to meet the high demands. Conceivably, this problem could be solved by use of industrial scale storage batteries, but at minimum it would require retooling of the energy system as it currently exists.

States That Allow Net Metering

In the United States, by a federal law passed in 2005, public electric utilities must offer net metering to customers on request. However, the federal law does not set standards for net metering and these vary widely from state to state.

This is one of the relatively few areas in regard to renewable energy where U.S. law and policy is more enlightened than most of the advanced world. Outside the U.S., currently net metering is being implemented in France, Denmark, Italy, and Spain among EU countries; to a limited degree in Ontario, British Columbia, and New Brunswick, Canada; and Victoria and Queensland, Australia.

Off-Grid Systems

The alternative to an on-grid system for home energy production is an “off-grid” system in which the home produces all of its own energy and is not connected to a commercial grid. An off-grid system is necessary where it’s impossible to connect to the grid, and provides a greater degree of independence from commercial energy production than an on-grid system. It is more costly to install, however, and loses
the convenience benefits of an on-grid system using net metering.