In this article, you will learn about solar net energy metering also known as ‘NEM’.
If you’re looking to install solar panels you will need to understand how this affects your relationship and billing with your electricity provider. This is because your house will still be connected to the main grid. This enables you to send and draw electricity from the utility grid based on your home’s requirements.
This means if you are generating excess energy you can sell it to your energy provider. Plus when you need extra electricity, like at night when solar panels don’t work, you can buy electricity from the grid like normal.
Net energy metering enables your utility provider to bill you correctly in this situation.
What is Net Energy Metering for Solar?
Let’s take a closer look at net energy metering, also referred to as ‘NEM’.
It allows you to send and receive electricity with the utility grid. Here’s how it works:
When your solar panels generate excess electricity that your home isn’t using it is sent to the main grid.
Sending energy to the grid allows you to sell electricity. Your meter will run backwards and your utility company issues you credit for the amount of electricity generated.
You are ‘selling’ electricity to the utility company.
For example, if you are not home during the day when your solar panels are most efficient you will send this energy into the grid.
The credit your utility company issues enables you to store the ‘economic value’ of this energy to use later.
Of course, solar panels don’t always cover your electricity requirements. For example, they don’t work at night but your home will be consuming power.
When this happens you will draw power from the main grid, just like a home without solar.
You are ‘buying’ electricity from the utility company.
To pay for this electricity you can use your credit built up from selling electricity.
If you use more electricity than your solar panels produce in total, you will be billed and pay as normal for this usage.
It requires a very large solar array to run a whole house so most people have a bill to pay. This will be ‘Trued-up’ by the energy company at the end of a specific period such as each quarter or annually.
Solar Net Energy Metering Benefits
Metered net energy for solar is a useful financial tool to ensure your system works in an efficient manner. Here are the pros to using NEM:
Reduce Electricity Bills
This main benefit is to reduce your energy bills as much as possible. It would be frustrating to invest in solar panels and not be able to use the electricity you generate. If you work during the middle of the day when solar panels produce the bulk of electricity you wouldn’t see the benefit on your electricity bills without energy metering.
You should see a significant reduction in your final electricity bill payments. You will only be paying for the extra electricity you draw from the grid.
Store Electricity for Later
A solar panel installer or energy company might tell you that you can ‘store energy on the main grid’. This is not strictly true as you won’t be using the exact same electricity your solar panels produce.
In reality, you are storing the economic value of the energy to use later. The difference is subtle, but many people get confused by this concept or they think there are batteries storing the electricity.
The technicalities don’t matter too much. The important thing is that you don’t lose the electricity from solar panels if you don’t use it immediately.
Supply Green Energy
With global warming and greenhouse gas becoming such a big concern across the world, you will be doing your part by producing clean electricity. As you send energy to the utility grid you become a green energy supplier. That’s pretty cool, you’re reducing your carbon footprint and everyone else’s too!
Disadvantages of Net Energy Metering
On the whole, NEM is considered beneficial but there are some pitfalls to keep in mind.
Reduced Credit
Keep an eye out for how much credit your energy company issues. Often they credit you less per kWh you produce than it sells it for. That means you’ll earn less for the electricity you supply than you pay for it when you draw from the main grid.
Oversized Solar Array
If you’re thinking about installing more solar panels than you actually need then this is known as oversizing. You might think it’s a good idea to completely wipe out your energy bills and actually make money by selling more electricity than you use.
In the short term, you will build up your credit. But this credit can expire in the long run and because you use less energy than you produce you will never be able to spend it.
The investment you make in the extra solar equipment will be wasted and you’ll have spent more money than necessary!
Not Available Everywhere
Net energy metering is not available in every state. Everywhere regulates energy slightly differently so you should check what is used in your local area. A local installer will know all the information for billing in your state. This should be included in the initial designs and calculations for your system.
How Do Electric Bills Work with Net Energy Metering?
You will still receive a regular energy bill or statement but payment is not made regularly. A utility company will ‘True-up’ the bill at the end of a quarter or year. Once this has been done you will need to pay any outstanding amount for electricity used.
The payments are less regular as electricity production for your solar array can be erratic in the short term leading to major fluctuations from month to month. For example, you will produce a lot more electricity in the summer compared to mid winter. It is easier to balance everything up over a longer period of time.
It is a good idea to keep an eye on regular bills and energy usage to make sure you are not left with the shock of a massive bill. Many people have been caught out by careless electricity usage or faulty solar panels.
Solar Net Energy Metering Summary
I hope you now have a clear picture of what net energy metering is and how it works.
The solar net energy metering explanation above lays out the concept in an easy-to-understand manner. This should help explain how solar panels work in tandem with the utility grid. Rates and fine details will change based on your supplier and region so it’s always best to check how your system will work before the installation is carried out.
