What is Net Metering? What you need to know

net metering

Net Metering allows wide usage of electricity with the help of these distributed sources of generation by the grid.

Earlier, centralized sources of generation to produce electricity and the grid were utilized, however, those days are long gone. Now, robust technologies like PVs Batteries and EVs with downward prices have become the distributed sources of generation. 

With this concept, a simple billing arrangement has been set for solar panel owners for getting compensation for energy generation by their solar panels and further transferring to the grid. For example, solar panels of a residential unit produce 10kWh during the day and are sent to the grid, then in the future they will not be charged for extracting 10kWh of power. 

Though sounds simple, rules, regulations and other factors come into play during this concept’s implementation. 

Net Metering has become the default billing arrangement for PV owners in some countries such as the United States. Usual arrangements are as follows: Producing and transferring 10kWH electricity during the day, and utilising 10kWH free of cost at night. Such cost-effective methods are beneficial to consumers as electricity is credited at wholesale rates, often costing 25% of the retail price of electricity.

Currently, 38 American states follow a net metering policy and 3 other states are in the final stages of implementation.  

Net Metering Controversy

Due to the price drop of solar panel prices, this concept seems to be gaining popularity. This has led to Net Metering becoming a big controversy in several American states. Recently, owners of conventional power plants are lobbying against this growing trend as it reduces their profits. For example, Nevada began introducing new rates for solar power and reverting its net metering rules by eliminating it from the state. The result was 5000 jobs getting eliminated as numerous solar power companies shut down, even though the reasons behind the legislation were multiple. 

Replacing Net Metering with Wholesale Power Purchasing

Wholesale tariffs taking over Net Metering would lead to solar owners getting less compensation for the generated electricity. In effect, they would consume less energy than supplied to the main grid. 

Once upon a time, solar panel installations were costly and their return on investment was not attractive. Now, solar is competing and faring better than fossil fuel power plants, even after the rebates and tax credits. Owners are benefiting from high profits over the equipment’s life span. This effective method provides a clean and renewable source of energy which benefits society in the long run.

Though lobbyists are trying to suppress the solar movements, Microgrids, Demand Management and Distributed Generation are here to stay. The advent of such concepts has led to widespread implementations of such an energy source. Hence, the promotion of such schemes like Net Metering or others with similar benefits is underway. 

Benefits of Net Metering

All aspects of electricity infrastructure are beneficiaries of such a scheme, with solar panel owners getting maximum benefits. Residential units locally utilise the electricity even if not transferred to the grid, thus lowering stress on the grid. In effect, installing large-scale roof-mounted solar panels increase the overall generation capacity of the grid resulting in fewer blackouts or brownouts. 

During periods of high demand in a day, solar power from certain localities are transferable to meet such demands. Thus, eliminating the need for always-online spinning reserves which are costly to maintain and run. In the long run, consumer-owned solar panels-battery bank combination may replace power plants or spinning reserves, thus, benefitting all and reducing overall retail tariff rates.

Also Read from the previous blogs:- Industrial Internet Enabled Controllers – The need of the hour

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