Straight Talk About Net MeteringAcross the country, there is growing interest in using rooftop solar panels and other small-scale, on-site power sources known as distributed generation (DG). To encourage theintroduction of these systems when they first came to market years ago, many statesapproved a billing system called net metering. While these policies vary by state, customerswith rooftop solar or other DG systems usually are credited at the full retail electric rate forany excess electricity they generate and sell to their local electric company via the grid.Electric companies are required to buy this power, even though it would generally cost lessto produce the electricity themselves or to buy the power on the wholesale market fromother electricity providers.There’s been a lot of talk lately about DG and the need to update net metering programs.These frequently asked questions are designed to help you better understand net metering,how net metering impacts electricity customers and the electric power grid, and how updatesto current net metering policies will ensure that all customers have safe and reliableelectricity and that electric rates are fair and affordable for all customers.What Are Distributed Generation Systems?DG systems are small-scale, on-site power sources located at or near customers’ homes orbusinesses. Some common examples include rooftop solar panels, energy storage devices,fuel cells, microturbines, small wind, and combined heat and power systems.Customers with these types of generation systems connect to the local electric grid and usethe grid both to buy power from their local electric company during times when their DGsystems are not producing enough to meet their needs and to sell power to their electriccompany when their systems are producing more electricity than is needed.What Is Net Metering?Net metering is a billing system that allows electric customers to sell to their electriccompany any excess electricity generated by their DG systems. While many different DGsources may be eligible for net metering credits, solar rooftop installations are by far themost common type of DG promoted with net metering.Net metering policies were introduced to encourage the growth of DG systems when theyfirst came to market years ago. While net metering policies vary by state, customers withrooftop solar or other DG systems usually are credited at the full retail electricity rate forany electricity they sell to electric companies via the grid. The full retail electricity rateincludes not only the cost of the power but also all of the fixed costs of the poles, wires,meters, advanced technologies, and other infrastructure that make the electric grid safe,reliable, and able to accommodate solar panels or other DG systems. Through the credit,net-metered customers effectively are avoiding paying these costs for the grid. Straight Talk About Net Metering 2Do Customers With DG Systems Still Use the Power Grid?Yes. By its nature, electricity—regardless of how it is generated—has unique properties that do not allow itto be easily or economically stored for later use. It must be generated and delivered at the precise moment itis needed.Because the majority of rooftop solar and DG systems do not have battery storage, net-metered customersremain connected to the local electric grid and use the grid to buy power from their local electric companyduring times when their systems are not producing enough energy to meet their needs. For example, the sundoes not shine at night, and solar power can appear or disappear rapidly over the course of a day. Net-metered customers also use the grid to sell power to their electric company when their systems are producingmore electricity than is needed. DG customers also rely on the grid to ensure that their own power supplyprovides reliable, high-quality service at all times.Since net-metered customers are both buying and selling electricity, they are relying on the grid more thancustomers without rooftop solar or other DG systems.How Does Net Metering Impact Customer Bills?1A customer’s electric bill is based on the electric company’s cost of providing electric service. This includesthe cost of the fuels used to generate electricity and the cost to transport and deliver the electricity to thecustomer. Costs also include the maintenance of the grid, as well as utility programs for low-incomeassistance, energy efficiency, environmental improvements, and other public benefits.In general, every electric customer has an electric meter that records the amount of power delivered by itselectric company. As electricity is used, the meter spins forward, much like a car’s odometer records milestraveled. In the case of an electric meter, the meter records energy use in kilowatt-hours (kWh).Net-metered customers generally are credited for the electricity they sell to the grid, with their electric meterrunning backwards to provide a credit against the electricity that these customers must buy from their electriccompany at night or during other periods when their electricity use exceeds their system’s output. Customersare only billed for their “net” energy use.That means that when rooftop solar or other DG customers generate electricity, they avoid paying for theutility’s power, which is fair because they did not use it. But, they also avoid paying for all of the fixed costsof the grid that delivers power when they need it and takes the power they sell back to the utility. As a result,these grid costs are shifted to those customers without rooftop solar or other DG systems through higherutility bills.What Is the Difference Between Retail and Wholesale Electricity Rates?Retail electricity rates are the final rates charged to customers by an electric company, based on all of thecosts involved in generating, transporting, and delivering power.Wholesale electricity rates include the cost of the fuel used to generate electricity and the cost of buying thepower in the competitive wholesale market from any number of electricity providers. They do not include thecost of transporting and delivering the electricity through the electric grid to reach a customer. Wholesale canchange numerous times throughout the day.1 Customers who purchase or lease rooftop solar panels and other DG systems first have to pay for the cost of those systems. Customers either pay for the entire system up front or enter into a lease agreement, which results in a monthly bill that is in addition to the bill that the local electric company sends. Leases are the most typical purchase arrangement. Straight Talk About Net Metering 3Because of the way that net metering policies originally were designed, net-metered customers often arecredited for the power they sell to electric companies, usually at the full retail electricity rate, even though itwould cost less for the companies to produce the electricity themselves or to buy the power on the wholesalemarket from other electricity providers.Many energy experts agree that net-metered customers should be compensated at the wholesale price for theelectricity they produce, similar to other electricity providers. This reflects the fact that electric companiesbuying this power still must incur the costs of delivering the power to their customers, including the costs ofmaintaining the poles, wires, meters, and other infrastructure required to deliver a reliable supply ofelectricity.How Does Net Metering Affect Electric Reliability?As the use of rooftop solar and other DG systems increases, so too does the two-way flow of power on theelectric distribution system. To ensure the safe and reliable delivery of electricity, an electric company’sdistribution system must be able to safely manage/control the flow of two-way power. At the same time,electric companies face integration challenges associated with the variable, fluctuating levels of powercreated by wind and solar DG systems.Electric companies must invest in their distribution systems to avoid overloading circuits, causing voltageregulation or power quality problems, or jeopardizing the safety of the public or utility employees. However,if net-metered customers do not contribute to the fixed costs of maintaining the grid and keeping it operatingreliably, a company’s remaining customers will face higher rates to pay for these costs.Should Current Net Metering Policies Be Updated?Yes. As rooftop solar and other DG systems become more developed, net metering policies and ratestructures in many states should be updated so that everyone who uses the electric grid helps pay to maintainit and to keep it operating reliably at all times. This will ensure that all customers have safe and reliableelectricity and that electric rates are fair and affordable for all customers.September 2013
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Description: Straight Talk About Net Metering 3 Because of the way that net metering policies originally were designed, net-metered customers often are credited for the power they ...
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