a NextLightEnergy Net-Metering and How it Incentivizes Homeowners_1

Net-Metering and How it Incentivizes Homeowners

Net-Metering and How it Incentivizes Homeowners

Today, the vast majority of residential solar energy systems are grid-tied, which means they get linked to the local electrical grid. Grid-tied solar systems are more practical than off-grid solar systems in most cases for the following reasons:

One reason is the cost. Grid-tied systems, unlike off-grid systems, do not necessitate batteries. The elimination of batteries helps to minimize not only equipment costs but also installation and maintenance costs.

The second reason is reliability. Notably, in a grid-tied system, the solar panel system does not have to satisfy the entire household’s electricity demand. Furthermore, the home can draw energy and electricity from the grid if necessary, particularly at night, when the weather is gloomy, or if the solar system fails; thus, the home will still have access to the electricity it requires through the grid.

What is Net-Metering?

Net-Metering is a system wherein solar panels, or other renewable energy generators connect to a public utility power grid. Also, surplus power is transferred into the grid, enabling consumers to cover the utility cost drawn from the utility.

Simply put, net-metering is a scheme that tracks, monitors, and credits solar owners for the excess energy they send to the public utility power grid.

How Does Net-Metering Work?

Many solar panel systems generate more energy than the household absorbs during the day while the sun is shining, allowing the meter to run backward and transfer the excess electricity to the power grid. Moreover, the home will draw power from the grid at night when the solar system is no longer generating energy or on cloudy days when the system might not be producing enough to meet the household’s electricity needs.

Simply, with net-metering, the excess energy generated by a home’s solar panel system can be used to offset and cover the cost of electricity consumed at periods of lesser production or when demand is significantly lower.

As solar consumers are billed based on their net energy consumption, they will only get billed if their solar panel system produces less energy than their household consumes in a given period. Moreover, they will get a credit for their surplus output in times of excess production, which they can use on future energy bills.

What States Offer Net-Metering?

Currently, some 40 states offer Net-Metering, including California, Washington, and New York, to name a few. However, state-by-state differences exist in terms of technical specifics and conditions in policies. Thus, it would be wise just to look up your state’s incentives for renewables and efficiency in the Database of State Incentives for Renewables and Efficiency.

Benefits of Net-Metering

Aside from cost savings and reliability, here are more specific benefits of Net-Metering:

Utility Bill Savings

As earlier established, the most significant advantage of net-metering for solar homeowners is reducing energy bills. Over the life of your solar panel system, net-metering can save you tens of thousands of dollars. Moreover, if your solar panel gets sized adequate, one can eliminate all of their energy costs in a single billing period. However, it is essential to note that the electricity bill probably includes fixed charges that net-metering cannot cancel out.

Shorter Payback Periods

Payback periods would be much shorter in areas that offer complete retail net-metering than in the regions that do not. This shorter payback period is because solar homeowners can save money on their energy bills, allowing them to recoup their investment costs more quickly. Because of net-metering, a solar power system in New Jersey, for example, will have a payback period of 4 to 5 years. In South Dakota, on the other hand, a system may take up to 12 years to pay for itself because the state does not have any kind of net metering.

Net-metering isn’t the only factor influencing the length of time it takes for the solar system to pay for itself. The size of your photovoltaic system, the amount of energy you use, the cost of your installation, and local solar incentives and rebates all interplay and factor into how long it takes to pay off the solar panels.

Eliminates the Need for Battery Storage and Backup Generator

Owners do not need battery storage devices by using net-metering since the extra electricity is collected by the utility grid, unlike off-grid PV systems. Furthermore, net-metering reduces the need for expensive generators since the power grid already serves as a backup generator.

Inexpensive and Low-Maintenance

Solar panels are low maintenance. The battery and generator are the only parts of a PV system that need to get serviced.

Yet, by using net-metering, one can remove these components and reduce the maintenance costs even further.

Reduces Pressure on the Grid

Residential solar panels support utilities and their customers by reducing the burden placed on the electric grid delivery system. Solar homeowners use their electricity instead of drawing power from the grid, meaning fewer people draw power directly. Furthermore, when a solar system sends excess energy to the grid, the energy is used by non-solar utility consumers to fulfill their own energy needs. This option relieves even more strain on utility-scale power plants.

Relieving some of the stress on the electric grid is particularly critical now, especially in particular places. As heatwaves become more frequent and utilities struggle to meet energy demands, reducing grid pressure is especially important and valuable in California.


Utility companies say that net-metering causes electric prices to increase for non-solar customers. Therefore, more states are transitioning to alternative net-metering systems that don’t pay homeowners the total retail cost of electricity for excess solar energy sent to the grid.

This option is called cost-shifting. Such a phenomenon does occur when there is a substantial amount of solar installed on the grid. However, only a few states are on the brink of meeting this scenario; thus, it seems that net-metering is more about defending utility profit margins and political interests than it is about consumer rate hikes.

A state that does not have a full retail net-metering program turns to an “avoided-cost net-metering” or some other net-metering scheme in place. Under avoided-cost net-metering programs, customers get compensated at the avoided cost rate of power, which is significantly lower than the retail rate. Besides, other states employ other alternative programs that fit neither the full retail net-metering nor avoided-cost net-metering molds.

You might also interested in: The Benefits And Growth Of Solar

FAQs About Net-Metering

To further bring enlightenment about net-metering, here are answers to some of the most frequently asked questions.

Every single kilowatt-hour of solar energy you send back to the grid will earn you money from your utility. This credit is normally equivalent to the full retail electricity price, but it varies depending on each state. Over the life of your solar panel system, you might save tens of thousands of dollars on your energy bills. There are calculators online that can help you get a more accurate estimate for your home.

No, you will not receive cash payments. Instead, any energy that you pump back into the grid gets credited to your power bill. Over the summer, most homes generate more energy from their rooftop solar panels. During the winter, you might need to use more grid electricity. Thus, you can build up your credits during the summer and then use them to hold your energy costs down through the winter.

A battery storage device, unlike net-metering, can operate independently of the grid. This independence means that by pairing your solar panels with a battery, it will collect any excess electricity produced for storage in your battery rather than being sent to the local grid.

Batteries and net-metering are both effective ways to make sure that your solar energy is not lost when you do not require its use. However, net-metering may be more valuable because it offers an opportunity that allows you to bank credits from your excess solar power to lower your potential bill payments in the future. Currently, net-metering is not available in all state jurisdictions, although some are already rethinking their policies.


On the other hand, since batteries are grid-independent, they provide a valuable option for homeowners. They can provide backup power 24 hours a day, seven days a week during outages, and they can even help you save money on your energy bills. If your utility charges time-of-use rates, for example, you can use battery power when rates are high and grid energy when rates drop.

Currently, you won't be eligible for net-metering credits in most states if you send collected solar energy from your batteries back to the grid. Several states, however, are reviewing their policies about this matter.

You must generate at least some of your electricity from a renewable source, which usually constitutes rooftop solar panels, to be eligible for net metering. It is best to check on your state’s policies for more specific eligibility criteria as other conditions and parameters differ by state and utility.


One of the most well-known solar incentives ever devised is net metering. Net-metering delivers continuous, ongoing dividends over a solar PV installation lifetime, distinctive from solar tax credits or rebates, which primarily provide one-time benefits to lower energy costs.

Open yourself to possibilities with NextLight, as they commit to educating people and making solar power available and affordable for all so they can make educated choices, save money on electricity, become grid-independent, and contribute to a sustainable world for future generations.

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