Net Metering – A Developing Concept

What is Net Metering

The prospect of dwindling energy resources and increased attention to environmental stewardship have expanded the role consumers can play in improving energy efficiency. Certainly the installation of solar panels on roofs and turning off of lights and appliances when not in use contribute to these initiatives. Despite these best of intentions, the problem of unused (i.e. wasted) generated energy persists. One solution (or part of the solution) involves sending the extra power to the grid for banked energy credit. This is commonly referred to as net metering.

Provided a home is equipped with a renewable energy source such as wind power and solar power, net metering is possible through the use of an electrical converter (i.e. inverter) which turns the direct current (DC) power coming from the renewable energy source into alternating current (AC) power to match the voltage of electricity flowing through the power line. It can send the excess energy that is generated back to the grid for other uses. This causes the electric power meter to “spin backward” and thereby provide the typical electric customer (and now a “supplier”) with a credit that can be used for future energy use or depending on the program in effect, at the end of the year either a retail or wholesale rate based rebate.

Net Metering Benefits the Customer

Consumers obviously benefit from net metering. At the very least, they can reduce their energy costs and even make money if they produce more than they consume, particularly if reimbursed at the retail rate. Net metering offers additional benefits, namely:

• Consumers can capture value for the energy they produce without the expense of a second meter or battery storage system.
• It relieves some of the pressure to expand the capacity of the electric grid, particularly during periods of peak demand.
• Since each home can potentially power other homes, a neighborhood of homes that use renewable energy and net metering can essentially become self sufficient.
• It promotes active engagement on the part of consumers to support alternative energy generation, the environment, and the preservation of natural energy-related resources.
• It increases consumer awareness of energy consumption.
• It saves the electric utilities money on meter reading/billing-related costs.

Ineffective Legislation has Limited Net Metering Application

Support for net metering is not unanimous. Electric utilities face the real prospect of decreasing profits and many consumers view the requirements to support such a program as intrusive. In fact, among the 50 U.S. states, 42 and the District of Columbia have implemented some form of to net metering, but 28 of them have rules that are so restrictive that they make it almost impossible for the average consumer to participate.

Figure 2 from the U.S. Energy Information Administration ( EIA) illustrates this fact:

• As of 2007, the number of customers actively enrolled in net metering programs is just over 48,000, but that represents a 45 percent annual growth rate.
• California, the largest source of net metering customers, represents 72 percent of this total, and had the largest increase in 2007 of over 8,700 customers.
• New Jersey was a distant second with a 2007 increase of just over 1,200 customers.
• Both states benefited from favorable rebate programs and other incentives built around solar energy development.

As renewable energy sources become more prevalent and the push to improve energy efficiency and reduce peak load demand increases, the annual growth represented by Figure 2 can only continue.