What is Net Metering and How Net Metering Works?

This short, informational article talks about one thing only; net metering. The term is still hugely foreign to many readers, particularly those that are interested in sustainable developments to enhance our environment and drastically reduce our carbon footprint. We’ll be keeping things as contrite as possible.

Net metering is a system of control. Its purpose is to maintain checks and balances specifically for those who have solar heating panels on their roofs. It is also a net preserver of energy usage. What this basically means is that home owners are in a position to monitor and control the amount of energy they use during the day or at night. When you’re away your home may generate extra electricity using solar energy. You many buy some expensive batteries to store that extra energy to use it at night but there’s another option to send extra power produced back to the grid and that’s what we call as net metering.

Net metering is a billing mechanism that credits solar energy customers for the electricity they add to the grid. For instance, if you are using solar panels to produce electricity at your home, it may generate more power than what your home needs during day light hours. If your home has the advantage of net metering, it allows you to send your extra power to the grid and provide credit that you can use when you need it. Net metering ensures the energy you generate at home doesn’t go to waste.

According to SEIA (Solar Energy Industries Association),

Net metering allows residential and commercial customers who generate their own electricity from solar power to feed electricity they do not use back into the grid. Many states have passed net metering laws. In other states, utilities may offer net metering programs voluntarily or as a result of regulatory decisions.

The solar panel system is a good example to use because the production of energy is intermittent and still depends on the amount of solar power available for generation from the sun and the regions in which it is installed.

Salient Features of the Net Metering System

  • Consumers can generate own energy at any time of the day
  • Solar energy can be used at night
  • Energy not used in a month, can be rolled over to be used in the next month
  • Solar power can be used during winter months when there is little or no sunlight

This last point is worth expanding. You can take, for example, a northern European region which has very few sunlight and daylight hours during the summer. It is still possible to store solar power during winter months when there is no daylight at all.

There are many questions that still require answers

Here, we will list just a few commonly asked questions, among many. Those new to the net metering system can contact their local municipal, government or state authority to find out how they can be accommodated.

  • Why should we get involved in net metering?

– Net metering lowers customers’ electricity bills, reducing the amount electricity that is normally purchased from a grid or distribution company. Customers receive credits for generated electricity that is not used. Those that are already on board have shown a close interest in saving the environment and the renewable energy options that allow them to do this.

  • What is a host customer?

– The customer generates his own electricity. They usually have an existing record with the distribution company and/or private enterprise facilitating the use of the net meter. The host customer is afforded both independence and empowerment in his ability to control the amount of electricity used and/or billed.

  • Can a net meter be installed behind an existing meter?

– No. An area needs to be selected where there is no existing meter. The net meter must, however, still be connected to a grid.

  • Is there a maximum capacity to what can be consumed?

– Firstly, it depends on whether the net metering facility is privately or publicly owned or controlled. Usually, if it is a private enterprise, the maximum cap is 2 MW. Maximum capacity can go as high as 10 MW if the net meter has been prepared for public use.

  • What is a neighbor net metering facility?

– It may only distribute credits to customers within the same neighborhood and to no less than ten residential customers. Also, it may not include a distribution charge in its net metering credits.

Advantages of Net Metering

  1. Reduced electricity bills
  2. Benefit for the environment
  3. No need to install expensive battery storage system
  4. Take some pressure off electric grids
  5. Encourages customers to move towards renewable energy
  6. Preserves natural energy resources

The monitoring process

Metering processes differ from country to country. Processes can also differ significantly from region to region, or state to state, depending on that country’s existing energy or environmental laws. It essentially determines how much power can be used by consumers at any one time. Most monitoring and chargeable fees are conducted on a monthly basis.

Advantages of using this monitoring process

  • Minimal fee is charged
  • Only one meter is used
  • Measures currents in two directions
  • No prior arrangements or notifications required
  • Credits can be rolled over to next month

Disadvantages of using monitoring system

  • In some cases, payments of deficits required
  • Annual settlement of residual account or bill may be required
  • Municipal and government regulated grid systems challenged by shortfalls in revenue collection
  • Owners of net metering/power generation systems do not pay full costs from the regional or national grid

The purpose of timing in net metering

The standard system used universally is also known as a time of use (TOU) net metering system. Its purpose is to accurately measure the amount of energy being processed and used at specific times of the day. Here are some functions, methodologies and concerns of using this system.

  • Smart meter used to measure use at any time of day.
  • Utility rates accurately measured and based on when power used.
  • Costs of generation highest during the day.
  • Time of use monitoring negatively impacts overall costs of net metering.


In many parts of the world, governments or localized municipal authorities remain resistant to the net metering monitoring process because it impacts negatively on their ability to collect revenue from tax and/or rate payers. To compound matters, in many developing nations where this problem is prevalent, they are still dealing with issues related to illegal connects in informal settlements. To expand on this controversy, we need to highlight this in favor of the citizen.

  • Revenue collected is not utilized effectively to providing housing for citizens living in informal settlements.
  • Authorities remain resistant to consumers’ rights to power usage as needed.
  • Because net metering systems are not fully regulated, it is not always easy for consumers to access these.
  • By not allowing access, costs of acquiring electricity remain excessive for consumers.

Benefits Far Outweigh Controversies

Quite by chance, we came across a statement of intent from one civil action group which focuses on both environmental sustainability and the rights of consumers. Without mentioning the action group by name (there are quite a number of these around the globe in any case), we simply highlight a few things they have mentioned in their statement. And it simply suggests that the benefits for using the net metering system far outweigh the controversies and pitfalls for using it.

  • Customers who generate their own electricity always credit themselves.
  • By generating their own electricity they can also make contributions to the grid for others to utilize.
  • Credits derived from generating excess power are cost-effective for all consumers, helping to reduce their energy costs.
  • Such a net metering system benefits essential services such as schools and hospitals which require more power.
  • Fair enterprise opportunities are extended to both private and government investors.
  • With these investments comes the opportunity to reduce expenditure in and use of expensive pollution emitting power plants.
  • Benefits are extended towards creating more jobs for and keeping local communities healthy.

We hope that this short informational article, a general overview mostly, has proved to be useful in helping you to shed some light on what net metering is and how it all works. We began our process by giving a brief description of net metering and then went on to list a few features. We felt compelled to list both the advantages and benefits of switching to the net metering system to better manage and reduce our energy consumption after making a note of the controversial resistance to this highly sustainable monitoring process.

Source: Net Metering
Image credit: Maria ,
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About Rinkesh

A true environmentalist by heart ❤️. Founded Conserve Energy Future with the sole motto of providing helpful information related to our rapidly depleting environment. Unless you strongly believe in Elon Musk‘s idea of making Mars as another habitable planet, do remember that there really is no 'Planet B' in this whole universe.