Net Metering

Net metering is a practice that encourages consumer investment in on-site electric generators - typically small-scale, renewable energy technologies. When a customer/generator is producing and consuming electricity at the same time, the laws of physics dictate that the electricity being produced flows to where it is being used. But what about when electricity is being generated and none is being consumed? In these instances net metering allows customer/generators to spin their meter backwards, in effect paying the customer/generator the retail rate for the electricity they generate but don't immediately consume. If a customer generates more electricity than they consume over a period of time, they are typically paid for that net excess generation (NEG) at the utility's avoided cost, or the wholesale rate.

Without net metering, small customer/generators usually have two meters, one measuring incoming electricity, for which they pay the retail rate, and one measuring the power they produce, for which they are compensated only at the utility's avoided cost. Thus net metering provides a strong economic incentive for electricity customers to install on-site, small-scale, renewable generating capacity.

A majority of states have some type of net metering programs. Most have some common characteristics, including a size limit for qualifying generators and a statewide limit of qualifying capacity (typically about .01% of a utility's peak load). Compensation for NEG is typically at the wholesale rate that the utility pays for electricity.

Two states, Minnesota and Wisconsin, stand out from the crowd because their net metering rules allow participants to be paid the retail rate for the net excess electricity they generate for each billing cycle. New Jersey and Colorado allow projects up to 2 MW to use net metering. The Sacramento Municipal Utility District also pays the retail rate for excess solar electricity generation.

Note: Dozens and dozens of states have enacted net metering rules. We are highlighting only a few of the more interesting ones here on our site. IREC is tracking state activities on net metering developments at this link.

More Information:

• Interstate Renewable Energy Council's Connecting to the Grid resources
• Summary Table of Net Metering Programs in the United States - by DSIRE, ongoing updates