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Net Metering: How a Little-Known Policy Can Shave Hundreds Off Your Electricity Bills

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Over the past decade, the concurrent rise in concern over environmental degradation and the increasing cost of electricity bills has driven many Americans to look to solar power to reduce both pollution and expense.

Solar installation costs continue to drop, and at the same time, new business models like third-party-owned solar take away the high upfront cost for homeowners. With these models, a solar provider owns and maintains the system on your roof and you just pay a low rate for the power.

The cornerstone policy driving solar expansion is called net energy metering, or NEM. Net metering exists in 43 states and is currently under attack in many of them, so it's important to understand what this valuable service is and how it can reduce costs for all utility customers and citizens, not just those who install solar or other clean energy sources.

What is net metering?
With NEM, customers with distributed energy systems like solar panels or wind turbines get full credit for the excess energy they feed on to the electric grid. For example, if they are away during the day when their solar panels are producing power, that power goes to the grid for the utility to sell to others, and the solar homeowner gets full retail credit for that electricity. When they start using power at night from the grid, they get to use up their credit before paying for additional usage. It provides the utility with on-site, clean electricity during peak usage periods when they need it most, and it benefits consumers.

Net energy metering is often likened to rollover minutes that many Americans receive from their cell-phone service providers, where allotted minutes that aren't used one month "roll over" to the next so that customers don't lose them.

Why are utility companies opposed to NEM?
Utility companies don't like net metering because the more people use alternative energy sources like rooftop solar, the less electricity they buy from the utility. This affects utilities' growth. They are trying to eliminate NEM to protect their profits. In fact, a report issued recently by the utilities' trade association, Edison Electric Institute, calls distributed solar, energy efficiency, and conservation a "vicious cycle." Many groups that support renewable energy are fighting back against utility companies' efforts to end NEM programs. For example, The Alliance for Solar Choice was formed in 2013 to protect NEM in California and beyond.

What are potential benefits of net energy metering for consumers?
Obviously, NEM offers substantial utility cost savings to people who have made the investment in distributed energy sources, such as solar and wind energy technology for their homes. But it's a misconception to think that they are the only ones benefiting from NEM. Studies show that net energy metering benefits all consumers and citizens. For example:

1. NEM reduces energy costs for all utility customers, even those who don't own renewable energy systems. study from Crossborder Energy shows that net metering will save California ratepayers $92.2 million when it's fully subscribed at 5% of peak demand; it would save Arizona Public Service customers $34 million per year. Though not yet used extensively, NEM is becoming increasingly beneficial in reducing costs for all energy consumers.

2. NEM reduces the need for dirty energy production, which leads to cleaner air and water. Pollution-emitting energy production is a threat to public health; NEM provides a substantial incentive for consumers to install clean energy systems, which results in cleaner water and air. Some California physicians feel so strongly about the health benefits provided by NEM and rooftop solar that they have joined with the solar energy community to form CAUSE, Californians Against Utilities Stopping Solar Energy. The group aims to prevent utility companies from eliminating NEM.

3. NEM helps support the solar industry, which provides jobs. The solar and clean energy industries are widely believed to be the wave of the future, and NEM helps encourage their growth. The more these industries expand, the more jobs they'll provide. For example, it's estimated that NEM has directly or indirectly created 43,000 jobs in California's burgeoning solar industry.

4. NEM reduces energy costs for major public institutions, such as schools. Many public institutions such as schools, libraries, and government buildings are some of the heaviest users of power in their communities, as the buildings are often old and energy-inefficient. NEM can substantially reduce costs for these public agencies; it's expected to save California's public schools and public agencies approximately $2.5 billion over the next 25 to 30 years.

It's clear that NEM offers both economic and health benefits to consumers and citizens in areas that use it. If you feel strongly about NEM, sign this petition on Change.org for fair compensation to residents who produce energy.

Your body, your wallet, and your community will thank you for your efforts.


Read/Post Comments (15) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 15, 2013, at 3:04 PM, engguy wrote:

    1) No, since most net-metering states also force companies to buy at privileged rates, raising costs for those that make little or no energy. #2 also raises costs.

    2) False unless you like living in the dark when it rains. Every kW of solar or wind requires an equal sized backup at the energy company. As a result, they have to idle more turbines (wasting fuel but producing no energy) and therefore increase pollution. This is before including manufacturing costs of solar panels, which use a considerable amount of water and release more CO2 than several years of operation save.

    3) No, it creates an unstable bubble in the market that will pop just as every other bubble has. We currently have an overabundance of installers and manufacturers when considering steady state conditions.

    4) It does no such thing because to use net metering you need to be on a use metered plan. Most institutions and larger businesses use bulk metering, which is incompatible with net metering.

    "Utility companies don't like net metering because the more people use alternative energy sources like rooftop solar, the less electricity they buy from the utility. " No, they are opposed to it for the following reasons:

    1) They need to idle as much production as the capacity of the system just in case the sun isn't shining as brightly. Idled stations cost money.

    2) They need to spend trillions of dollars over the next few years in order to support large scale net metering, as current systems cannot be back driven.

    3) They will be forced to deal with state and federal regulations on power production for systems they don't own nor control.

    4) They don't need more daytime power. Peak power in the US is after 6pm, when the sun is already set and solar contributes nothing. The power companies can already meet demand just fine, and it's actually cheaper for them and their customers if they have more stable use than huge fluctuations in energy need.

  • Report this Comment On September 15, 2013, at 3:25 PM, ODGER wrote:

    who can i contact in arkansas to find out more about state rebates

  • Report this Comment On September 15, 2013, at 3:53 PM, SouthernEagle wrote:

    I have about ten acres that I would let a company construct a PV farm if I could share in the profits while supplying my residence. In the future the power companies will reduce their load during the day and load the units after the sun sets.

  • Report this Comment On September 15, 2013, at 5:27 PM, Dadw5boys wrote:

    engguy it does not cost money for a power plant to idle down until needed Enron proved that

  • Report this Comment On September 15, 2013, at 5:37 PM, craigmnilsson wrote:

    I sell metering to Coops and Municipals in Ohio. Net metering is the preferred method. What they do not like is bi-directional.

  • Report this Comment On September 15, 2013, at 6:45 PM, speculawyer wrote:

    engguy . . . you are WRONG.

    1) No, that is a feed-in tariff program. Feed-in tariff programs and net-metering are not the same. Net metering is actually kinda of the opposite of feed-in tariff programs . . . . I lend my high-value peak-rate PV electricity to the utility during the day and get paid back in low-value off-peak night-time electricity. So the utility benefits.

    2) engguy clearly does not stand for 'engineer guy' because that is flat out wrong. Between geographic diversity, source diversity (solar, wind, geothermal, etc.), dispatched hydro, pumped storage, demand-response, and other techniques, you simply DO NOT require an EQUAL back-up amount.

    Solar PV is great stuff. It is awesome to reduce pollution, mountain-top destruction, CO2 emissions, and other down-sides of fossil fuels with solar PV. My PV array provides both my home and car with all the net electricity I use and it only cost me around $12K. ($8K after tax-credit.)

  • Report this Comment On September 15, 2013, at 7:08 PM, jmc6237 wrote:

    The utilities will raise the rates to get back the money

  • Report this Comment On September 15, 2013, at 7:35 PM, RussellLowes wrote:

    engguy has it mostly wrong, apparently mixing net metering with feed-in tariff, in addition to having other misconceptions.

    Solar energy is running an average of about 12 cents delivered cost, when done on site (distributed generation includes on-site and nearby), and when done in centralized solar farms.

    Solar has to have backup, to some degree. So does coal, nuclear and any other electricity source. That what "reserve margin" is for. Nukes go down in large lumpy amounts, because the reactors are so big (U.S. average is about 1000 megawatts; 1000 million watts). Coal units average 300-600 MWe, still lumpy. When a coal unit (or any other capacity) goes down, you have to have the reserve margin there for it -- same as for solar and wind.

    Net metering is where the utility buys electricity (e) at the same price it sells it for, up to the point of "net zero," where e bought = e sold.

    Solar tends to provide e when it is needed most, during sunlight hours, especially where there are air conditioners. This solar displaces the need for the building of natural gas peak units. These gas peakers often cost 25 cents per kilowatt-hour of electricity (kWhe).

    Solar provides e at less than half that cost. Hence, for every kWhe delivered by solar, the customer base pays much less energy for peak power durations. This saves all customers money, not just those who enjoy the benefit of solar.

  • Report this Comment On September 15, 2013, at 7:36 PM, RussellLowes wrote:

    ODGER: You might want to check with Regulatory Assistance Project; search them online.

  • Report this Comment On September 15, 2013, at 8:58 PM, bamissfa wrote:

    OK here's a foolish question perhaps.

    If the power companies can't beat NEM with their lawsuit why then doesn't the power companies provide the solar panels to their customers and give the discounts to the customers themselves.

    Duke energy in NC has for at least 20 years installed load control devices in homes the customer agreed AND then charged the customer for the devices, this was under contract with the customer getting $15 off the monthly electric bill for 4 months June thru Sept. Later Duke Energy reniged on the 15 and reduced the "credit" to the customer to only $8 per mont for those 4 months.

  • Report this Comment On September 15, 2013, at 9:01 PM, JLMRN wrote:

    I think this article overlooks a very big problem. I agree that solar power should be used extensively; however, I do believe that the grid must be maintained. Is it possible that the wholesale shift to solar will weaken the grid? If less people are using the grid, where will the money come from to maintain it?

  • Report this Comment On September 15, 2013, at 9:53 PM, ChMacQueen wrote:

    Engguy is right on.

    The article is very misleading. Net Metering is NOT what its cracked up to be but it does profit consumers at times.

    Like Engguy said it does not reduce pollution, the utility always needs their energy online and read if it goes cloudy or raining. They can't go telling customers to wait 2 hours while they fire up those 3 turbines that weren't needed because it was sunny a bit ago for the solar people.

    But also Net Metering pays the customer for every KwH same as the company charges. But the company in its charge is also including maintaince on the grid and power stations. Contracts with the power station, maintaining the workers to fix the lines, and everything else. Who's going to pay for all of that when everyone is using Solar during the day and come night time barely using less then you contribute?

  • Report this Comment On September 15, 2013, at 10:07 PM, socman1 wrote:

    all nem programs are not created equal. In indiana we are reimbursed at a percent of the wholesale price not at full retail. The power provider is allowed to opt out of the state program. Many of us in indiana find the program very favorable, to the power company, as they can still profit from the sale of our power to others. The power companies here claim the peak power times to be between 12 and 6 pm. the hottest part of the day in the warm months. With solar and small wind they do not have to buy extra power at peak times, which is very costly, for municipal power companies. The nem program here in indiana holds down the cost of power to the consumer period.

  • Report this Comment On September 15, 2013, at 10:33 PM, fingerlakes54 wrote:

    If this issue turns into a grudge match between utility companies and it's customers the Feds should consider using the same power it used when it took over operations of all the nations railroads in World War I. To get a cohesive energy policy and one that is consistent for the good of the public --just nationalize the power industry and make changes that move us toward a better system. The railroads were nationalized in 1917 to avoid strikes and other disruptions during war time. In 1921 the railroads were turned back over to the private owners, and a proper national plan for railroads evolved. It failed in some respects but it was less of a failure than could have been expected if railroads tried to work it out by themselves. The power companies need to accept that alternative power sources are good for everyone and they should challenge their management to plan for the future that is profitable and well managed.

  • Report this Comment On September 23, 2013, at 8:30 PM, engguy wrote:

    RussellLowes, I said privileged rates rather than feed-in rates. If a regular customer were to somehow produce more energy than they consume, the company doesn't have to buy that energy. If a net-metered customer produces even one kWh of electricity, the company is contractually bound to buy it even if they could generate it themselves at lower end-cost.

    While you say 18cents/kWh, all literature suggests 18 cents/kWh even under the best conditions. But lets assume 12 cents for the sake of demonstrating why even that is privileged. The total cost to a utility company is split into both generation and distribution, with both costs almost equal in the case of nuclear and high efficiency (but not "clean") coal. If the price is 14 cents/kWh at peak, lets assume the transmission cost is 7 cents. That means that for every kWh of electricity produced through net-metering, the utilities (and eventually customers) are paying the effective rate of 19 cents per kWh. The ONLY people benefiting from solar subsidies (which net metering is one of many types) are those who are wealthy enough to install more production than they need but fail to capture excess production within their homes.

    Even worse, solar does NOT provide electricity at peak, which is generally at about 6pm (varies by state, but generally after 4pm, when solar has less than 25% capacity). The load following and peaking plants practically operate as if solar was never there, but on a more dynamic loading due to rapid increases in electrical use as the day progresses. What ends up happening is that base load production needs are lowered while not affecting peak power. That is the exact opposite of an environmentally friendly setup.

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