What Is Net Metering & How Does It Work? A Guide for Solar Users

One of the largest advantages of installing solar panels at your home, business, or farm is the money you save each month on your utility bill. However, in many states across the U.S., there’s an additional advantage that can be even more of a force multiplier for your energy savings.

This is called net metering, and it provides a huge benefit for solar users by giving them a one-for-one kWh credit for the excess energy that their solar panels generate.

Understanding how net metering works can empower you to not only reduce your energy usage but also get credit for the energy that you produce but don’t use. So, how do you take advantage of it? Let’s explore more about net metering and how to make it work for you.

How Net Metering Works

During peak solar conditions, such as sunny summer days, you may not use up all of the electricity that your solar panels produce. However, during other times, like at night or in the winter, when daylight hours are shorter, your panels might not generate enough energy to offset your electricity consumption. That means you must purchase additional power from your utility provider.

Net metering is an arrangement with your utility provider that allows you to gain credit for the extra energy that you produce during peak times. You can then draw on those credits in the future when you need them.

Those credits often equal the full retail price of electricity, making it a 1:1 exchange, although some utilities may offer lower rates. There also may be a cap on how much energy you can receive credit for within a certain period. Overall, it means you’ll pay less — or nothing at all — for additional power when you need to purchase it.

Net metering carries several benefits for solar users. Those include:

  • Lower overall energy bills.
  • A shorter time period to recoup your solar panel installation costs.
  • Higher home values due to increased energy savings.
  • Little to no restriction on time-of-day use, or when you use your power, day or night.

Net Metering vs. Net Billing

There’s another arrangement similar to net metering known as net billing, and while these programs share some features, net billing policies are distinct in a few ways.

Energy users also receive compensation for the excess energy they produce through net billing, but it’s often not at a 1:1 ratio. Users typically receive compensation at a lower rate than the retail rate, such as the wholesale rate the electric provider would pay for its energy. Users may also not be able to carry over credits from month to month, instead receiving compensation solely within the month.

For solar users, net metering is often the more advantageous arrangement. But in areas where utilities do not offer net metering, net billing is still a helpful tool to save money. As some states are considering transitioning away from net metering in favor of other arrangements, net billing is one of the alternatives they are considering.

Where Is Net Metering Available?

The availability of net metering — and the specific details of the arrangement — depends on where you live. There is significant variation across the country, and while many states require utilities to offer net metering, the requirements can look different.

Thirty-four states have mandatory rules for net metering at the state level, according to the Database of State Incentives for Renewables maintained by the Clean Energy Technology Center. These laws cover regulated utilities but may not apply to utilities owned by municipalities or cooperatives.

In the Midwest, states with mandatory net metering include:

  • Iowa
  • Missouri
  • Nebraska
  • Wisconsin
  • Minnesota
  • Kansas
  • North Dakota
  • Illinois

Several other states have other rules in place that use a system other than net metering. For example, in South Dakota, net metering is not mandatory, but solar power users who are connected to regulated utilities still may sell unused power to their utility providers under other terms. In Illinois, the state is currently in the process of transitioning away from traditional net metering.

If you’re interested in exploring the current net metering policies in your state, we recommend checking with a solar energy company like 1 Source Solar that can help you understand how it works and how to take advantage of it.

How to Get Started With Net Metering

To start pursuing net metering, it’s important to work with your utility and your solar company to learn about the up-front requirements that will be needed for your system to qualify.

Some of these requirements could include:

  • Connecting your system to the electrical grid: Net metering is not available for solar systems that are off the grid.
  • Net metering equipment: You may need to have a different meter installed that is compatible with net metering.
  • Application and approval to enroll: You will likely need to fill out an application with your utility provider to receive approval for their net metering program.

When you work with 1 Source Solar, we’re well-versed in net metering requirements across the Midwest and can handle the necessary paperwork for you, making it a no-stress process to start receiving the benefits.

Learn More About Net Metering in Your Area From Our Expert Solar Installation Team

Are you interested in reaping the benefits of net metering or net billing in your area? At 1 Source Solar, we’re ready to help you understand what programs are available through your utility, help you fill out the program application, and navigate you through any metering requirements your utility may have.

Contact our team of expert solar specialists to get started today!