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How Rooftop Solar and Net Metering Works

How Rooftop Solar and Net Metering Works

By the end of 2020, nearly three million households had implemented solar energy via rooftop solar panels. However, the ownership or leasing of solar installations can be confusing. While it sounds like a great idea, the benefits may depend on your arrangement with your local electric company.

Solar panels are connected to the local electric company's supply grid with most installations. However, most solar users will only utilize a portion of the energy they collect throughout the day, meaning the extra power is lost to the electric company's grid. However, with net metering, those with rooftop solar energy can recoup some potential loss.

How Does Solar and Net Metering Work?

While millions of people have switched to solar energy for their homes and business, not all states offer incentives like net metering.

Net metering will allow those with rooftop panels to sell unused or extra energy back to the utility company that owns the power grid. During this transaction, net metering will help offset the cost of future utility payments for electricity when an adequate supply is unavailable.

On a sunny day, solar panels often create more power than your household may use. On rainy days, your family may rely on energy from the local electric company. In essence, net metering allows you to sell electricity to the power company in times of surplus and buy electricity in times of need, such as during the evening. The net metering agreement you establish with your power company determines the prices both parties will pay for buying and selling electricity.

Types of Net Metering

Not all states offer net metering programs. However, the three main types available vary from state to state.

Net Metering

Net metering is one of the most common types of rooftop solar metering in the states that offer it. The incentive will allow those with solar panels to sell excess power to the nearby utility company grid. In exchange, you'll receive future credit to help offset any electrical costs when there is not enough solar energy created.

Buy All / Sell All

A "buy all, sell all" agreement allows customers with rooftop solar panels to sell their generated energy to the local power company at wholesale pricing. Typically, the customer would use the funds they receive to pay for their electrical services since they use power from local grids. This agreement will require the home to contain two separate meters -- one for the local grid and one for rooftop solar panels.

Net Billing

Net billing is similar to net metering in terms of solar energy usage. With net billing, customers can still use the energy they generate via rooftop panels; however, they won't accrue future credits for any power they sell to the company. Typically, this agreement is more common among commercial solar users rather than residential.

Benefits of Solar Energy

Solar power allows for clean and efficient energy production, thus reducing your overall carbon footprint. In addition to not compromising a homeowner's quality of life, solar energy allows a consumer to have sole control over their finances, making the prospect more enticing.

Benefits of Net Metering

Net metering agreements allow homeowners to reap more benefits than many understand regarding rooftop solar energy. Under net metering, homeowners can save hundreds to thousands of dollars in electrical services each year — an excellent reason to leap.

Many people who have solar panels installed on or near their homes for personal consumption do so to reduce the environmental impact that retail electrical companies have. In addition, rooftop solar reduces the strain on power grids during distribution and transmission and minimizes energy loss from sending electricity further than needed.

Net Metering Alternatives

For households in areas where net metering plans are unavailable or where the terms and conditions are not favorable to consumers, solar installations can install battery backup systems to store excess power locally for use later in the day or when solar power generation is insufficient to meet your needs.

Keep in mind that having local battery systems installed can significantly increase your installation's cost. They won't necessarily eliminate the cost-effectiveness of solar power, but they will extend the time it takes to recoup your investment.

Takeaway

Even though solar energy works in all climates, consecutive dark days can make it difficult for the panels to produce an adequate energy supply. During these times, those with solar panels rely on retail energy to ensure their electrical supply to their home. In addition, net metering will give customers more control over future electrical costs, allowing them to use their future credits at their own convenience.