What is Net Metering?

Written by Davey Newlove


The solar industry is a complex industry with terminology that not everyone understands.  Here at JSunPV we are here to help you understand the industry and the terms used. One term that customers will hear a lot is “net metering”. But what is net metering? Net metering is the largest benefit provided to solar owners. Let’s take a closer look at what it is and how it works to help benefit solar customers.


What is Net Metering?

Net metering is also known as net energy metering, or NEM.  According to the National Renewable Energy Laboratory (NREL), NEM “is a metering and billing arrangement designed to compensate distributed energy generation (DG) system owners for any generation that is exported to the utility grid.” NEM customers directly use the energy that is produced by their solar system. If the amount of electricity the customer’s system produces is more than the amount that the customer can use, the excess energy is then exported back to the grid. If the customer’s system produces less energy than the customer uses, they then import energy from the grid. The customer is usually compensated for the excess energy that is exported to the grid, but on a kilowatt-hour (kWh) basis. The amount of compensation is different depending on state and local policies that are in place.



Net metering came around in the United States in 1983 and is a widely used compensation mechanism at the state level. Currently, a majority of states and territories of the United States have mandatory NEM policies in place. Some utilities voluntarily offer NEM policies available to customers as well. For example, in Texas where the is not a mandatory NEM policy, there may be a utility that does. In this case the customer can still take advantage of this policy through the utility company.  Check with your local utility to see what their net metering policy is.


Why Does Net Metering Exist?

There are two main reasons why net metering policies exist. The first is to help encourage widespread adoption of renewable energy throughout the country. According to EnergySage, the second reason is “because utilities, and the electricity grid as a whole, can benefit from the influx of low-to no-cost solar energy onto the grid.” Solar energy can help balance out the cost of buying electricity from other more expensive resources, such as coal or natural gas. This balance offset is even greater in the summer months when electricity rates are more expensive than other times of the year.


Protecting the Electrical Grid

Unfortunately, there are some utilities out there that see NEM policies as lost revenue opportunities. This means that they view solar and its policies as a threat to their bottom line profit. According to the Solar Energy Industries Association (SEIA), “net metering policies create a smoother demand curve for electricity and allow for utilities to better manage their peak electricity loads.” NEM policies encourage customers to invest in renewable energy systems that are built near the point of consumption. This is important because this reduces the strain and power loss of energy traveling across long-distance power lines to get to the point of consumption. The strain of long-distance power lines are one of the many factors that can lead to a blackout.


Save by Going Solar

Net metering policies are the best policy for solar customers. They allow for customers to store every unit of energy their system produces with that energy stored to be used later by the grid. Because of this, customers can save tens of thousands of dollars over the lifespan of their system. This is done by offsetting your need for electricity from the grid. NEM policies are not the only way utilities compensate customers for going solar. They are, however, the most common and effective policy at the moment. Check out this article from EnergySage to see the NEM policy in your state.


NEM policies are beneficial to solar customers. If you are ready to take advantage of these benefits, contact JSunPV to get your project started today!