TLDR: Net metering is an important program that compensates you for the value your solar system provides the energy grid. Understanding net metering in your area is critical to making an informed solar investment decision.

What is Net Metering and How Does It Work?

Net metering is a billing arrangement with your utility company that allows you to utilize the excess electricity your solar panels generate. When your solar system produces more electricity than you consume, the surplus is fed back into the grid, and you receive credits on your electricity bill. These credits can then be used to offset the electricity you draw from the grid when your solar panels aren’t producing enough to meet your needs.

Think of net metering as a savings account for your electricity. During sunny days, your solar panels are hard at work, generating electricity that you can either use immediately or “deposit” into the electrical grid for later use. The credits you earn from depositing that excess electricity can be “withdrawn” when you need them, such as during nighttime or cloudy days.

The beauty of net metering lies in its simplicity and fairness. You’re essentially using the grid as a giant battery, storing your excess solar energy for future use. This not only maximizes the utility of your solar installation but also contributes to a more sustainable and resilient energy ecosystem. By allowing homeowners to generate their own electricity and share the surplus, net metering promotes the adoption of renewable energy, reduces the strain on the grid, and encourages energy independence.

Different Types of Net Metering Explained

There are many different flavors of net metering set by utilities and state utility commissions. Whether it’s annual or monthly net metering, or even a buy-all, sell-all arrangement, each comes with its own set of rules, benefits, and drawbacks. 

Annual Net Metering: Pros and Cons

What It Is:

Annual net metering allows you to roll over your excess electricity credits from month to month, typically settling the account once a year. This means that the electricity you generate in sun-abundant months can be used to offset your consumption in less sunny periods.

Pros:

• Seasonal Flexibility: Annual net metering is particularly beneficial for balancing out seasonal variations in solar energy production. For instance, the excess energy generated during the sunny summer months can be used during the winter when solar production typically decreases.
• Maximized Savings: By allowing credits to roll over for an entire year, you have the opportunity to maximize your savings on your annual electricity bill.
• Simplified Billing: With an annual settlement, you only have to reconcile your electricity credits once a year, making it easier to manage your energy budget.

Cons:

• Complex Settlement: The annual true-up process can be complicated, requiring a thorough review of your energy production and consumption over the year.
• Potential for Lost Credits: In some annual net metering policies, if you generate more electricity than you consume over the course of the year, those excess credits might be forfeited or compensated at a lower rate.

Monthly Net Metering: What You Need to Know

What It Is:

In monthly net metering, your electricity credits are used within the same billing cycle. Any excess electricity you generate during a month is used to offset your consumption for that specific month.

Pros:

• Immediate Savings: Monthly net metering allows you to see immediate reductions in your electricity bill, as credits are applied within the same billing cycle.
• Simpler Accounting: With credits being used within the month, there’s less need to track long-term electricity production and consumption.

Cons:

• Limited Rollover: Unlike annual net metering, monthly credits do not roll over, which means you can’t save them for less sunny periods.
• Missed Savings Opportunities: If you generate a lot of excess electricity in one month, those credits are not as valuable because they don’t roll over to future months.

Buy-All, Sell-All Arrangements: An Alternative to Net Metering

What It Is:

In a buy-all, sell-all arrangement, all the electricity you generate is sold back to the grid, and you buy what you need at a different rate. Essentially, your solar system and your home are metered separately.

Pros:

• Guaranteed Compensation: You’re compensated for every kilowatt-hour you generate, regardless of your own electricity consumption.
• Simplifies Grid Management: This arrangement can be easier for utility companies to manage, as they purchase all the electricity generated and sell it back as needed.

Cons:

• Two Different Rates: You sell the electricity at a wholesale rate but buy it back at a retail rate, which can often result in less financial benefit for the consumer.
• Complex Billing: Managing two separate meters and rates can make your electricity billing more complicated.

New Jersey Programs

The net metering programs across New Jersey utilities including PSE&G, JCP&L, Atlantic City Electric, and Orange & Rockland are structured as annual net metering programs, where credits for excess energy generated by solar systems are accrued and can be used to offset future bills. These credits are reconciled annually, ensuring accurate accounting of energy credits over the year.

Summary

Understanding these different net metering arrangements can empower you to make an informed decision that best suits your energy needs and financial goals. Each option has its own set of advantages and drawbacks, so it’s crucial to weigh these factors and how they can impact the financial return of a solar investment. Working with a reputable solar company like Daylight will ensure you get the best information on net metering in your area.