By going solar, you make a meaningful contribution toward purifying the air we breathe and reducing the impact of climate change. But with the ecological pluses aside, there are also economic reasons to install solar panels on your house. Imagine your electric meter running backward — instead of racking up charges for the energy you use, you’re credited due to the extra energy your solar panels make. This is a real practice called solar net metering. Homeowners everywhere are taking advantage of it by becoming power producers, rather than just power consumers, and selling their solar electricity. But how does selling electricity work exactly?
How to Sell Electricity from Solar Panels
How does net metering work? Imagine this. It’s a perfect, sunny day. No one is home, and little air conditioning is needed. The washer and dryer aren’t running, no televisions are blaring, and no computers are humming. All the lights are off. From an energy perspective, your house is napping. But your solar panels are wide awake. They’re at their peak, churning out plenty of green solar energy. With the initial cost of solar panel installation being such a big investment, you are probably looking ways to increase your return on investment rate.
So much energy and nowhere to go, right? But if your home is able to take advantage of solar net metering, that electricity runs through your meter and out to the grid. A digital meter on your house records electricity moving in either direction as it comes into the house and as it leaves. The “net” part of the term means that the homeowner pays the “net” amount for the electricity used by the house minus the extra sold back to the grid.
Factors to Consider Before Starting Solar Net Metering
From a consumer’s point of view, it seems like a no-brainer. You use what energy you need, and you have a market ready to buy up your surplus energy, which lowers your overall electric bill. However, there are still some factors to consider before you start solar net metering.
Net Metering State Laws
The first depends on where you live, since not every state allows net metering. Among those that do, the policies vary—some are more favorable for the consumer than others. There are 44 states, as well as the District of Columbia, that already have mandatory net metering rules. Alabama, Mississippi, Tennessee and South Dakota do not have net metering policies. Texas and Idaho do not have mandatory state-wide net metering rules, but some cities and energy providers in those states offer net metering.
Solar Energy Rollovers and Reimbursements
It’s not enough to know if your state or utility company allows net metering. You also need some understanding of the fine print, since not all net metering programs are created equal.
First, find out if net metering credit be rolled over from month to month. Similarly, what happens to unused credits at the end of the year? Do they expire? Are they paid out at a lower rate than monthly surpluses?
It’s also important to determine whether your utility company charge a monthly connection fee. More importantly, find out exactly how much utility will pay for the excess power you produce through net metering.
The majority of states pay retail rates for surplus electricity — so the utility pays you the same rate it charges when it sells its electricity to you. About 10 states, however, pay consumers “avoid costs rates,” which are basically what it cost the power company to produce its electricity—and these are lower than the retail rate.
Limits on Selling Solar Energy
You should also check and see if your utility or state impose limits on how much surplus electricity you can sell back to the power grid. Many states have limits. Knowing the cap might help you decide how many solar panels you want to install. On the other hand, if solar net metering limits are generous—or non-existent—you may choose to be more liberal in the size of your solar panel system.
However, net metering should not be the primary consideration when designing a household solar panel system. It’s usually more cost effective to focus on roof angle, orientation, and area, as well as your average electricity usage, when sizing your system. Remember that when you install a solar energy system, there are options for upgrading to solar home heating and cooling, solar pool heater installations, and more.
There are very few states in which surplus solar energy sales can exceed a consumer’s average usage. This makes sense, since solar net metering policies are designed to encourage residential solar panel usage, not the building of commercial scale solar farms. In fact, almost half of states that allow net metering limit it to 1 megawatt (MW).* Others have even smaller caps: Vermont and Wisconsin allow net metering for systems up to 20 kilowatts (kW).
Massachusetts offers a generous 10 MW limit for certain systems. New Mexico tops that with an 80 MW cap. A few have no net metering capacity limit—namely Arizona, New Jersey, and Ohio.
It is always best to get in touch with a local solar panel professional near you to find out what’s available in your area currently as it changes. Consumers should also be aware that policies can change. A new law in Virginia, for instance, limits new residential solar installations to the size needed to meet annual consumption for the past 12 months. So be sure you’re up to date with the rules.
Anti-Solar Utility Companies
Unfortunately, a handful of utility companies try to make it hard for consumers to go solar. Why? Well, think about it. If you’re getting your electricity from the sun, you’re not buying it from the local utility company. It’s a competitive issue.
Many utilities own power plants. As more consumers go solar, the need to run the plants diminishes (which is good news for the air, if they happen to be burning fossil fuels). These utilities worry that they could end up getting stuck with expensive power plants that no longer have a use. Given solar’s growing popularity, it’s easy to see why utilities would be nervous.
Some of these utilities attempt to penalize or tax solar users. In one of the more notable cases, Arizona utility Salt River Project approved the addition of a $50 “demand charge” added to the monthly bills of solar customers. Other less-than-friendly utilities are reducing solar incentives—or trying to convince state regulators to do so. Local solar advocates or installers can let you know if your utility is solar-friendly or not.
Good News For Solar Energy
But don’t be disheartened by these warnings. Solar has a lot of champions these days: from the White House to governors and mayors throughout the US, environmentally clean energy is a top priority.
Trends are running in favor of the green homeowner. Solar prices have fallen tremendously. Cities and states are offering local solar rebates and incentives. Consumer-friendly financing is available. And the solar industry has matured—there are countless large and reputable solar installers who will guide you in your solar journey.