As the owner or lessee of a solar panel system, you are entitled to the electricity it produces free of charge. Throughout the year, though, the electricity your solar panels produce will vary—sometimes you may produce more than you need and at other times, not enough. The practice of “net-metering” helps to even out how these peaks and valleys in electricity production affect your electricity bills. Here’s how it works:
Net-metering: making profit off your solar system
If your system is producing more electricity than you need, the excess will be fed into your electric utility’s grid. When this happens, your meter actually runs in reverse. In months where your solar power system generates more electricity than you need, your utility bill will show a credit based on the net number of kilowatt-hours you gave back to the grid. On the flipside, if you’re producing less than you need, you’ll be able to draw the difference from the utility in the same way you did prior to going solar. In these instances, you would “owe” the utility for the electricity it provides.
This back and forth between your system and the grid ensures that your excess production will be used and your shortages will be met. In general, most homes will produce excess electricity in the summer months and will draw from the grid in the winter. Because these ebbs and flows in production are pretty predictable, your utility won’t send you a check when you produce more than you need. Instead, it will carry those credits on your bill until eventually, they are depleted when the trend reverses and your consumption outpaces your production.
Efficient solar systems: You pay for what you consume
Through this system of net-metering, you will only pay for the net amount of electricity you ultimately consume from your utility. In general, most homeowners install solar PV systems that are sized to generate slightly less electricity than their home actually consumes annually. In these cases, the homeowners end up owing the utility a small amount each year. But, if you produce more than you need throughout the year, the utility will give you credits for the excess you produce. The rate you will receive for those credits is set by the utility for a certain amount per kWh, which may be slightly less than the retail price of the electricity you generally pay. You are not likely to get paid cash for those credits. The utility, however, will allow you to apply these credits to another bill (for your second home, or the homes of friends or family). You may even have the option of gifting or donating your excess credits to your local school or religious institution. Most people don’t want to have to manage the donation of excess credits which is why they usually opt to size the system so that it produces just enough electricity to meet their annual consumption.