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Net metering, also referred to as net energy metering or NEM, is an incentive that for solar panel users to return unused energy back to the grid. This is advantageous to homeowners with solar panel systems that are so efficient that they generate more electricity than what is consumed. Energy can be sent back to the electrical grid in exchange for credits. Credits can then be redeemed to offset the cost of electricity in scenarios where solar panels are underperforming. For example, credits can be redeemed at night while solar panels aren’t actively generating electricity.
Most residential solar panel systems are designed to match energy production with energy consumption. As weather changes throughout the year, as do the conditions necessary to generate electricity. There may be periods in which the amount of energy that your solar panels produce exceed expectations, such as unusually hot summer months. Net metering ensures that the excess electricity does not go to waste and credits the homeowner in the process. Think of it as if the energy company is holding on to your excess electricity for you to use at a later time.
Energy companies have been creative in implementing incentives for going solar and net metering is one of them. As of 2016, a total of 41 states as well as Washington D.C. have implemented net metering within their rules. Two more states have promulgated net metering to the utility companies who have implemented the strategy. To see if net metering applies to your state, check out the Database of State Incentives for Renewables and Efficiency (DSIRE®). The database also offers insight into other incentives that may be available in your area.
Solar homes will most commonly generate excess electricity during the summer months. Alternatively, solar homes will likely need to consume electricity from the grid during the winter months. The predictability of this pattern is realized by utility companies. Utility companies won’t cut you a check each month for your excess electricity, rather they will hold onto your credits until you need them. If your solar panel system is optimized, then you may be able to generate enough electricity to match your consumption for an entire year.