Net Metering is simply a mechanism for sharing electricity with your LDC (Local Distribution Company). The LDC doesn’t pay you for the electricity you share with them, but both you and the LDC benefit from net metering by:
As a generator, you are able to store your excess electricity (produced through solar generation) with your LDC. In effect, your solar system is connected to a vast, virtually unlimited battery bank, which allows your solar panels to operate at peak output all day long. Your electricty credit is balanced against what you consume over the billing period.
As the LDC, you gain valuable peak power generation within your network, thus relieving stress on your infrastructure.
Net Metering is truely a win for both parties!
In general, all net metered installations will:
- Contain an inverter (or inverters) capable of exporting electricity that satisfies the anti-islanding requirements of the LDC.
- Be governed by an agreement with your LDC,
- Require the installation of a “bi-directional” electrical meter.
Net metered installations may or may not contain batteries, at the discretion of the generator (aka “you”). If the generator wishes back-up emergency power then batteries will be present. LDC’s which attempt to deny battery based installations are confusing net-metering with feed-in tarrifs and need to be educated.
The Economics of Net Metering
The sharing of electricity (back and forth) with your LDC allows small solar installations to have a big impact on utility bills. We size net metered systems based on desired utility bill reduction (on average), budget, available installation area, and (in some cases) the maximum allowable installation limit imposed by the LDC.
Average Electrical Bill = $115.20 / month
Cost of Electricity (per kWh) = (Average Electrical Bill $) / Average Electrical Consumption in kWh)
$115.20 / 686
= $0.168 / per kWh
686 kWh (per month consumption) / 31 (number of days in the month) = 22.13 kWh per day
22.13 kWh per day / 4.2 (average sun hours per day)
The above example shows us that with an average cost per kWh of electricity at 16.8 cents per kWh, and an average energy consumption per month of 686 kWh that a 5.27 kW solar array will offset the average energy consumption 100% over the course of the year. As the cost of electricity continues to rise, the amount of required solar falls. As the price of solar falls, the cost to install the required amount of solar falls also.
10 years ago, the cost per watt of solar was around $10 per watt. This installation would have cost $50,000 in solar panels alone! Today, with the cost of solar under $1.00 per watt, this same installation would be under $5000 in solar panels!
Remember: Solar panel installations are pretty modular. Even if you don’t install enough panels today to cover 100% of your needs, you can always add more later, and the panels you do install will begin reducing your electricity bill and insulating you from rate increases immediately!