Net metering is a billing method that credits solar system owners for electricity exported onto the electricity grid. Under the simplest form of net metering, a utility customer’s billing meter runs backward as solar electricity is generated and exported to the electricity grid, and forward as electricity is consumed from the grid. At the end of a billing period, the customer receives a bill for net electricity, which is the amount of electricity consumed minus the amount of electricity produced and exported by the utility customer’s photovoltaic (PV) system. This policy allows PV system owners to offset electricity purchases from the utility with every kilowatt-hour of solar electricity a PV system produces.

Under an alternative billing policy, sometimes called “dual metering” or “net purchase and sale metering,” utilities install a second meter at the customer site and pay a different rate for solar electricity exported to the grid, generally a wholesale avoided cost rate. Customers who own PV systems in areas with a dual-metering policy generally receive a lower (wholesale rate) bill credit for solar electricity exported to the grid than customers in areas with net metering. A few utilities with dual-metering policies, however, offer a higher-than-retail rate payment for solar electricity generated by customer-owned systems.

If no net-metering policy is in place, a PV system owner typically has two options: (1) send excess solar electricity back to the grid without compensation; in this case, owners size the system so that production never exceeds base load, which minimizes the amount of free electricity sent to the grid; or (2) purchase a battery storage system to capture excess electricity and store it for future use. Neither option is particularly financially attractive, so many customers might choose to forego the solar installation altogether or install a small system that produces only enough electricity for immediate consumption on site. The lack of a net-metering policy, then, can discourage investment in solar energy systems. (Source)

Resources:

The Interstate Renewable Energy Council’s (IREC) Connecting to the Grid program provides services and resources to facilitate the development of interconnection procedures and net metering rules for renewable-energy systems and other forms of distributed generation (DG). This page on IREC’s web site serves as an information clearinghouse on interconnection and net-metering issues.

This 2013 report (Evaluating the Benefits and Costs of Net Energy Metering in California) explores recent claims by California’s investor-owned utilities that the state’s net energy metering policy causes substantial cost shifts between energy customers with solar photovoltaic systems and other non-solar customers, particularly in the residential market.