Net Energy Metering (NEM)

Net Metering is a practice in which utilities credit you for the excess electricity generated by your solar panels. These credits can be used to offset the cost of power that must be purchased from the power company when the solar array does not have sufficient sunlight to produce the instantaneous power required.

Breaking Down Net Energy Metering (NEM):

When excess electricity is produced, it is sent back onto the grid, the electric company must buy that energy from the customer. Customers receive credit from the electric company for the excess energy they may have produced during the monthly billing cycle. They can draw on these energy credits at times when their electricity usage is greater than their production – such as a heavily overcast day or during the night. Any unused credits are carried forward to the next billing cycle, (when ‘Annual’ net metering is made available by the net metering agreement).

How Net Metering Works

Energy production from a solar array peaks in the middle of the day, (usually when power consumption in the home is lowest) and, conversely, is lower in the morning and evening when power consumption in the home is much greater.

Net Metering references the use of a ‘special’ electric meter by the power company to record the flow of power in either direction. When the solar array is producing more power than the home requires, the special meter will run backwards, (decreasing the amount owed by the customer); and when the home is using more power than the solar array can produce, the meter runs forward, (increasing the amount owed by the customer). At the end of the billing cycle the customer will only owe the power company the difference (net) between the amount of power consumed by the customer, and the amount of power produced by the solar array.

In some cases, when the Power Company offers Annual Net Metering, credit for excess power produced by the solar array may be carried forward to the following month(s), and be available until the end of the ‘annual reset’ period.