Molly Ayala
Solar panels can significantly reduce electricity bills, but they usually don't eliminate them. The amount of savings depends on several factors, including the amount of power generated by the solar panels, the number of appliances in the home, and the net metering policy of the utility company. Net metering is a billing mechanism in which the utility company credits the customer's electric bill for excess solar electricity generated and sent to the power grid. The credits can be banked and used when the solar panels aren't producing enough electricity, such as during cloudy or winter months. However, not all states or utilities offer net metering, and the compensation structures can vary, with some states transitioning to net billing, which offers lower credits. Additionally, utility companies impose fixed charges, such as customer service and delivery fees, which may or may not be covered by net metering credits. Some states and organizations offer programs to help low-income families access solar power, and adding a solar battery can also help to reduce costs by storing excess electricity for future use.
| Characteristics | Values |
|---|---|
| Net metering | A billing mechanism in which the utility company credits your electric bill, usually at the retail rate, for excess solar electricity you generate and send to the power grid |
| Net billing | A system in which the credits you get for sending power back to the grid are lower than the retail rate |
| Net Energy Metering (NEM) | A monthly statement that provides details on how you are tracking towards True-Up; it contains your current and year-to-date charges and credits in the "Energy Charges/Credits" section |
| True-Up statement | A formal accounting of how much electricity you took from the grid and sent to the grid over a specific period of time |
| Non-bypassable charges | Charges that remain the same regardless of how much electricity you consume from the grid and may or may not be covered by any net metering credits |
| Fixed charges | Mandatory utility company fees that you have to pay every month even if you have solar panels |
| Solar Legacy TOU Periods | Applicable for customers with interconnection applications for a solar program that included one or more "benefiting" accounts |
| Solar bill | The rate at which a charge or credit is calculated is based on your electric rate schedule |
| Solar contract | A contract that specifies the credit you'll receive for generating solar electricity |
| Solar lender | A lender that offers loans for solar panel installation |
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What You'll Learn
Net metering and net billing
Net metering allows customers to offset their energy use and transfer energy back to their electric companies in exchange for a bill credit. Net metering transactions are usually a one-to-one exchange, meaning the credits are often equal to the retail rate of electricity. The credits can be banked and used when the customer needs to pull electricity from the grid. Net metering is mandated by the legislators of many states to be offered by investor-owned utilities.
Net billing, on the other hand, enables customers to sell their excess energy to the utility company, typically at the wholesale rate. This is a monetary exchange in which the energy generated by the home solar system is treated like that of a large-scale solar project. Net billing is often offered by rural electric cooperatives and municipal utilities as they are not required to follow investor-owned utility policies for net metering.
It is important to note that net metering and net billing policies vary from state to state and utility to utility. Before signing any solar contract, it is advisable to understand the net metering or net billing policy of the utility company to determine how it will impact future electricity bills and overall solar savings.
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True-up statements
The True-Up Statement includes a summary of your net electricity use over the previous 12-month period, and either a credit or a balance to pay. All utility customers have a meter that reads how much power they use and when, so the utility can bill them appropriately. Solar users make their own power when the sun shines and send any surplus energy back to the grid. During low solar production months or when the sun isn't shining, solar users buy electricity from the utility.
The True-Up Statement reconciles all the cumulative energy charges and credits and compensation for the entire 12-month period. Any remaining charges must be paid, and any excess surpluses are typically reset to zero. If your system produced more energy than you consumed over the 12-month billing cycle, you will receive a small credit on your True-Up bill. This credit will be between 2 to 4 cents per kilowatt-hour for any leftover energy.
Monthly statements from the utility include minimum monthly due delivery charges, as well as a snapshot of current and year-to-date charges and credits. This allows homeowners to track their progress toward the annual True-Up. It's important to note that each solar system is unique and can be affected by various factors, such as location, weather, and system size.
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Fixed charges
The amount of fixed charges varies across different utility companies and states. For example, in Ohio, utility companies like American Electric Power (AEP), Dayton Power & Light (DP&L), Duke Energy, and FirstEnergy have proposed increasing their fixed charges. This would make it more difficult for their customers to switch to solar power, as higher fixed charges would reduce the potential savings from lowering energy consumption. Similarly, in Virginia and Indiana, there have been efforts to combat rising fixed charges to protect the rights of solar owners.
It is important for consumers considering solar power to understand the net metering policies in their area and the fixed charges they will be responsible for. While solar panels can significantly reduce electricity costs, the impact on the electric bill will depend on the specific charges and credits applicable.
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Nonbypassable charges
Non-bypassable charges (NBCs) are fees that cannot be paid for by net energy metering credits. In other words, even if you have generated net metering credits through your solar system, you will still have to pay NBCs. These charges apply even if you buy your grid-supplied power from an outside power company.
NBCs are important to understand when considering a switch to solar energy. While solar energy can drastically lower your electric bills, it is important to know whether net metering is available in your area and the credit you will receive, as this will impact your future electricity bills and overall solar savings.
NBCs are dependent on the state and utility company. For example, in California, NEM 2.0 introduced non-bypassable charges, meaning a small portion of the electric bill can no longer be offset by excess production. This means that, even if you are producing more electricity than you are using, you will still have to pay NBCs.
To avoid paying NBCs, you can try to use as much of your own electricity as possible. This can be achieved by using electricity during the day and on sunny days when your solar panels are producing electricity. You can also store your excess solar electricity in a solar battery to use in the future, instead of sending it to the grid.
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Utility rate plans
There are several types of rate plans available, and the right plan for a customer depends on their energy consumption and lifestyle. The Time of Use (TOU) rate plan is one of the most common, as it closely aligns with standard utility energy rates. TOU plans offer lower rates during most of the day, on weekends, and holidays.
Solar customers are often required to be on a TOU rate schedule, and their accounts may show a credit even when their system has not generated a net energy surplus, as the rate per kWh is higher during certain times. Net metering (NEM) is a solar incentive that compensates customers for excess solar electricity generation. With NEM, if solar panels produce more electricity than is being used, that electricity is sent to the grid in exchange for a credit. These credits can be "'banked"' and used when the solar system isn't producing enough electricity.
The availability and specifics of NEM policies vary by state and utility company. Some states and utilities offer full credits, while others credit at a reduced rate. In some areas, the credits depend on the time of day energy is sent to the grid.
In addition to NEM, there are other rate plans that solar customers can consider. Solar consultants can help evaluate energy consumption and recommend the best rate plan.
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Frequently asked questions
Net metering is a billing mechanism in which the utility company credits your electric bill, usually at the retail rate, for excess solar electricity you generate and send to the power grid.
If your solar panels produce more electricity than you use in a given month, you may see a credit on your electricity bill, depending on your utility company's net metering policy. With net metering, if your solar panels produce more electricity than you're using, that electricity is sent to the grid in exchange for a credit.
Before signing any solar contract, it's important to know whether net metering is available and the credit you'll receive, as it will impact your future electricity bills and overall solar savings. You can also look into community solar farms, which do not require installing solar panels.
