What is Net Metering?

I. Introduction

Net energy metering (NEM) is a billing arrangement that allows individuals and businesses with solar panels or other renewable energy systems to send excess electricity back to the grid and receive credits on their utility bills. This means that during times when the renewable energy system generates more electricity than the user needs, the excess electricity is fed back into the grid and the user receives credits that can offset future electricity bills. Net metering is a key component in the adoption and growth of renewable energy in the United States as it can help offset the cost of renewable energy systems.

II. Net Metering Laws in Florida

Florida has had a net metering policy in place since 2008, which was enacted by the Florida Public Service Commission (PSC). This policy requires investor-owned utilities (IOUs) to offer net metering to any customer who generates their own electricity using renewable sources. To be eligible for net metering benefits in Florida, renewable energy systems must have a capacity of 2 megawatts (MW) or less, and the system must adhere to the local utility service area rules.

The states four Investor Owned Utilities are:

  • Duke Energy Florida
  • Florida Power & Light (FPL)
  • Florida Public Utilities Corporation
  • Tampa Electric Company (TECO)

These IOUs service almost 80% of Floridians, and the remainder are covered by municipal utility companies that may have their own form of net metering. Florida requires these investor-owned utility companies to pay back monthly excess generation at the full retail rate, which is higher than the wholesale rates various other states require. The full retail rate includes additional charges such as taxes, fees, and transmission charges, which would not be accounted for under a wholesale rate. So when a solar owner generates excess energy, the IOUs essentially act as a buyer purchasing energy at the retail rate. Having said that, the credit a customer receives in a given month cannot exceed the amount of electricity they used from the grid. For example, if a homeowner uses 1,000 kilowatt-hours of electricity from the grid in a given month and generates 1,200 kilowatt-hours of solar energy, they would receive a credit for the 200 kilowatt-hours of excess energy at the retail rate. However, if they used 1,200 kilowatt-hours of electricity from the grid in that same month, they would not receive a credit for the excess energy because they did not generate more energy than they used. Any excess credits that are not used in a given month are carried over to the next month’s bill at the full retail rate. This means that if a homeowner generates excess energy in one month, but cannot use all of the credits, they can use those credits in the following month to offset their electricity usage and lower their bill. The credits carry over from month to month until the end of the calendar year, at which point any remaining credits are paid out at a lower wholesale rate. This is the “Credit Rollover Policy”, and it is something to be aware of because while the retail rate provides a strong incentive for homeowners to invest in solar energy, it does not reflect the actual cost of producing and delivering energy to the grid. Therefore, the lower wholesale rate at the end of the year ensures that the solar owner is compensated fairly for any excess energy they generate beyond their own consumption, while also reflecting the actual cost of producing and delivering energy to the grid.

Another potential benefit of utilizing renewable energy involves the Time of Use (TOU) rates that certain IOUs within the state of Florida offer. It is best to check with your utility company to see if they offer TOU rates and whether they would fit your energy use pattern. These rates allow customers to pay different prices for electricity depending on the time of day, with higher rates during peak usage hours and lower rates during off-peak hours. For homeowners with solar panel systems and net metering, TOU rates can be beneficial because they can help maximize the value of the excess energy generated by the solar panels. During peak hours, when the electricity rate is higher, the homeowner can use the excess energy generated by the solar panels to offset their usage and avoid paying the higher rate. During off-peak hours, when the electricity rate is lower, the homeowner can export excess energy to the grid and receive a credit at the retail rate, which is typically higher than the TOU off-peak rate. This means that the homeowner can receive more value for their excess energy during off-peak hours than if they were on a standard rate plan.

III. Net Metering Laws in Texas

Unlike Florida, the State of Texas does not have any laws regarding net metering. However, solar owners in Texas do have other options when it comes to benefitting from their surplus energy. Most large IOUs in the state of Texas offer some form of net metering and many municipal utility companies allow you to receive some credit for excess energy production. For more information on the incentives you can receive in the state of Texas, it is best to check with your retail electric provider (REP) to determine if and any benefits you can take advantage of.

If you live in an area where you can choose your REP, it’s important to take the time to research and compare your options. Don’t simply go with the first company that comes to mind or the one with the flashiest ads. Instead, look into each company’s rates, customer reviews, and renewable energy options, among other factors. By doing your due diligence and comparing multiple options, you’ll be better equipped to find the REP that best suits your needs. This can help you save money on your electric bill, as well as ensure that your energy consumption aligns with your values, whether that be supporting renewable energy or other initiatives. When it comes to choosing the right REP for your needs, it is best to factor in these three data points:

  • What is your monthly average for electric usage?
  • If you have a solar system, what is the average amount of surplus energy you produce?
  • What time of day do you use the most electricity?

By considering these three factors, you can make an informed decision on which REP best aligns with your energy expenditure. This will help you get the most benefit from your solar system and ensure that you’re getting the best rates possible while living in the state of Texas.

IV. Net Metering vs Off-Grid Solar

Many people mistakenly believe that net metering and off-grid solar systems are compatible. However, in reality, they offer distinct advantages to consumers based on their energy usage patterns. First off, we know that net metering involves connecting a solar system to the grid which allows excess energy to be fed back into the grid. This arrangement is mutually beneficial for both the solar system owner and the utility company as the solar system owner gets a lower electricity bill, while the utility company reduces the strain on the power grid. On the other hand, off-grid solar systems involves the ability to provide power in areas where the utility grid connection is not available, or unwanted. In an off-grid solar system, the energy is produced and stored in batteries, making you highly dependent on the system for your energy needs. To achieve complete self-sustainability, you will need to make a larger initial investment to accommodate for more solar panels and solar batteries to achieve a 100% offset. For this reason, a majority of solar owners prefer net metering over off grid solar, as they do not need to worry about storing enough energy and/or having a system large enough for 100% offset.

V. Net Metering and Battery Storage

Net metering allows homeowners to receive credits on their electricity bills for excess solar power generated during the day. This can be especially beneficial in areas with high demand charges or time-of-use (TOU) rates, where electricity may be significantly more expensive during peak demand periods. By storing excess solar power in a battery, homeowners can use this stored energy during high-demand periods and reduce their reliance on the grid, potentially saving money on their electricity bills. For example, in areas with TOU rates, electricity is typically more expensive during the late afternoon and early evening, when people are returning home from work and turning on their appliances. With solar batteries and net metering, homeowners can store excess solar power generated during the day and use it during these high-demand periods, reducing their reliance on the grid and potentially saving money on electricity bills. By combining net metering and solar batteries, homeowners can maximize their use of solar power and minimize their reliance on the grid during high-demand periods. This not only saves money on electricity bills but also helps reduce carbon emissions and promote a cleaner energy future. It’s important to note that while TOU rates can be an effective way to reduce peak demand usage, they can also be complex and vary depending on the utility and location. Homeowners should consult with their utility provider or a qualified solar installer to determine the best approach for their specific energy needs and goals.

VI. The Importance of Net Metering

Net metering is a critical policy that allows solar owners to get fair compensation for any excess energy they generate beyond their own consumption. It’s a win-win situation for both the solar system owner and the utility company, as the homeowner receives a reduced electric bill, and the utility company takes stress off the power grid.

Unfortunately in Florida, there is a threat to net metering laws as the utility companies are pushing to eliminate it. These utility companies believe that net metering reduces their revenue, while also acknowledging that a continued increase in solar energy may force them to update their power girds in order to handle the two-way flow of electricity. They also argue that net metering unfairly shifts the costs of maintaining the power grid onto non-solar customers, although studies have shown that the benefits of net metering outweigh the costs. Thankfully, Governor Ron DeSantis vetoed a net metering bill in April of 2022 that was pushed by the largest utility company in Florida, Florida Power & Light.

Eliminating net metering could harm Florida’s economy, as solar companies and their employees would be impacted by the reduction in demand for solar installations. This could lead to job losses and a decrease in economic activity. It is crucial that we advocate for the continuation of net metering in Florida to ensure the fair compensation of solar owners, stability of the power grid, and the growth of solar energy in the state. There are several ways to advocate for net metering, including signing petitions, contacting state representatives, and participating in community events and discussions. By working together, we can ensure that net metering remains a viable option for solar owners in Florida.