Financing 101
2 min read

How Does Net Metering Work?

The short answer:

In some states, if you generate more power than you use, your utility company will pay YOU. This is called "net-metering".

The long answer:

Here are 5 important things to know about net metering.

1: Your utility company will pay you.

  • Sound too good to be true? It's not.
  • When your solar installation is installed, you'll get a special two-way electric meter that monitors electricity produced versus consumed.
  • If your solar installation produces more electricity than you use, the excess electricity is exported to the grid.

2: There is a limit to how large your system can be.

  • Most states have a cap on the size of a solar installation they will compensate excess electricity for
  • For example, in New York State, residential systems are limited to 25 kW (kilowatts) per electric meter.
  • Don't worry, the average home solar system is 5-10kW.

3: How much you get paid depends on where you live.

  • You will be credited for your excess electricity sent to the grid by your utility company on a per kilowatt-hour (kWh) basis.
  • The price per kWh varies depending on a variety of things - what state you live in, the local policies, what type of install (residential, commercial, etc).
  • Most commonly, you are credited with the "retail rate" you pay for electricity or a bit less.
  • In certain cases, compensation levels may be zero ... see point #4.

4: Net-metering laws wildly vary state by state...and they keep changing!

  • Almost every state has some form of solar net metering laws as of 2021 - yay!
  • BUT the laws & level of compensation vary depending on what state you live in.
  • Be sure to discuss if net metering is in effect where you live with your solar provider.

5: Good for you & good for the grid.

  • Net metering allows you to make money back from your solar installation faster. Woohoo!
  • It also allows your to essentially be a mini 'power plant' for your neighbors and provide local power.
  • Local power generation helps smooth electricity demand across the grid and prevent grid failures.

More power to the people.

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