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Net Metering: How a Little-Known Policy Can Shave Hundreds Off Your Electricity Bills

By: Motley Fool
Posted: 9/15/2013 2:15:00 PM
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Over the past decade, the concurrent rise in concern over environmental degradation and the increasing cost of electricity bills has driven many Americans to look to solar power to reduce both pollution and expense.

Solar installation costs continue to drop, and at the same time, new business models like third-party-owned solar take away the high upfront cost for homeowners. With these models, a solar provider owns and maintains the system on your roof and you just pay a low rate for the power.

The cornerstone policy driving solar expansion is called net energy metering, or NEM. Net metering exists in 43 states and is currently under attack in many of them, so it's important to understand what this valuable service is and how it can reduce costs for all utility customers and citizens, not just those who install solar or other clean energy sources.

What is net metering?
With NEM, customers with distributed energy systems like solar panels or wind turbines get full credit for the excess energy they feed on to the electric grid. For example, if they are away during the day when their solar panels are producing power, that power goes to the grid for the utility to sell to others, and the solar homeowner gets full retail credit for that electricity. When they start using power at night from the grid, they get to use up their credit before paying for additional usage. It provides the utility with on-site, clean electricity during peak usage periods when they need it most, and it benefits consumers.

Net energy metering is often likened to rollover minutes that many Americans receive from their cell-phone service providers, where allotted minutes that aren't used one month "roll over" to the next so that customers don't lose them.

Why are utility companies opposed to NEM?
Utility companies don't like net metering because the more people use alternative energy sources like rooftop solar, the less electricity they buy from the utility. This affects utilities' growth. They are trying to eliminate NEM to protect their profits. In fact, a report issued recently by the utilities' trade association, Edison Electric Institute, calls distributed solar, energy efficiency, and conservation a "vicious cycle." Many groups that support renewable energy are fighting back against utility companies' efforts to end NEM programs. For example,The Alliance for Solar Choice was formed in 2013 to protect NEM in California and beyond.

What are potential benefits of net energy metering for consumers?
Obviously, NEM offers substantial utility cost savings to people who have made the investment in distributed energy sources, such as solar and wind energy technology for their homes. But it's a misconception to think that they are the only ones benefiting from NEM. Studies show that net energy metering benefits all consumers and citizens. For example:

1. NEM reduces energy costs for all utility customers, even those who don't own renewable energy systems. A study from Crossborder Energy shows that net metering will save California ratepayers $92.2 million when it's fully subscribed at 5% of peak demand; it would save Arizona Public Service customers $34 million per year. Though not yet used extensively, NEM is becoming increasingly beneficial in reducing costs for all energy consumers.

2. NEM reduces the need for dirty energy production, which leads to cleaner air and water. Pollution-emitting energy production is a threat to public health; NEM provides a substantial incentive for consumers to install clean energy systems, which results in cleaner water and air. Some California physicians feel so strongly about the health benefits provided by NEM and rooftop solar that they have joined with the solar energy community to form CAUSE, Californians Against Utilities Stopping Solar Energy. The group aims to prevent utility companies from eliminating NEM.

3. NEM helps support the solar industry, which provides jobs. The solar and clean energy industries are widely believed to be the wave of the future, and NEM helps encourage their growth. The more these industries expand, the more jobs they'll provide. For example, it's estimated that NEM has directly or indirectly created 43,000 jobs in California's burgeoning solar industry.

4. NEM reduces energy costs for major public institutions, such as schools. Many public institutions such as schools, libraries, and government buildings are some of the heaviest users of power in their communities, as the buildings are often old and energy-inefficient. NEM can substantially reduce costs for these public agencies; it's expected to save California's public schools and public agencies approximately $2.5 billion over the next 25 to 30 years.

It's clear that NEM offers both economic and health benefits to consumers and citizens in areas that use it. If you feel strongly about NEM, sign this petition on for fair compensation to residents who produce energy.

Your body, your wallet, and your community will thank you for your efforts.

