Net metering, also called “net energy metering” (NEM) is a policy that allows homeowners who generate their own electricity from sources like solar panels to send any excess power back to the grid and receive credits on their utility bill. The credits can be used to offset the cost of power that the homeowner consumes from the grid during times when their own generation is not enough to meet their needs, such as at night or on cloudy days.
The way it works is that the utility installs a special meter on the customer’s property that can measure the flow of electricity in two directions: into the grid when the customer generates more power than they consume and out of the grid when the customer consumes more power than they generate. At the end of each billing period, the customer is billed only for the “net” energy consumed, which is the difference between the energy they generated and the energy they consumed.
Net metering policies vary by state, but most states have some form of net metering policy in place, although some states have more favorable policies than others. Net metering is one of the ways that homeowners can offset the cost of a solar power system and make it more financially viable. Additionally it also helps to increase the penetration of the renewable energy sources in the grid, and reduce the overall reliance on fossil fuel generation.